Vistry has agreed to give Countryside shareholders 60 pence per share plus 0.255 of a new Vistry share for each old Countryside one. Based on most recent closing prices, this values Countryside at £1,254m.
Vistry was created in January 2020 when Bovis Homes acquired Galliford Try’s Linden Homes and Partnerships & Regeneration businesses for £1,100m.
Countryside has been formally in play since June when it relented to shareholder pressure and agreed to listen to any takeover offers. It had previously rejected two approaches from one of its major shareholders, Inclusive Capital Partners, which wanted to take the business private.
Vistry said that acquiring Countryside would make the business more resilient to the cyclicality of the housing market, because most of Countryside’s work is for housing associations and institutional private rental sector (PRS) investors. Countryside reckons itself to be the market leader in house-building partnerships with housing associations, public bodies and institutional private rental operators. During 2021 it completed 5,385 new homes, of which 2,394 were private for sale, 2,107 affordable homes and 884 were PRS homes.
The Vistry directors believe that the combined group can deliver at least £50m of pre-tax recurring cost synergies on an annual run-rate basis by the end of the second year following completion.
And if it doesn’t work out, they said, Vistry would have a big enough partnerships business – based on the combined Countryside and Linden Partnerships – that the organisation could be neatly split in two at a later date, if that was deemed best for shareholder value.
Inclusive Capital Partners (InCap), which holds 9.2% of Countryside and started the whole sale process, has provided an irrevocable undertaking to Vistry in support of the deal. Vistry has also received undertakings from Countryside institutional shareholders Browning West, David Capital Partners, Anson Advisors and Abrams Capital Management, representing in aggregate 39.1% of the total.
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.
“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."
Countryside chairman Douglas Hurt said: "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. 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."
In light of the takeover, the Countryside directors have discontinued their search for a chief executive. The post has been vacant since Iain McPherson's departure in January.
The combined group will be led by Vistry's Greg Fitzgerald with Vistry chairman Ralph Findlay remaining chairman.
In fact, the Vistry board will be unchanged except for the addition of Countryside chief financial officer Tim Lawlor, who will become Vistry Group CFO.
Earl Sibley, the current chief financial officer of the Vistry Group, will become chief operating officer, taking over from Graham Prothero, who handed in his resignation in April and leaves at the end of the year.
Stephen Teagle will lead the partnerships business of the combined group as chief executive – Partnerships Division; Keith Carnegie will lead the house-building business as chief executive – Housebuilding Division.
In-Cap founder and managing partner Jeffrey Ubben 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. 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 295 pence per share possible cash offer.”
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