(Alliance News) - The UK's competition watchdog has opened a preliminary investigation into the GBP2.52 billion acquisition of Redrow PLC by Barratt Developments PLC.

Shares in Barratt fell 0.9% to 472.92 pence in London on Friday, while shares in Redrow eased 0.4% to 660.50p.

The Competition & Markets Authority said it is considering whether the deal will result in a "substantial lessening" of competition.

The CMA invited interested parties to comment before a deadline of April 2, as the first part of an information-gathering process.

It will then decide whether to launch a formal investigation.

In February, Barratt Developments agreed an all-share takeover offer for smaller peer Redrow, valuing Redrow at GBP2.52 billion.

Under the takeover, each Redrow shareholder will receive 1.44 new Barratt shares for each Redrow share. Following completion, shareholders in Redrow will hold around 33% of the combined group, while Barratt shareholders will hold around 67%.

Directors of both Redrow and Barratt unanimously recommended that shareholders vote to accept the deal.

"We believe that the combination will create an exceptional UK housebuilder in terms of quality, service and sustainability, delivering excellence and driving innovation for customers, employees, sub-contractors and the supply chain," said Barratt at the time.

Housebuilders have already attracted the attention of the CMA.

In February, the regulator said it found "fundamental concerns" within the UK housebuilding market, and launched an investigation into eight housebuilders, including Redrow and Barratt.

Publishing its final report on the housebuilding market which followed a year-long study, the CMA found that "the complex and unpredictable planning system, together with the limitations of speculative private development, is responsible for the persistent under delivery of new homes".

The CMA said: "There are persistent shortfalls in the number of homes built across England, Scotland, and Wales, with less than 250,000 built last year across Great Britain - well below the 300,000-target for England alone."

By Jeremy Cutler, Alliance News reporter

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