Crest Nicholson has rejected a takeover bid from rival housebuilder, Bellway, for £650m.

In a statement, Crest Nicholson said that it had received a revised proposal for a possible all-share, which would see its shareholders receive 0.093 new ordinary shares in Bellway, equating to 17.1% of the company.

Despite Bellway valuing the shares at 258 pence each, which represents a premium of 18.8% to Crest Nicholson’s share price, the firm said that the proposal "significantly undervalued" the housebuilder and its "future standalone prospects", while not being in the interests of shareholders.

Bellway has made offer previously, making improved bids each time, stating in its latest announcement that it believes there is a "compelling strategic and financial rationale for a combination" of the two firms.

Investment director at AJ Bell, Russ Mould, said: "A clever strategy is to make acquisitions when times are hard. Exploit an opportunity to buy a rival, increase scale and reap the benefits once market conditions improve.

"Bellway is trying to do just that, with its eyes firmly fixed on Crest Nicholson. The offer price hasn’t quite hit the mark so the next step is to do the M&A dance and keep coming back with a more generous bid until it gets the deal over the line."

The news comes after Crest Nicholson reported a £25m fall in its half-year revenue year-on-year, while recording a pre-tax loss of £30.9m in the same period.

Furthermore, its number of home completions dropped by 12% in the six months to the end of April, adding that it now expects a pre-tax profit of between £22m-29m for the full financial year which is below previous expectations.

However, The Guardian reported shares at the group jumped by 8% to 230 pence per share in early trading following the announcement, despite having halved over the past three years.

Head of investment at interactive investor, Victoria Scholar, added: "Before today’s jump, shares in Crest Nicholson were roughly flat year-to-date and were little changed year-on-year, underperforming the wider UK market, providing an opportunity for Bellway to make an offer while shares remain relatively cheap.

!Crest Nicholson has had a tough time lately – just this week the company cut its dividend and announced a profit warning, predicting full year earnings will drop by at least a third after reporting an 88% slide in half-year profit, driven by higher interest rates and sluggish demand. The weakness in its performance and the vulnerability of its shares makes Crest Nicholson more susceptible to takeover attempts.

"Today’s update is the latest suggestion of consolidation in the sector after Barratt and Redrow announced plans for a £2.5bn merger in February and Vistry acquired Countryside in 2022 for £1.25bn. UK housebuilders appear to be increasingly eyeing inorganic growth, looking to tie-up with rivals to combat pressures from the slowdown in developer deals and weak residential demand, weighed down by higher mortgage rates."

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