Housebuilder Vistry agrees £1.25bn deal to buy rival Countryside

Two of the UK’s leading housebuilders are merging after an approach from FTSE 250 developer Vistry Group to buy struggling rival Countryside Partnerships.

The board of Countryside has agreed to a cash and share offer from Vistry that values the company at £1.25bn, a premium of approximately 9.1 per cent to Countryside’s closing share price of 228p last Friday.

The news propelled Countryside’s shares 5 per cent higher to 239.4p by early morning in London on Monday. Vistry shares fell 1 per cent to 730p.

The offer has the support of five major Countryside shareholders, including US activist Browning West, which has pushed for a sale and collectively owns about two-fifths of the company’s shares.

The combined group will be led by Vistry boss Greg Fitzgerald, who expects the combination to result in £50mn in annual cost savings two years after the deal completes.

Countryside works in partnership with housing associations to deliver projects with a large proportion of affordable housing.

The company’s growth plans hit the buffers this year after it issued an unexpected profit warning and its boss stepped down. Shareholders have lobbied for a sale after missing out on the housing boom.

“Getting the American shareholders on our side was relatively straightforward. They see the merits of the combination, partly because Countryside has not had a chief executive for some months now in uncertain times,” said Fitzgerald.

A tie-up between the companies would provide “much needed affordable housing across England and material benefits for shareholders”, he added.

The combined group’s revenue would split roughly in half between a partnerships’ business, which will work with housing associations on affordable housing, and a housebuilding division selling on to the open market.

That split would offer Vistry “greater resilience to the cyclicity of the housing market”, said Fitzgerald, who said the partnerships division could be spun off if investors were undervaluing the combined entity by 2025.

“We have the prospect of having by far and away the biggest affordable business in the country by 2025. Imagine what that could be worth on the open market,” he said.

Vistry expects the deal to potentially double its operating profits to more than £800mn. The company is funding the acquisition with debt arranged by HSBC, which it aims to repay within two years.

The deal also has the support of San Francisco-based investment fund Inclusive Capital Partners, or In-Cap, which owns about 9 per cent of Countryside and which had its own £1.5bn approach to buy the company rebuffed this year.

The Vistry deal will do more to address the affordable housing shortage in the UK and delivers better long-term value for shareholders than In-Cap’s own 295p-a-share offer, said Jeffrey Ubben, In-Cap’s founder.

The deal is likely to require approval by the Competition and Markets Authority, according to Jefferies analyst Glynis Johnson.