Bovis Homes (Frankfurt: 911164 - news) is in takeover talks with Galliford Try (Stuttgart: 0GF.SG - news) after rejecting approaches from its rival and another housebuilder, Redrow (LSE: RDW.L - news) .
A tie-up between Galliford and Bovis would see the country's 6th and 8th-biggest housebuilders by home completions combine at a time when Bovis is attempting to overcome a series of challenges.
Its chief executive David Ritchie left the business after the company issued a profit warning in December linked to poor customer satisfaction.
Bovis announced last month that it would be slowing the pace of building in 2017 after taking a £7m hit related to complaints about unfinished properties, including electrical and plumbing faults.
Its problems were seen as making Bovis potentially more attractive for takeover but it said on Sunday that it had dismissed the opening salvos from Galliford and Redrow on value grounds.
Though Galliford confirmed it was still in talks over a possible purchase, saying it had made an all-share offer that would value Bovis at £1.19bn or 886p-per share.
It proposed an equity split in the combined group of 52.25% to Galliford shareholders and 47.75% to those of Bovis.
Galliford said a merger could "create a new major housebuilder with national scale and geographic coverage" as well as delivering savings from combining the two firms' "operational structures, sourcing and operating practices."
Redrow said it had approached Bovis with a proposal worth a total of 814 pence per Bovis share, made up of cash, new Redrow shares and a dividend payment.
Bovis said it had terminated discussions with Redrow after the firm indicated it was not willing to improve its offer.
"The board also concluded that the Redrow proposal was not in the interests of Bovis shareholders as the cash element of the offer would require shareholders to crystallise value at the current Bovis valuation," the Bovis statement said.
It added: "In the meantime, the Board is making good progress with plans to recover and improve group profitability and enhance return on capital employed.
"The search for a new chief executive is also progressing well.
"The Board of Bovis remains committed to maximising returns to shareholders and will continue to consider all strategic alternatives."