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Barratt Developments PLC announced Monday that it will move forward with its approximately £2.5 billion ($3.2 billion) acquisition of rival homebuilder Redrow PLC this week, despite the ongoing investigation by the U.K.'s competition regulator. The decision to complete the deal before receiving a green light from the Competition and Markets Authority (CMA) is aimed at reducing uncertainty surrounding the transaction.

Barratt and Redrow to complete £2.5B Dea : Court Sanction Expected Tuesday

In a joint statement, Barratt and Redrow confirmed they have secured a court hearing scheduled for Tuesday to sanction the scheme, which will enable the deal's completion. By doing so, Barratt and Redrow aim to mitigate any potential delays that could arise from the CMA’s investigation.

The CMA, however, retains the authority to halt the integration of the two businesses until it completes its inquiry. This is likely to include issuing an initial enforcement order, a standard procedure designed to preserve the status quo during an ongoing investigation.

CMA Investigation Continues

The CMA first raised concerns on Aug. 8, identifying potential competition issues in a specific area around Whitchurch, where Barratt and Redrow both have developments. The competition watchdog concluded its initial phase of inquiry into the deal, citing fears that the acquisition could harm consumers in that locality.

Barratt and Redrow were given until Aug. 15 to propose remedies to address these concerns. If the proposed solutions are deemed inadequate, the CMA’s investigation could advance to a more intensive second phase, with a decision expected by Thursday.

In light of the CMA’s concerns, Barratt and Redrow acknowledged their willingness to engage and present remedies, specifically regarding sales and future building projects on the Redrow site in Whitchurch. However, the companies have clarified that these remedies will not include selling any land.

Barratt and Redrow to complete £2.5B Dea : Strategic Move to Finalize the Deal

Despite the unresolved competition concerns, Barratt and Redrow have chosen to drop the clause in their scheme document requiring CMA clearance before completing the deal.

"Barratt has waived the CMA condition to the scheme, and the parties now intend to complete the combination later this week," the companies said in their joint statement. This move, they argue, will eliminate uncertainty for employees, supply chains, and stakeholders, allowing the newly combined entity, Barratt Redrow PLC, to commence operations sooner.

The merged company, which will be named Barratt Redrow PLC, is poised to become a dominant force in the U.K. homebuilding sector, with plans to accelerate home construction nationwide. After the transaction, Redrow shareholders will own 32.8% of the combined group, with Barratt shareholders holding the remaining 67.2%.

Legal Advisers and Next Steps

Legal advisers on the deal include Linklaters LLP for Barratt and Slaughter and May for Redrow. The CMA probe, which began in March and entered its first phase in June, remains a significant hurdle. The competition regulator's final decision on whether to escalate the investigation will likely shape the immediate future of the newly formed Barratt Redrow PLC.