The UK’s competition watchdog has started a formal investigation into housebuilder Barratt’s £2.5 billion deal to buy rival Redrow.
The Competition and Markets Authority (CMA) said on Friday that it is looking into whether the buyout, announced earlier this year, will hurt competition.
It comes after the CMA announced an initial probe in March. That has now stepped up into an official inquiry. The watchdog said it will report its findings by August 8.
The two housebuilders agreed an all-share deal in February which would see them become Barratt Redrow.
The new group would be expected to build about 23,000 homes a year and make more than £7 billion in revenue.
They said it creates an opportunity to bring together two “highly complementary” companies and accelerate the building of “much-needed” homes across the country.
When two large companies combine it can lessen choice for customers and lead to higher prices or lower quality services.
The watchdog has the power to block a merger or enforce changes to address its concerns once it has investigated the potential risks.
It comes after Crest Nicholson confirmed that it rejected two takeover offers by rival Bellway last month, including one worth £650 million.
Read MoreThe bids are the latest example of consolidation attempts among housebuilders, as the sector struggles through a period of weak demand due to high mortgage rates.
A spokesperson for Barratt said: “We are confident that the combination of Barratt and Redrow is in the best interests of customers and will accelerate the delivery of the homes this country needs.
“We look forward to working constructively with the CMA as they undertake their review.”
Redrow was approached for comment.
