Housebuilder Bellway pulled out of its £720 million takeover of Crest Nicholson over concerns about its smaller rival’s ballooning bill to fix dangerous cladding after the Grenfell Tower tragedy.
Bellway has been tight-lipped about the reasons for pulling out of the 273p-a-share takeover last month. The decision is said to have blindsided Crest’s board, which had said that it was “minded” to recommend the takeover to its shareholders.
City sources said that the cladding liabilities were one of three key issues raised during due diligence; the two sides were also too far apart over their valuations of Crest’s land bank and unsold stock of houses, they added.
Private housebuilders’ responsibility to remove dangerous cladding was thrust into the spotlight last week as the final report by the Grenfell Tower inquiry was published.
Angela Rayner, deputy prime minister, said that remediation work has begun on only half of the 4,630 buildings in England identified with dangerous cladding.
Downing Street said building developers that drag their feet could be thrown in jail under new laws being considered by the government.
Crest Nicholson, which recently hired Martyn Clark, a former Persimmon director, as its chief executive, set aside £145 million to settle future cladding liabilities in its June 2024 results.
Government figures from April show that Crest Nicholson was responsible for remediating 107 buildings over 11 metres tall with another 156 yet to assess. Industry rivals say that on a crude per-property basis, Crest’s provision is considerably lower than others, and roughly half of the per-property contingency set aside by Bellway.
This does not provide a basis to suggest that Crest is understating its remediation liability, however. Experts said that cladding on different buildings can cost vastly different amounts to remediate.
Sources close to Crest pointed out that the company’s cladding provision had been subject to extensive scrutiny by its external auditors. Third-party consultants had also been brought in to oversee the process.
Bellway and Crest Nicholson declined to comment.