- Countryside shares rally post Vistry deal
- Takeover price represents 9% premium
- Deal to create leader in Partnerships housing sector
The share prices of housebuilder Vistry Group (VTY) and Countryside Partnerships (CSP) moved in opposite directions, after the former agreed to buy Countryside in a deal that values the UK homebuilder at £1.25 billion.
The boards of both companies have recommended the cash and share deal.
Shares in Vistry Group drifted 0.67% lower to 736p whilst shares in Countryside jumped 5.2% to 240p. The takeover price represents a 9.1% premium to Countryside’s prior closing price.
Under the terms of the deal Countryside holders will get 0.255 of a new Vistry share and 60 pence in cash for each Countryside share held.
HIGHER PREVIOUS BIDS REJECTED
Countryside was put up for sale in the wake of pressure from activist investor Browning West who started building a stake in 2020.
The group has suffered from a slump in earnings and revenue brought about by its overly ambitious regional expansion plans and supply chain constraints.
In April, Countryside issued a profit warning and suspended its share buyback programme.
These difficulties have been reflected in the share price performance. After peaking at a level of 568p in late August 2021, the shares have declined by 57%.
Countryside rejected two previous bids from Inclusive Capital that valued it at about £1.47 billion, arguing at the time that these undervalued the company.
STRATEGIC LOGIC FOR DEAL
Vistry chief executive Greg Fitzgerald struck an optimistic note highlighting the strategic merits of the deal:
‘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.’
Vistry’s share price has also struggled recently.
Given growing pressures from rising interest rates, build cost inflation and a slowing UK economy, both businesses may benefit from working together to take on the macroeconomic challenges.
The group said it has earmarked at least £50 million in cost savings by the end of the second year after the deal, while it flagged ‘significant benefits’ of adding Countryside’s timber frame business.
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