Bovis, Berkeley see little logic in a merger - sources

By Costas Pitas

LONDON (Reuters) - British housebuilders Bovis (BVS.L) and Berkeley (BKGH.L) see little logic in a merger, sources close to the companies told Reuters, after a media report said an influential Bovis shareholder wrote to Berkeley asking it to consider such a step.

A source close to Berkeley said there were better fits for Bovis when asked about a report in The Sunday Times newspaper which said a fund manager at Schroder Investment Management (SDR.L) had written to London-focused builder Berkeley asking it to consider an all-stock merger.

A source close to Bovis also saw little reason for the housebuilders to merge.

"It is unlikely because the land market is so benign at the market. You don't need to buy another housebuilder to get your hands on land," the source told Reuters when asked about the media report.

Bovis has been searching for a new permanent chief executive since David Ritchie quit this month after the company warned on profit in December, saying it had failed to complete the number of homes it expected during the year.

Bovis shares rose 4.1 percent by 1512 GMT on Monday following the report but remain the weakest performers of the major British housebuilders since Britons voted on June 23 to leave the European Union. Berkeley shares rose 2.6 percent.

Schroders, which holds a 6.4 percent stake in Bovis, according to analyst UBS, did not immediately respond to a request for comment.

The source close to Berkeley said merger speculation was inevitable given Bovis' underperformance in recent months but a merger would not be in keeping with Berkeley's past behaviour.

"Berkeley has never made a corporate acquisition of this nature. There are a lot more strategic fits out there (for Bovis) than Berkeley," the source said.

The Telegraph newspaper reported fellow housebuilders Redrow (RDW.L) and Persimmon (PSN.L) "could still be in the frame to buy Bovis."

Both firms declined to comment.

Richard Marwood, a senior fund manager at Royal London Asset Management, which invests in Berkeley, said he was not surprised to hear talk of corporate activity around Bovis.

"Clearly, Bovis has had operational issues and it does trade at one of the lowest prices to book in their sector, and so there's maybe a view that if you could get what would be perceived to be better management running those assets, you'd make more money," he told Reuters.

However, he said he was surprised Berkeley had been suggested as a potential partner, given its focus on London and the southeast of England.

The British property market has been generally resilient since the Brexit vote, defying economists' predictions of a downturn.

The last major consolidation in the market occurred nearly a decade ago when companies Taylor Woodrow and George Wimpey merged to form Taylor Wimpey (TW.L), becoming Britain's biggest housebuilder at the time.

In recent years, British housebuilders have reported rising profits and gradually expanded output, benefiting from government schemes to support home ownership and a lack of supply which has pushed up prices.

(Additional reporting by Simon Jessop; editing by Adrian Croft)