Bellway takeover might be best option for Crest Nicholson, says RBC

It was revealed last week that Bellway had made two approaches to acquire Crest over recent months, both a significant premiums to the share price yet both rejected by the latter's board.

The second proposal valued Crest at 253p per share, a 20.5% premium to Crest's three-month average but at just 0.79 times book value.

"Is an offer below book value credible? Normally no, but in this special situation yes," RBC said in a research note on Tuesday.

"At first glance, an offer below book looks opportunistic, but this view assumes that the book value is reliable and that one has faith in the company to turn the land profitably into houses. However, Crest has demonstrated several times in the last year that book value is not what it seems, and its ability to generate profits is far from certain."

Ahead of the so-called 'put up or shut up ' deadline on 11 July, RBC said Crest shareholders might do well to consider another potential offer from Bellway.

"We believe that a sale to Bellway offers a less risky and less bumpy path for investors and if Bellway comes back for a third time investors would do well to hear it out," the broker said.