Both firms confirmed that a revised offer had been made after two previous bids topping out at £650 million were rejected.

Crest Nicholson has also been approached by Avant Homes but rejected the deal while talks with Bellway continued.

The latest all-share offer worth around £720m would see Crest Nicholson’s shareholders hold an 18% stake in the enlarged group.

A shared stock exchange update said: “The Board of Crest Nicholson has confirmed to Bellway that the Revised Proposal is at a value that it would be minded to recommend unanimously to Crest Nicholson’s shareholders.

“The Boards of Bellway and Crest Nicholson believe that there is compelling strategic and financial rationale for a combination of Bellway and Crest Nicholson.

“The Revised Proposal would bring together the strength of each business with complementary brands to reinforce Bellway’s position as a leading UK housebuilder, while enabling Crest Nicholson shareholders to benefit from the scale of the combined business.

“In addition, the Board of Bellway believes a combination would deliver significant operational benefits (including procurement synergies) and the ability to open dual outlets on at least 10 current and future Crest Nicholson sites with complementary brands to drive incremental volumes at attractive margins.

“As part of the combination the Board of Bellway intends to retain and deploy the Crest Nicholson brand across the enlarged group (including on Bellway sites).”

Bellway now has an extended deadline of August 8 to make a firm offer.

Crest Nicholson made a £31m pre-tax loss on reduced revenue in the six months to April 2024, compared with a £28m profit the previous year.

Bellway recently announced it was “on track” to deliver 7,500 homes this financial year, with improved affordability having yielded a strong spring selling season. It is one of eight housebuilders being probed by the Competition and Markets Authority over alleged “anti-competitive behaviour”

A merger of Bellway and Crest Nicholson would create a business with a turnover of £4.3 billion.