Persimmon's agreement on Ideal under bid threat

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The Independent Online
An auction for Trafalgar House's Ideal Homes subsidiary could begin in the next few days despite last night's agreement by the house- builder Persimmon to pay pounds 170m for the business.

The deal, to be partially paid for through a pounds 91m cash call, tops the pounds 160m which the rival Beazer Homes is thought to have been prepared to bid. But Beazer said yesterday it was "keeping its options open" after previously claiming it had been excluded by Trafalgar from negotiations to sell the business.

The deal, which would make the York-based Persimmon the UK's fourth-biggest housebuilder, must be cleared by Trafalgar shareholders at an extraordinary general meeting on February 22. One option still open to Beazer would be an approach to the group's main shareholders to get them to overturn yesterday's agreement. Beazer said it was "evaluating the situation".

Its decision could turn on the value of tax losses being sold with Ideal. Neither Persimmon nor Trafalgar would give any indication as to their size, but sources suggest that Beazer might be prepared to add them to its original bid, thought to have been around pounds 160m.

John Watkins, a Trafalgar director, said last night: "If Beazer want to make an improved offer they can do that and if they come up with something sufficiently interesting, we will talk to them. We have a duty to our shareholders to do that."

Mr Watkins admitted that Beazer had not been included in the formal bid process for Ideal, which began after Trafalgar's preliminary results were published on 15 December. A number of parties, not including Beazer, were invited to make a formal offer, he said. Beazer subsequently lodged an expression of interest, but the Persimmon offer was preferred on grounds of price, the commercial terms, the degree of readiness to complete and the shorter timetable, he claimed.

Persimmon will receive a pounds 3m compensation fee if it fails to reach agreement on the offer. It is calling on shareholders for pounds 91m in a one-for-two rights issue to part-finance the Ideal acquisition, its first, but the market generally reacted well to the deal. The shares fell just 4p to 191p yesterday.

Duncan Davidson said the rationale for the acquisition was that it would be earnings-enhancing from the start, even before taking account of the tax losses and any cost cuts. The plan was to close six of the combined group's 21 offices, but Mr Davidson would give no indication as to possible redundancies or other cuts. However, the typical small office which is under threat of closure is thought to employ around 15 people, pointing to the loss of around 90 jobs. Ideal also has a head office at Woking, very close to another site at Weybridge in the south of England, which could be combined.

The enlarged group will sell around 6,500 houses a year, ranking after Wimpey, Beazer and Barrett Homes. One of the key reasons for the deal was Ideal's land bank, Mr Davidson said. The group will own 23,700 plots or around four years' usage, at an average cost of around pounds 16,200 each.

Persimmon estimated profits would dip to pounds 22.5m for the year to last December, from pounds 25.2m before, after a difficult selling period between April and September. It is proposing to hold the final dividend at 6.5p, to make a maintained total of 9.5p.

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