By Justin George Varghese
(Reuters) - News of a 950 million pounds bid for the residential units of builder Galliford Try (LON:GFRD) plc drove shares in the company 8% higher on Tuesday even as the bidder Bovis Homes (LON:BVS) said the two sides were no longer in talks.
Galliford on Saturday said it had rejected a bid from Bovis to buy its Linden Homes and Partnerships & Regeneration businesses in exchange for new Bovis Homes shares, judging it was not in the interests of all shareholders.
Bovis said in a statement on Tuesday that negotiations had broken down after it followed up an initial approach with a formal offer on May 8 of 950 million pounds in its own shares as well as the assumption of 100 million pounds in debt.
Galliford, under pressure from shareholders in recent months, reiterated in a separate statement on Tuesday that it remained confident in its long-term prospects.
Analysts said the reaction of markets on their first day trading on news of the talks suggested the deal may not be dead or that Galliford may yet find another buyer.
"With the potential for 10-15% EPS enhancement to Bovis at that price, and greater than 50% upside to Galliford share price at the offer price, we believe the story may not have fully played out," Jefferies analysts said in a note.
Shares in sector peer Kier plc rose 4% with another broker, Liberum, pointing to it as an alternative target for Bovis.
Galliford shares gained as much as 8.2% to 582.5 pence in early trading. Bovis shares were flat after an initial gain.
Galliford, known for projects ranging from the redevelopment of the Wimbledon tennis venue to hospitals and city bypasses, has been reviewing its operations, reducing the size of its faltering construction business, to focus on more profitable sectors, under newly-installed chief executive Graham Prothero.
The company, among those hit heavily by the collapse last year of government contractor Carillion, flagged last month that the review would hurt earnings this year.
Britain's real estate market, and in particular housing, is struggling in the face of a slowing global economy and the fallout of the country's chaotic attempts to leave the European Union.
"Investors may question the wiseness of the deal given where we are in the housing cycle and political uncertainty," Jefferies analysts added.
"(But) Bovis indicates the acquisition was targeted due to the fit of the business in housebuilding, the scale it would bring to the group as a whole, and the inclusion of the Partnerships business in its own emerging new division."