Horizon’s bid for Crest stirs sector

An investment vehicle backed by entrepreneur Hugh Osmond has made a bid approach for Crest Nicholson, the privately held UK housebuilder.

Horizon Acquisition, a quoted special purpose acquisition vehicle, made the approach with an offer for Crest of £350m to £400m, a small discount to estimates of the value of the company’s land bank last year.

If a deal went ahead, it would be the first big acquisition in the industry since the start of the recession and could trigger further activity.

“This will, rightly or wrongly, bring a run of speculative talk about the prospects of takeovers among the other house builders,” Alastair Stewart, an analyst at Investec said.

Horizon, floated on the stock market this year after raising £417.7m for acquisitions, is headed by Mr Osmond, the serial entrepreneur involved in companies including Pizza Express, the Punch pub group and Pearl, the insurance group now known as Phoenix. Horizon’s chairman is Mike Fairey, the ex-deputy chief executive of Lloyds.

Horizon is looking at Crest along with four or five other deals, according to a person close to the group.

The group has informed Crest’s lenders, which include Lloyds and HSBC, of the approach and plans to ask them for permission to initiate negotiations from as early as next week, according to people familiar with the matter.

“They [Horizon] have spotted that Crest’s management are acutely unhappy and desperate for a new owner,” said one person close to the situation.

Crest was taken private by a 50-50 venture between HBOS and Sir Tom Hunter, the Scottish entrepreneur, close to the peak of the market in May 2007.

In February last year Crest completed a £630m debt for equity swap that left its lenders holding 90 per cent of the stock, with the remaining 10 per cent going to management.

The restructuring helped the housebuilder slash its borrowings from £1.09bn to just £620m, set to mature in 2012. Horizon would acquire the group via the debt, paying down a large chunk at par and asking lenders to write down the remainder.

One hurdle to the deal would be the losses that Crest’s creditors would have to bear were it to go ahead. Horizon was not available for comment.