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Galliford Try and Bovis homes merger

Practical discussions about equity High-Yield Portfolios (HYP) for income
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daveh
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Galliford Try and Bovis homes merger

#250652

Postby daveh » September 10th, 2019, 8:38 am

Details here:
http://www.investegate.co.uk/article.as ... 7400L&fe=1

Potential Transaction terms

If the Potential Transaction proceeds, it is expected to value the Housing Businesses at £1.075 billion comprising:

- the issue to Galliford Try shareholders of 0.57406 Bovis Homes shares per Galliford Try share, which would equate to 63,739,385 Bovis Homes shares (in aggregate) valued at £675 million based on Bovis Homes' closing share price on 9 September 2019, being the last business day prior to this announcement; plus

- the payment of £300 million in cash (the "Cash Consideration") to Galliford Try; plus

- the transfer to Bovis Homes of Galliford Try's 10-year debt private placement of £100 million (the "Debt Private Placement").

In addition, Galliford Try's pension schemes would be transferred to Bovis Homes at completion of the Potential Transaction on terms acceptable to the Galliford Try pension schemes' trustees and Bovis Homes.



What to do if it goes ahead? Probably keep Bovis homes, not sure about the Galliford Try construction business.

daveh
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Re: Galliford Try and Bovis homes merger

#250656

Postby daveh » September 10th, 2019, 8:51 am

The market seems to like it - up 17% as of 8.45 this morning, but Bovis is down 4% ish so clearly the market thinks GFRD share holders are getting the better side of the deal.

So a GFRD share holder will get .57 of a share of bovis worth 575p at this mornings price plus the GFRD construction business which is being valued at ~145p per share.

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Re: Galliford Try and Bovis homes merger

#250730

Postby spiderbill » September 10th, 2019, 1:03 pm

Feels like all this will really do is crystalize my losses. The remaining part of the company will have a harder time recovering from the partly-Carillion-induced slump and could easily fall further. I'd rather give them time to rebuild and at least get some dividends in while they do it.

daveh
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Re: Galliford Try and Bovis homes merger

#250745

Postby daveh » September 10th, 2019, 1:58 pm

spiderbill wrote:Feels like all this will really do is crystalize my losses. The remaining part of the company will have a harder time recovering from the partly-Carillion-induced slump and could easily fall further. I'd rather give them time to rebuild and at least get some dividends in while they do it.


Indeed, it will be quite a big loss in capital terms for me*, but in one sense we will be exchanging shares in GFRD for shares in Bovis, the question is are we getting a fair proportion of the combined company with the price of GFRD being depressed due to problems in the construction arm. The market thinks so as the GFRD price is up and Bovis down. Better than an all cash deal as with shares in the combined company we do at least share in any uplift in the Bovis price if the combined company is better than the constituent parts.

We should be due a divi in December, be interesting if and how much dividend GFRD pay this year. Bovis are yielding ~11% according to the LSE site, but there was a big uplift in the dividend for the 12 months to Dec18 (from 47.5p to 102p, which may not be continued this year as the cover is only 1.0x). GFRD share holders would not be eligible for the Bovis final if the deal goes ahead, but at least we would be exchanging for another high yield share. Not sure if the construction rump off GFRD will be able to pay much in the way of dividends until it is back on a sound footing as it was not putting much in the way of cashflow into the company and margins were/are pretty thin.

I better go and have a look at Bovis's results and see what I might be getting if the deal does go ahead.

* about a 37% loss in capital terms but "only" 18% when dividends are taken into account.

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Re: Galliford Try and Bovis homes merger

#250792

Postby Gengulphus » September 10th, 2019, 4:38 pm

Worth noting that Galliford Try's full-year results are due out tomorrow. So I think I'll delay assessing this corporate action properly until then - but I do notice that the segmental breakdown in last year's report has Linden Homes and Partnerships & Regeneration contributing 42% of Galliford Try's total revenues between them and 35% of its net assets, but 109% of its profit before tax. So it's been a confused picture whether it should be counted as a Housebuilder or a Construction company for diversification purposes - but daveh's figures say pretty clearly that the market thinks most of the value of the company lies in its Housebuilder activities, and I can see why.

