Persimmon rights to fund Ideal bid

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The Independent Online

City Editor

The acrimonious battle for control of the Trafalgar House subsidiary Ideal Homes will come to a head early next week when Persimmon - which controversially secured an exclusive negotiation period for the deal - makes a formal offer of about pounds 160m and launches a rights issue to part- fund the acquisition.

Persimmon's talks with Trafalgar sparked a row two weeks ago with a rival housebuilder Beazer Homes, which claims to have been shut out of discussions to buy Ideal.

Beazer said yesterday it was holding its own fire until it saw the size and terms of the offer, but it was still considering its options, including the possibility of appealing directly to Trafalgar House's independent shareholders.

Persimmon's exclusivity period, which is understood to run out at the end of the month, caused a furore because it was seen as a cosy deal stitched up between the Persimmon non-executive director Sir Chips Keswick and Trafalgar House, which is 26 per cent owned by the Keswick-controlled Hong Kong Land.

Trafalgar maintains that Persimmon's offer was superior to any others in a number of unspecified respects - and not just financially.

Duncan Davidson, chairman of Persimmon, was locked in meetings yesterday and unable to comment on the acquisition which would be the first such deal since Persimmon came to the market 10 years ago. If the deal goes ahead, Persimmon will jump up the league table to fourth place behind Wimpey, Barratt and Beazer.

Beazer, which is twice the size of Persimmon, insists that it is better placed to move quickly to complete the acquisition because its offer would be financed principally from its own cash resources and bank borrowings.

The Persimmon proposals are thought to include a one-for-two rights issue to raise just over pounds 100m, for which underwriting will be sought on Monday.

Once that is arranged the terms of the bid might be announced as early as next Tuesday. Trafalgar needs to tie up the deal as soon as possible to reduce debts of more than pounds 200m.

Last month it stunned the City with annual losses of pounds 321m, nearly twice the level predicted by some analysts. The conglomerate's shares collapsed last year, although at 32p, they are well above their low of 21p.

The planned disposal of Ideal, one of the group's most profitable divisions, follows the sale at the end of last year of some of Trafalgar's most high- profile trophy assets, including the Ritz hotel, acquired by the secretive Barclay brothers for pounds 75m.

Ideal doubled operating profits last year to pounds 19m. It has 100 development sites which at the end of the year to September included 6,600 plots.

The struggle for control of Ideal confirms a resurgence of interest in the housebuilding sector, where share prices have risen sharply in recent weeks in anticipation of higher levels of activity this year.

Berkeley Homes, one of the sector's most successful companies launched a rights issue earlier this week to buy extra building land while Alfred McAlpine pulled out of general construction work to focus in part on its own housebuilding effort.