Housebuilder Vistry has tabled a recommended offer for rival Countryside at 0.255 of a new Vistry share and 60p in cash, valuing the business at just over £1.2bn.
The offer represents a premium of around 9.1% to the closing price per Countryside share of 228p on 2 September.
Vistry, which owns Bovis Homes, said the merger of the two companies would create one of the country’s leading homebuilders, comprising a top-tier housebuilder and a leading partnerships business, with capability across all housing tenures, and delivering much-needed affordable housing.
It said the combination had a “strong strategic rationale and the potential for material value creation for shareholders”.
Vistry said the merger with Countryside would strengthen its position across both housebuilding and partnerships to deliver sector-leading returns and enable capital-light, high-return partnerships business, targeting a 40% return on capital employed in the short term and expected to increase to more than £3bn of revenue per annum in the medium term.
It added that, if the market does not recognise the full value of the combined companies by 2025, each of its two divisions would be large enough to be spun out as independent businesses.
Greater exposure to partnerships would also offer greater resilience to the cyclical nature of housebuilding, said Vistry.
The merger is also expected to deliver cost savings of around £50m.
Vistry chief executive Greg Fitzgerald said: “This proposed combination has a highly compelling strategic rationale. It will create a leader in the partnerships housing sector, with the scale and expertise to accelerate profitable growth across both partnerships and housebuilding and expand the delivery of much-needed affordable housing across England.
“The proposed combination will add the strength of the Countryside brand to Vistry’s own well-established Bovis Homes and Linden Homes brands and will leverage the skills and market knowledge of both the Countryside and Vistry teams.”
Douglas Hurt, Countryside chairman, added: “The combination will create a leading, enlarged partnerships business and is an opportunity to leverage both Countryside’s brand and placemaking experience with the growing Vistry partnerships business, alongside Vistry’s established housebuilding business.
“The scale of the combined group will enable the delivery of synergies, operating efficiencies, and further growth for the benefit of Countryside shareholders and wider stakeholders. The Countryside board has carefully reviewed this combination and believes it offers the best potential to create the greatest value for Countryside shareholders.”
The proposed takeover already has the support of Countryside’s biggest shareholder Inclusive Capital Partners, which has had two unsolicited takeovers of the firm rejected already.
Jeffrey Ubben, founder and managing partner of In-Cap, said: “In-Cap fully embraces the offer for Countryside by Vistry. The combination would create a leader in the growing, asset-light, mixed-tenure partnerships market, and better positions the pro forma entity to address the affordable housing shortage in the UK. On a pro forma basis, we believe that both the partnerships and homebuilding segments will be franchise assets with the capability and resources to achieve standalone opportunities for scale.”
He added: “We are excited for Greg Fitzgerald to lead the pro forma entity given his long-tenured experience in the partnerships and homebuilding industries. Also, due to significant operating synergies, In-Cap believes the combination delivers superior long-term value relative to its 295p per share possible cash offer.”
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