Berkeley to return £1.4bn after rejecting buyouts

Tony Pidgley, the managing director of Berkeley Group, the residential property developer, will earn £24m from his personal stake in the company after its decision to hand back cash to shareholders.

Tony Pidgley, the managing director of Berkeley Group, the residential property developer, will earn £24m from his personal stake in the company after its decision to hand back cash to shareholders.

The company has rejected management buyout proposals from private equity groups and instead, after a strategic review, plans to return a total of £1.4bn to shareholders over the next six years, with £600m being paid out this year alone. Berkeley shares surged 29 per cent to 1197p in response to the news.

"Management buyouts have been put to us but this aligns the interests of the company with my staff and shareholders," said Mr Pidgley, who founded Berkeley as a housebuilder in 1976. He said he did not favour buyouts because they presented management with a conflict of interest in having to negotiate a purchase of a company that they are also paid to run.

The most likely method of handing back the cash is expected to be through an issue of B shares that can subsequently be redeemed for cash at set dates in the future.

Mr Pidgley has 2 million shares in Berkeley, which said it would hand back the equivalent of £12-per-share to investors. The capital is being released by Berkeley after it took the decision to quit high-volume, green-field housebuilding and concentrate on urban regeneration sites instead.

Mr Pidgley said: "The capital required for this more focused business enables Berkeley to propose to return £12-per-share to shareholders in cash over the next six years to 2010, a total of over £1.4bn, and maximising the value of the resulting company.

"The board believes this is a unique way of enhancing shareholder value while retaining sufficient working capital to fully realise the value within our current and future land holdings."

Berkeley also announced annual results yesterday, reporting a 4.1 per cent increase in profits to £230.2m on turnover up 10.6 per cent at £1.2bn.

Berkeley decided to get out of traditional housebuilding after seeing returns diminish. A decade of falling interest rates has encouraged more capital into property development, driving down profit margins.

Urban regeneration of brown-field sites tends to have higher barriers to entry because it involves more complicated sites that have to be cleared before building can start. The company will specialise in flats and small houses in urban developments which Mr Pidgley believes will enjoy growing demand despite the apparent trend for people to want to move out of large urban areas into the countryside. Mr Pidgley said: "If you are married with two kids you're probably not going to want to live in a city but there is also a period in people's lives when they are older when they want to enjoy life and it is the one- and two-bedroom flats that sell. There is a big investment market as well."

Urban living is also increasingly popular with younger people without families. However, a more affluent older generation represents the biggest market.

"Demographics work in our favour. There is an ageing population who want to buy properties having retired early, despite what you read about the retirement age, who want a nice big flat where they can entertain and live securely with underground parking," Mr Pidgley said.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Financial Controller

£45 - £55k DOE: Guru Careers: A Financial Controller is required to join a suc...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£12500 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Day In a Page

Mullah Omar, creator of the Taliban, is dead... for the fourth time

Mullah Omar, creator of the Taliban, is dead... for the fourth time

I was once told that intelligence services declare their enemies dead to provoke them into popping up their heads and revealing their location, says Robert Fisk
Margaret Attwood on climate change: 'Time is running out for our fragile, Goldilocks planet'

Margaret Attwood on climate change

The author looks back on what she wrote about oil in 2009, and reflects on how the conversation has changed in a mere six years
New Dr Seuss manuscript discovered: What Pet Should I Get? goes on sale this week

New Dr Seuss manuscript discovered

What Pet Should I Get? goes on sale this week
Oculus Rift and the lonely cartoon hedgehog who could become the first ever virtual reality movie star

The cartoon hedgehog leading the way into a whole new reality

Virtual reality is the 'next chapter' of entertainment. Tim Walker gives it a try
Ants have unique ability to switch between individual and collective action, says study

Secrets of ants' teamwork revealed

The insects have an almost unique ability to switch between individual and collective action
Donovan interview: The singer is releasing a greatest hits album to mark his 50th year in folk

Donovan marks his 50th year in folk

The singer tells Nick Duerden about receiving death threats, why the world is 'mentally ill', and how he can write a song about anything, from ecology to crumpets
Twitter accused of 'Facebookisation' over plans to overhaul reverse-chronological timeline

Twitter accused of 'Facebookisation'

Facebook exasperates its users by deciding which posts they can and can’t see. So why has Twitter announced plans to do the same?
Jane Birkin asks Hermès to rename bag - but what else could the fashion house call it?

Jane Birkin asks Hermès to rename bag

The star was shocked by a Peta investigation into the exotic skins trade
10 best waterproof mascaras

Whatever the weather: 10 best waterproof mascaras

We found lash-enhancing beauties that won’t budge no matter what you throw at them
Diego Costa biography: Chelsea striker's route to the top - from those who shared his journey

Diego Costa: I go to war. You come with me...

Chelsea's rampaging striker had to fight his way from a poor city in Brazil to life at the top of the Premier League. A new book speaks to those who shared his journey
Ashes 2015: England show the mettle to strike back hard in third Test

England show the mettle to strike back hard in third Test

The biggest problem facing them in Birmingham was the recovery of the zeitgeist that drained so quickly under the weight of Australian runs at Lord's, says Kevin Garside
Women's Open 2015: Charley Hull - 'I know I'm a good golfer but I'm also just a person'

Charley Hull: 'I know I'm a good golfer but I'm also just a person'

British teen keeps her feet on ground ahead of Women's Open
Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'
Singapore's domestic workers routinely exploited and often abused in the service of rich nationals

Singapore's hidden secret of domestic worker abuse

David Cameron was shown the country's shiniest veneer on his tour. What he didn't see was the army of foreign women who are routinely exploited and often abused in the service of rich nationals