Permira ups stakes in McCarthy bid battle

The private equity firms Barclays Capital and Permira upped the stakes yesterday in the battle to take control of McCarthy & Stone, the retirement homes builder, after raising their recommended offer to £1.06bn. The deal would represent the largest takeover in the UK housebuilding sector if it succeeds.

The 1,030p-a-share cash offer represents a 30p increase on their previous bid and puts Mars Bidco - the acquisition vehicle for the private equity companies - in a strong position to acquire the builder. McCarthy & Stone has agreed to pay a break-fee of £10m to Mars Bidco if the deal does not proceed.

However, a rival bidder - Mother Bidco - purchased 4.8 million McCarthy & Stone shares at 1,060p a share yesterday, putting pressure on Mars Bidco to raise its offer still further.

Mother Bidco, a consortium that includes HBOS, the billionaire brothers Simon and David Reuben and West Coast Capital, the private equity company headed by the retail tycoon Tom Hunter, approached McCarthy & Stone last week regarding a 1,030p-a-share bid. However, the offer was dependent on the builder's board recommending the deal and negotiating a separate break fee. The approach was rejected and Mother Bidco, which changed its name from Broomco last week, has not yet made a hostile bid. Vincent Tchenguiz, the property tycoon, has also been linked with an offer but has yet to show his hand.

Bridgewell Securities analyst Chris Millington said: "Due to the £10m break clause payable to Mars Bidco in the event of the bid not proceeding, they are clearly front runners at this point, but we cannot rule out a higher offer from Broomco (Mother Bidco)."

Shares in the housebuilder increased 3.4 per cent to 1,075p yesterday as investors gambled on a counterbid, or at least a higher bid from Mars Bidco. With only one bid on the table, McCarthy & Stone is advising its shareholders to accept Mars Bidco's increased offer. "It is the only copper-bottomed, no-strings-attached bid we have received," said the chief executive Keith Lovelock.

McCarthy & Stone has attracted interest due to its exposure to older customers who tend to have greater spending power than first-timebuyers. The offer is more than double its net assets per share, last reported at 438p.