The all-share deal is at a 27% premium to Redrow’s present share price with each Redrow share receiving 1.44 Barratt shares under the recommended offer.

Following completion, Redrow shareholders would hold just under 33% of the equity in the company which will be called Barratt Redrow.

The combined business would create a mega house builder turning over £7.45bn and delivering over 22,600 homes a year, based on past performance.

Combined the business, which retains the three brands – Barratt, Wilson Homes and Redrow – would have net cash of £874m.

This morning Barratt said the deal would allow for £90m in cost-saving synergies and offered opportunities to consolidate the supply chain.

Steve Morgan, Redrow’s founder said he supported the deal.

“During the 50 years since I founded Redrow, I could not be more proud of the unique reputation it has earned for building premium homes and thriving communities, ” said Morgan.

“Barratt is a home builder I have long admired due to their likeminded attention to quality.

“I am confident that the Barratt / Redrow combination with their three high-quality complementary brands, will create a standout home builder for the future and accelerate the delivery of much needed homes.”

David Thomas, group chief executive of Barratt, said: “This is an exciting opportunity to bring together two highly complementary companies, creating an exceptional home builder in terms of quality, service and sustainability, able to build more of the high-quality homes this country needs.

“The combined group would leverage the respective strengths of both Barratt and Redrow, delivering significant benefits to our people, our supply chains, and – most importantly – our customers.”

Subject to regulatory and shareholder approval the deal is expected to completed in the second quarter of this year.