Vistry agrees $1.43bn Countryside deal

November 2022 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

November 2022 Issue

British house builder Vistry has agreed to acquire its rival Countryside in a deal worth $1.43bn. The newly combined company would be the third largest house builder in the country.

Under the terms of the deal, Countryside shareholders will receive 0.255 new Vistry shares and 60 pence in cash for each Countryside share held. The deal has an implied value of 249 pence per Countryside share, about 9.1 percent above Countryside’s closing price on the last day of trading before the deal was announced. Upon completion, Countryside shareholders will hold 37 percent of the merged business. The takeover is expected to complete by the end of the first quarter of 2023.

Five major shareholders in Countryside, including US activist Browning West (which pushed for a sale), representing 39 percent of the company’s shareholding, have already announced their support for the planned takeover, along with the boards of both companies.

The deal also has the support of San Francisco-based investment fund Inclusive Capital Partners, which owns about 9 percent of Countryside and which had its own £1.5bn approach to buy the company rebuffed earlier this year. Inclusive Capital released a statement making it clear that it was “supportive of the Vistry Offer, recognising the significant synergies between the two entities and considerable value creation opportunities for shareholders presented by the combination” and was no longer considering making an offer for Countryside.

The resulting combined business will see 45 percent, or £1.9bn, of revenue coming from partnerships, with 55 percent, or £2.3bn, coming from private house building.

Under the new board structure, Tim Lawlor will join the executive leadership team of Vistry as chief financial officer (CFO) and Earl Sibley, currently CFO of the Vistry Group, will assume the position of chief operating officer. Stephen Teagle will lead the partnerships business of the combined group as chief executive of the partnerships division and Keith Carnegie will lead as chief executive of the housebuilding division.

Vistry expects the combination to result in £50m in annual cost savings two years after the deal completes. The company also expects the deal to potentially double its operating profits to more than £800m. Vistry is funding the acquisition with debt arranged by HSBC, which it aims to repay within two years.

“This proposed Combination has a highly compelling strategic rationale,” said Greg Fitzgerald, chief executive of Vistry. “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.

“We believe there is clear potential to generate material value for both Vistry and Countryside Shareholders and wider stakeholders from a combined group with enhanced scale and superior returns and to improve the performance of key parts of Countryside’s business. We welcome the support of the Countryside Board and the support we have already received from a significant proportion of Countryside Shareholders for the Combination,” he added.

“The Combination will create a leading, enlarged partnerships business and is an opportunity to leverage both Countryside’s brand and place-making experience with the growing Vistry partnerships business, alongside Vistry’s established housebuilding business,” said Douglas Hurt, chairman of Countryside. “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 statement announcing the deal also noted the possibility that, in the event the stock market does not value the business as anticipated by 2025, the combined Vistry and Countryside Partnerships business might be spun out into a separate standalone partnership firm, leaving the traditional housebuilding efforts of Vistry separate.

Richard Summerfield