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Thursday, 2 August, 2001, 09:29 GMT 10:29 UK
McAlpine in buyout talks with Wimpey
Model of new housing development with Wimpey and McAlpine logos
Wimpey's move could trigger wider consolidation
House builder Alfred McAlpine has confirmed it has held talks with rival George Wimpey over the sale of its house building business.

The move could trigger a much wider shakeup of the UK house building industry, which analysts say is at present dominated by middle-sized firms.

Talks between the two are at an advanced stage with Wimpey having completed due diligence, the companies said.

Neither company was prepared to put a price tag on the potential deal, although they said any deal would be for cash, not shares. But earlier the Guardian newspaper suggested Wimpey will bid 440m ($630.4m, 720m euro).

McAlpine has rebuffed a number of bids in the last year, although none of them have come close to the 420 pence a share the Guardian is predicting.

The house building part of McAlpine's business provides half the group's turnover, as well as nearly 90% of its profits.

Slow pace

If the deal goes ahead, it will create the UK's largest house building group with a value of more than 1bn.

Analysts expect the government would smile on the deal, should it proceed.

UK house builders (by market capitalisation)
Berkeley Group: 929.5m
Persimmon: 898m
Barratt Development: 802.5m
George Wimpey: 724.9m
Wilson Bowden: 688.5m
Bellway: 395.5m
McAlpine: 357.8m
Plans for new house building in the UK are well behind schedule, and house prices continue to soar in many parts of the country as new housing starts have fallen.

Part of the problem, according to some observers, is the range of small-to-medium building firms lacking the "assembly line" ethos and techniques which bring prices down in the US and much of Europe.

Wimpey has recently seen its business lean towards lower-priced housing, with the average price of its homes at 120,000 below the national average of 135,000.

McAlpine, on the other hand, has been moving upmarket, and already has plots of land in prime locations.

Consolidation

Acquiring land and negotiating tricky planning procedures has been one of the main barriers to increasing the speed of housing starts.

The deal would be the latest in the consolidation of the house building industry after Taylor Woodrow acquired Bryant and Persimmon took over Beazer.

The turmoil in the equity markets in recent months has made house builders one of the more solid sectors in the UK market, with Wimpey shares up 30% since the beginning of the year and McAlpine gaining more than 45%.

This morning's trading saw McAlpine nearly 20% to 398.5 pence, while Wimpey shares slipping 6% to 183.25 pence.

See also:

02 Aug 01 | Business
House giants come under same roof
12 Jun 00 | UK Politics
Showdown looms over new houses
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