The UK's competition watchdog, the Competition and Markets Authority (CMA), has launched a formal investigation into housebuilder Barratt's £2.5billion acquisition of rival Redrow.
The CMA announced on Friday that it is examining whether the buyout, which was revealed earlier this year, could harm competition. This follows an initial probe by the CMA in March, which has now escalated into an official inquiry. The watchdog plans to report its findings by 8 August.
In February, the two housebuilders agreed to an all-share deal that would result in the formation of Barratt Redrow. The newly formed group is projected to build approximately 23,000 homes annually and generate over £7billion in revenue.
Both companies believe the merger presents an opportunity to unite two "highly complementary" firms and expedite the construction of "much-needed" homes nationwide. However, when large corporations merge, it can reduce options for customers and potentially lead to increased prices or diminished quality services.
The watchdog possesses the authority to block a merger or enforce modifications to address its concerns after investigating potential risks. This development comes in the wake of Crest Nicholson's confirmation last month that it had turned down two takeover bids from rival Bellway, including one valued at £650million.
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These bids are the most recent instances of consolidation attempts among housebuilders, as the sector grapples with weak demand due to high mortgage rates. A Barratt representative said: "We are confident that the combination of Barratt and Redrow is in the best interests of customers and will accelerate the delivery of the homes this country needs. We look forward to working constructively with the CMA as they undertake their review."
Redrow has been contacted for a statement.
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