Vistry Group (LON:VTYV) PLC (LSE:VTY) said it is to buy rival housebuilder Countryside Partnerships PLC (LSE:CSP) for a cash and share combination of £1.25bn, with the 'mix and match facility' scheme effective by end of first quarter of 2023.
The deal, which has been recommended by the board of Countryside, is expected to 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", said Vistry chief executive Greg Fitzgerald.
Vistry, which is due to release its interim results on Thursday, said Countryside shareholders will receive 0.255 of a new Vistry share and 60p in cash for each Countryside share, which represents an implied value per Countryside share of 249p, based on Vistry's closing share price of 741p on 2 September 2022.
The terms of the combination represent a premium of approximately 9.1% to the closing price per Countryside share of 228p on 2 September.
Vistry said the combination offers a "compelling opportunity" and the potential for material value creation for shareholders in the combined group, as it will strengthen Vistry's position across housebuilding and partnerships to deliver sector-leading returns.
This would result in the combined group's partnership revenue exceeding £3bn per annum in the medium term, significantly exceeding Vistry's existing medium-term target of about £1.6bn, the company said in a statement.
Within two years of completion, Vistry expects to deliver at least £50mln in recurring cost savings on an annual run-rate basis.
Countryside built 5,385 homes last year, while its bigger rival delivered 8,639, according to annual reports.
Vistry and Countryside stocks are both lower this year. Countryside has underperformed the sector and faced senior management upheaval, putting greater pressure on shareholders to strike a deal.
Vistry, which bought Galliford Try’s housing business Linden at the start of 2020, said the enlarged business will be led by current Vistry chief Fitzgerald.
Shares in Vistry were down 0.94% at 734.00p in early morning trade.