What this corporate action does mean, assuming it goes ahead, is that after it my HYP will contain two holdings in place of its current Galliford Try holding. The Bovis holding will be a large fraction of the current Galliford Try holding size, which makes it about 2/3rds of an average holding for my HYP, and (without yet having checked properly) I think it will be pretty much a pure Housebuilder holding. The remaining Galliford Try holding will be a small fraction of its current size, which makes it about 1/6th of an average holding (*), will be pretty much a pure Construction holding, and unless the company has turned its Construction divisions around since last year, a long way from being profitable enough to really sustain a dividend.

A bit of background with regard to my HYP is that it has two other holdings that are clearly housebuilders (Barratt Developments and Taylor Wimpey) and none that are clearly Construction companies. So this corporate action looks likely to leave it nearly "tripled up" in Housebuilders and with virtually nothing in Construction (**), and what there is in Construction doesn't look all that good to me, in any of last year's annual report, the interim results earlier this year or July's trading statement. This is one of the things I'll be looking at in particular in tomorrow's full-year results, as there is a glimmer of hope in the trading statement in the form of its statement that "The Aberdeen Western Peripheral Route is complete ..." - that's been a bit of an exceptional cost nightmare for the company IIRC.

So it looks unlikely that I'll especially want what's left of Galliford Try in my HYP after Linden Homes and Partnerships & Regeneration have gone, and it will be a very small holding for my HYP, which really needs to be either topped up or tidied up - the latter looking more likely to me at present. And I don't think I'll want to remain "tripled up" in Housebuilders, especially as the sector looks likely to be delivering 10%+ of my HYP income after this action, so I'll be wanting to review all three of Barratt Developments, Bovis Homes and Taylor Wimpey, and quite likely concluding that one of them ought to go... So it's very possible that I'll conclude that I want to get rid of both parts of Galliford Try, and in that case it may well seem best just to get rid of the whole thing now.

But I emphasise that that's just an indication of which way my thoughts are going, that they're heavily influenced by what else happens to be in my HYP, and tomorrow's results may cause them to change markedly. So it's definitely not meant as advice to sell - just as an illustration of how I would go about thinking about a rather messy-to-take-into-account corporate action like this one.

(*) Yes, 2/3 + 1/6 = 5/6 is less than 1 - but that's because the existing Galliford Try holding is somewhat less than average for my HYP.

(**) Well, actually it was like that already, at least as the market views Galliford Try - what this corporate action really brings out is that the market disagrees with my previous assessment of the relative values of the different parts of the company. I made that assessment quite a few years ago and I wasn't at all certain about it, so I think it likely that either it was always wrong or it has become so - so I'm not saying that I disagree with the market's assessment, just that it's caused me to re-assess (provisionally today, and I'll have a proper look at it when the annual report comes out - which might or might not be together with tomorrow's full-year results).

Gengulphus

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Re: Galliford Try and Bovis homes merger, and Galliford Try final results

#250909

Postby Gengulphus » September 11th, 2019, 8:20 am

The full-year results are out: https://www.investegate.co.uk/galliford ... 00028897L/

The headline figures don't look very good to me:

""

Every single one of them is worse than the 2018 comparative...

On the dividend:

"DIVIDEND

The directors are recommending a final dividend of 35.0 pence per share which, subject to approval at the AGM, will be paid on 4 December 2019 to shareholders on the register at 8 November 2019. This is in line with our policy of paying a dividend which is 2x covered by earnings. Together with the interim dividend of 23.0 pence per share paid in April, this will result in a total dividend for 2019 of 58.0 pence per share.
"

Note that the ex-dividend date is Thursday 7 November - as usual when announcements give dividend dates in that way, the "on the register" date is one trading day later.

No annual report yet, and looking around a bit more on the Galliford Try website, it seems to have usually come out about 2-3 weeks after the final results in past years, so we can probably expect it around the end of this month or start of next.

