Under the terms of the deal to be put to shareholders, Barratt shareholders will get 67.2% of the combined group and Redrow shareholders will get 32.8%, effectively making it a Barratt takeover.

The combined group will be called Barratt Redrow and become a third brand and division of the group, alongside Barratt Homes and David Wilson Homes. The move creates a mega housebuilder turning over £7.45bn and delivering over 22,600 homes a year, based on past performance, with net cash of £874m.

The board of Barratt believes that joining with Redrow will deliver pre-tax cost synergies of at least £90m a year after three years. The one-off costs of delivering these savings are expected to be approximately £73m, with 57%. incurred in the first year following completion.

Savings will be achieved by shedding 10% of the combined workforce, Barratt said, and the closure of nine offices.

This morning Barratt said: “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. The combination will bring together two companies with highly complementary geographic footprints and three highly respected brands – Barratt Homes, David Wilson Homes and Redrow – with which to accelerate the delivery of much-needed housing across the UK and provide the opportunity for shareholders to participate in future value creation in the combined group.”

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 like-minded 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.