McCarthy & Stone warms to £1.1bn HBOS bid, but rivals may return

The bidding war for the retirement homes builder McCarthy & Stone took a further twist yesterday after the board switched its recommendation to a £1.1bn bid from a consortium led by HBOS that includes the billionaire Reuben brothers and the retail tycoon Sir Tom Hunter. However, it is unlikely that the latest offer will be the last, with rival bidders still considering their options.

The HBOS-led consortium, Mother Bidco, has lodged its unconditional £1.1bn takeover offer for the construction company after failing to win a recommendation from the board with a lower conditional bid last month. The 1,075p-a-share cash offer is higher than a previous recommended bid of 1,030p a share from Mars Bidco, a consortium including private equity companies Barclays Capital and Permira.

Keith Lovelock, the chief executive of McCarthy & Stone, said the company had no hesitation in recommending the higher offer that the board considered "fair and reasonable". If the Mother Bidco offer succeeds, McCarthy & Stone is liable to pay a £10m break fee to Mars Bidco.

However, Mother Bidco has purchased a 4.7 per cent stake in the builder at a price of 1,060p a share, meaning it can recoup its bid costs if the takeover fails.

Shares in McCarthy & Stone rose 2 per cent to 1,099p in heavy volume yesterday as investors gambled on a higher bid emerging.

A spokesman for Mars Bidco declined to say whether it would raise its bid. Meanwhile, a third bidder, Vincent Tchenguiz, has yet to be ruled out of the process but has not formally bid for the company.

Mars Bidco has already raised its bid for McCarthy & Stone once to ward off competition from Mother Bidco and appears likely to do so again. Whether it chooses to match the Mother Bidco offer or raise it towards £11 a share is as yet unclear.

The bids offer a massive premium to the company's net asset value, last reported at 438p a share, in effect ruling out industry interest in buying the company.

McCarthy & Stone's customer base is considered a key attraction to the private equity bidders as its customers are better off than first-time buyers and can often pay for property upfront.