Galliford Try rejects £950m approach for housebuilding arm from Bovis

City investors piled into struggling construction giant Galliford Try on Tuesday, on hopes that its decision to reject a £950 million approach for its housebuilding arm from Bovis Homes could lead to an auction.

Bovis Homes confirmed weekend reports that it made an all-share proposal for Galliford’s Linden Homes and regeneration businesses.

It said the bid was rejected on Friday because the takeover target, which was advised by Rothschild, “did not believe that the proposal fully reflected the value” of the businesses.

FTSE 250 builder Bovis said the companies are no longer in discussions. Galliford also confirmed this in a brief statement.

However, investors appeared to think the initial offer may lead to the housebuilding division attracting more suitors or a fresh Bovis bid, sending shares in Galliford up 24.5p, or 4.5%, to 563p. Bovis shares were flat.

Jefferies analyst Glynis Johnson pointed to the tie-up being attractive to Bovis because of “the scale it would bring to the group as a whole”.

Bovis’ interest comes despite a tough UK housing market, which is grappling with Brexit jitters, weaker consumer confidence and higher buying taxes.

Bovis would have paid £950 million for the division, funded entirely by Bovis shares. It would also have taken on £100 million of its debt. Galliford has a pipeline of thousands of homes it can build, many in London.

Government contractor Galliford would have remained an independent UK-listed company focused on construction.

That would allow it to concentrate on helping the business bounce back from a difficult 18 months in the outsourcing industry that has seen numerous contractors either collapse, issue profit alerts or announce strategic reviews.

Galliford, which has been plagued by delays and overrunning budgets, last month said pre-tax profits in the year to June could be up to £40 million lower than the expected £156 million.

Today it said that the board “remains confident in the long-term prospects of the group”.

Despite today’s share price leap, Canaccord Genuity analyst Aynsley Lammin cautioned that interest for the Linden division could be slim because “housebuilders already have good land banks, there are opportunities to buy more land at attractive prices rather than a standalone company”.