Redrow raises £150m and brings Harrow in-house

Redrow chairman Steve Morgan has united his Harrow Estates regeneration vehicle with the housebuilding group he formed in the 1970s.

Redrow announced a £150m rights issue to pay off debt and raise funds for land acquisition at the same time as the £15m buy-out of Warrington-based Harrow.

Morgan founded Harrow in 2001 with land broker Mike Riding after the two worked on a scheme at a former rubber works in Leyland.

Harrow comes with five freehold land assets and options to acquire seven further strategic land assets. Riding left Harrow to join Trevor Hemmings' Northern Trust at the start of 2009 as land director.

Redrow said in a statement the rights issue will strengthen the balance sheet and reduce net gearing. Debt facilities will fall from £425m to £250m as a result, easing covenants relating to land purchases and joint ventures.

The rights issue is offered at a price of 105p a share, a 55% discount to the closing price of 233.5p on Tuesday 22 September.

The rights issue is underwritten by a syndicate of banks led by Merrill Lynch International and JP Morgan Cazenove.

Morgan is also buying into the rights issue through his Bridgemere and Durcan funds. Harrow was part of Bridgemere prior to the rights issue. The restructuring takes Morgan's stake to 29.9% of Redrow.

Morgan said: "The proposed Rights Issue will strengthen Redrow's balance sheet and position Redrow for growth. We are returning Redrow to its traditional focus on a great product in the market for family housing. We now need to enhance our ability to acquire land through selected acquisitions. This is all part of our strategy to steer the business back to delivering a much improved return on capital employed. I am very pleased to be supporting the proposed issue in full in respect of the 29.9 per cent. of the shares in Redrow which I control."

Law firm Mace & Jones in Liverpool advised Harrow.