McCarthy & Stone surges on £500m-plus bid approach

McCarthy & Stone, the UK's biggest developer of retirement homes, revealed yesterday it had received a takeover approach that may lead to an offer.

Speculation that the company, whose interim profits rose 80 per cent this year, may be swooped upon lifted the group's shares in the past few weeks. Shares yesterday were up more than 8 per cent, forcing the company to confirm to the stock exchange that it was in talks with a potential buyer.

The shares have gained 45 per cent this year, and yesterday closed 9.3 per cent higher at 495.5p. This values the business at around £515m, and its highest value in 14 years.

"Talks are at an extremely early stage and may or may not lead to an offer being made," the company said.

Persimmon Homes, George Wimpey, Wilson Bowden and Barratt Homes were all cited yesterday as possible bidding candidates. Sources close to Persimmon, however, were last night ruling them out.

"McCarthy & Stone has looked like a consolidation target for some time," Mark Hake, an analyst at Merrill Lynch, said yesterday. "It provides quite an attractive opportunity, as it has a unique business model. This would make it an appealing bolt-on acquisition, albeit a large one, for one of the bigger housebuilders."

Although venture capital money may be behind the approach, and the prospect of a management buyout is not being ruled out, the City is expecting a listed rival to come forward as the bidder.

James Crocker, an analyst at Merchant Securities, said: "A venture capital bid could have come in at a much earlier stage and picked up the company at a much lower price. That we are only seeing a bidder come to light now would suggest it is a listed company that would be relying on its paper to fund the deal. All the housebuilders have seen their share prices rise recently."

A take out price could be as high as £6 a share, valuing the group at up to £624m, analysts said yesterday. John McCarthy, one of the founders of the business and its non-executive chairman, owns as much as 17 per cent of the company and would have to be offered a substantial premium to bow out. But a rival is thought unlikely to pay more than £550m.

The firm has prospered from low interest rates that have allowed people to borrow cheaply to buy homes.

With 65 per cent of the market for retirement homes, McCarthy & Stone is benefiting from the ever-growing population of over-50s.