And I haven't yet looked at how this affects and/or is affected by the proposed deal with Bovis Homes.

Gengulphus

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Re: Galliford Try and Bovis homes merger

#251391

Postby monabri » September 12th, 2019, 2:54 pm

I held GFRD but sold out for a small loss in June - partly influenced by the likes of Carillion & Interserve. There was always one excuse after another and - frankly - I lost trust in the management - documented here

viewtopic.php?p=128219#p128219

viewtopic.php?p=140533#p140533

viewtopic.php?p=178928#p178928


Here's the divi history.

https://www.dividenddata.co.uk/dividend ... ?epic=GFRD

AsleepInYorkshire
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Re: Galliford Try and Bovis homes merger, and Galliford Try final results

#251498

Postby AsleepInYorkshire » September 12th, 2019, 9:10 pm

Gengulphus wrote:The full-year results are out: https://www.investegate.co.uk/galliford ... 00028897L/
The headline figures don't look very good to me:


Every single one of them is worse than the 2018 comparative...
On the dividend:
DIVIDEND

The directors are recommending a final dividend of 35.0 pence per share which, subject to approval at the AGM, will be paid on 4 December 2019 to shareholders on the register at 8 November 2019. This is in line with our policy of paying a dividend which is 2x covered by earnings. Together with the interim dividend of 23.0 pence per share paid in April, this will result in a total dividend for 2019 of 58.0 pence per share

Note that the ex-dividend date is Thursday 7 November - as usual when announcements give dividend dates in that way, the "on the register" date is one trading day later.

No annual report yet, and looking around a bit more on the Galliford Try website, it seems to have usually come out about 2-3 weeks after the final results in past years, so we can probably expect it around the end of this month or start of next.

And I haven't yet looked at how this affects and/or is affected by the proposed deal with Bovis Homes.

Gengulphus

#216549 by AsleepInYorkshire
April 21st, 2019, 9:54 pm
viewtopic.php?f=15&t=17254&hilit=galliford&start=20

I think the Board cannot avoid some criticism regarding their inability to bottom the Bridge issues. Looking forward Graham Prothero's review should identify any other issues that "may" need to be "outed". Subject to finding nothing of any significance then he's got two simple options (again in my opinion)

1 ) Pay a dividend, full anticipated or reduced
(if reduced I speculate about 60-65p full year)
2 ) Pay no dividend on the pretext that the balance sheet needs to be protected/strengthened

I have one small reservation. Galliford's debt levels have increased and (regardless of how they got there) it may be time to reduce them and protect the long term health of the business. If Galliford's Board agree they may well want to see option 2 (above) embedded into year end results.


I was a little too optimistic when I ventured 60-65p full year dividend in my post from April. It was very much in the right ball park though. I also mentioned that Galliford's debts were excessive. It would appear that Graham Prothero has risen from the barrel of manure he found himself in and is holding a rose. The "cash injection" from the Bovis merger will remove debt and leave the construction business well placed to trade with a positive cash position.

There remain some difficult headwinds for Galliford as a stand alone construction company, not least of which I think is the uncertainty surrounding Brexit.

I wish all stakeholders well

AiY

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Re: Galliford Try and Bovis homes merger

#252609

Postby Ricksure » September 19th, 2019, 4:55 am

Merger talks would appear to be well advanced, received the following message from my broker A J Bell YouInvest.... Galliford Try Plc has announced a potential bonus issue, where you will receive new shares in addition to your existing holdings.

Shareholders, subject to the potential combination of Bovis Homes Group and Galliford Try's Housing Businesses, shall receive 0.57406 Bovis Homes shares for each Galliford Try Plc share held.

To view the announcement in full, please copy and paste the following link into your web browser:
https://www.londonstockexchange.com/exc ... 19855.html

The stock distribution may be subject to withholding tax which will be a cash debit to the account. Shareholders are reminded that they need to fund the account via a deposit, transfer or sale of shares to cover any tax liabilities.


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