A planned £2.5bn merger between British housebuilders Barratt Developments and Redrow Plc looks set to go ahead despite concerns from the competition regulator.
It comes after Barratt announced on Monday it planned to push ahead and start the process of taking over its rival this week, even though the two firms will officially remain separate until the watchdog gives its final approval.
The Competition and Markets Authority (CMA) has been investigating the deal and earlier this month expressed worries that the acquisition could lead to higher prices and lower-quality homes in the Whitchurch region in Shropshire. Both firms have developments in the area.
However, Barratt said it was temporarily putting aside the concerns because Whitchurch was “only one of the more than 400 local areas where the two companies overlap”.
Read more: What merger could mean for homes being delivered across the UK
The company said it was hopeful of imminently addressing the regulator’s concerns and resolving the issue, removing the final potential obstacle to the deal.
The CMA has not raised concerns over the merger at a national level.
Barratt said that sealing the deal, following a court hearing scheduled for Wednesday, would remove uncertainty for staff, the supply chain and wider stakeholders.
The firm also said the move would allow it to “accelerate” the merger and spur “the delivery of high-quality, sustainable homes and communities for customers across the UK” while also “addressing the country’s need for homes”.
The housebuilder said it expected the CMA to impose an enforcement order on both firms in response, which would prevent Barratt and Redrow from integrating their two businesses until the regulator was satisfied its concerns had been addressed.
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The companies expect to have fully merged within 18 months of the acquisition.
Around 10% of jobs across the combined business are expected to be lost as a result of the deal, which will help save bosses at least £90m a year.
Barratt recently forecast that it expected to build between 13,000 and 13,500 homes during the 12 months to June 2025 – a 7% drop on the year before.
Monday’s announcement came as hopes rise that the housing market is starting to pick up following sluggish demand amid high interest rates last year.
It also follows Labour’s announcement of a shake-up in the planning system which aims to pave the way for 1.5 million new homes to be built in the next five years.
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Russ Mould, from investment firm AJ Bell, said: “The issues raised by the competition authorities always looked surmountable given they were restricted to just one part of Whitchurch in Shropshire and Barratt has waived the CMA clearance condition which had been written into the deal.
“An enforcement order from the regulator is likely but Barratt and Redrow are ready for it and will presumably do what’s necessary to prevent the probe going any further.”
He added: “Speculation could now build over whether either of Barratt’s main rivals – Taylor Wimpey and Persimmon – might pursue their own deal in response.”
A CMA spokesperson said: “Whilst we are aware of Barratt’s intention to complete its deal with Redrow imminently, our competition concerns still stand. The CMA will take such action as appropriate to ensure competition is preserved whilst our investigation continues.”
