Troubled housebuilder Bovis Homes has rejected the £1.2bn bid from rival Galliford Try but appointed the former Galliford boss Greg Fitzgerald as its new chief executive.
Galliford had been the frontrunner to buy Bovis after Redrow, another housebuilder, pulled out of the bidding battle last week. Galliford had offered 886p a share, valuing Bovis at £1.2bn, while Redrow’s cash-and-shares bid was worth £1.1bn, or 814p a share.
Bovis is seeking to draw a line under its recent troubles by recruiting Fitzgerald, the highly regarded former chief executive and chairman of Gallliford, where he worked for more than 30 years. Bovis issued a shock profit warning in late December, prompting the departure of chief executive David Ritchie.
Fitzgerald will have to improve build quality and customer service at Bovis, after the company set aside £7m to fix poorly built homes. It was accused of pressuring customers to move into unfinished homes before Christmas so it could hit sales targets.
Like the Berkeley boss Tony Pidgley, Fitzgerald has been credited with correctly calling the housing cycle and oversaw a near 200% rise in Galliford’s share price while he was at the helm. He previously founded two housebuilders – Midas and Gerald Wood Homes – that were later bought by Galliford. He currently serves as non-executive chairman at Ardent Hire Solutions and Baker Estates.
Fitzgerald will receive a three-year pay and shares package worth up to £8.1m. It includes an annual salary of £650,000; an annual bonus of up to 100% of salary in shares, deferred for three years; a long-term share incentive plan of up to 200% of salary for each of the first two years and 150% of salary thereafter and a one-off share award of up to 100% of salary to recompense Fitzgerald for relinquishing management of certain investments to take up his new role.
Bovis stressed that apart from the salary his package is all in shares, which Fitzgerald had insisted on. He replaces the interim chief executive Earl Sibley, who will return to his previous role as finance director of Bovis.
Fitzgerald said: “Bovis has a great brand, excellent people and a high-quality land bank. I very much look forward to working with the management team to restore Bovis’s position as a leading housebuilder and deliver significantly improved returns to shareholders.”
Bovis said it was “making good progress with resolving the high level of customer service issues we faced at the start of 2017”. It said more than half its employees had taken part in a bespoke customer training programme, which all staff will have completed by the end of April. Sales and reservations are in line with the company’s expectations.
It intends to return to shareholders any excess capital from a balance sheet optimisation programme and from improved cash generation from operations.
Bovis shares reacted positively to the news, rising by 2.85% to 870.6p in early trading.
