McCarthy & Stone shares leap on bid approaches
Saturday 03 June 2006
McCarthy & Stone, the builder which dominates the retirement home sector, admitted yesterday it had received takeover approaches. The company's shares leapt 15 per cent to 907.5p, valuing it at £932m. Analysts said a successful bid could value the builder at 950p a share, or £975m.
McCarthy & Stone, which saw off a bid from its then chairman and founder John McCarthy three years ago, did not name the bidders. However, its statement suggested the process was at an early stage. "The board of McCarthy & Stone has received approaches which may or may not result in an offer... The approaches are subject to a number of pre-conditions, including due diligence," the company said.
In the listed sector, McCarthy & Stone has no real rivals, as retirement homes are a specialist sector, with different dynamics to mainstream house building. It has 60 per cent market share.
Industry sources indicated its suitor did not come from any of the more obvious possible bigger house builders: Persimmon, Wimpey, or Barratt. Some suggested a possible management buyout, the involvement of private equity, or a foreign predator.
The attractions of the retirement market are the high margins available and the growth characteristics of the sector: people are living longer and are generally more affluent in their retirement.
Mr McCarthy, who founded the company in 1963, ran it for 40 years until his bid approach to the board was rejected in 2003. He subsequently sold his 13 per cent stake.
The latest offer will have come at nearly double the price Mr McCarthy balked at paying. He withdrew his offer, saying the shares got run up too high - the stock was trading at 520p. He then shocked the board by putting out a unilateral profits warning as he gave up the attempted buyout, warning of "more difficult times ahead" just weeks after the company told the City it would beat profit forecasts.
Mr McCarthy had sought to merge McCarthy & Stone with a privately owned rival, Churchill Retirement Living, which was run by his sons, Spencer and Clinton.
Last night, Spencer McCarthy, the chairman of Churchill, said: "Churchill has not been involved in this bid. The focus of our strategy is to pursue the growth of our own company and extend our successes of previous years."
Churchill is the No 2 player in the sector, but it is a long way behind McCarthy & Stone.
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