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Housebuilder plots takeover amid hopes of construction boom under Truss

Housebuilder plots takeover amid hopes of construction boom under Truss
Housebuilder plots takeover amid hopes of construction boom under Truss

Vistry Group is exploring a takeover of rival Countryside Properties in what would be a bet on a housebuilding boom under Liz Truss.

Greg Fitzgerald, chief executive of Vistry, wants to pursue a deal for Countryside amid unrest among its US investors, according to multiple City sources.

Countryside put itself up for sale in June after rejecting two unsolicited takeover offers from its third-largest shareholder Inclusive Capital Partners.

San Francisco-based In-Cap, which has built up a 9.2pc stake, offered as much as £1.5bn for the company. Vistry could seek a lower price against the increasingly gloomy economic backdrop, a property insider said.

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However, the board rejected the In-Cap bid, saying it “materially undervalued” the housebuilder and its prospects.

Countryside said it would begin a formal sale process after a number of shareholders said the company would fare better as a privately owned company or as part of a bigger business.

US hedge fund Browning West, Countryside’s largest investor, ramped up the pressure by accusing bosses of “significant destruction of shareholder value”.

At the time, the housebuilder said it had only received offers from In-Cap and was not in discussions with any other suitors.

But a deal with Vistry would allow Countryside to assuage investor unrest as housebuilders face up to a slowdown in the housing market.

Both companies have dedicated partnerships businesses, which ink deals with local authorities and housing associations to build developments with a mix of market-rate and affordable housing.

An industry source said Vistry was “very bullish” on growing its partnerships business, adding that a tie-up with Countryside would roughly double its revenue in that division.

It comes as Ms Truss has pledged to help more buyers get on the housing ladder by introducing a policy that would allow applicants to use rent payments as proof they can afford a mortgage.

She has also vowed to tear up the red tape holding back housebuilding and make it easier to build on brownfield land.

Property analyst Alastair Stewart said the overlap in partnerships made the two companies a “good fit”, adding that a combined group would be a “considerable force to reckon with” amid growing demand for affordable homes.

Mr Stewart also pointed to Vistry boss Greg Fitzgerald’s experience in combining major housebuilders after he helped to steer through the huge merger of Bovis Homes and Galliford Try to create Vistry in 2020.

It comes as HSBC sounded the alarm over the outlook for the property sector, warning it was on the brink of a downturn.

On Friday, the bank predicted a 20pc slump in housing demand from the autumn as rising interest rates and energy bills take their toll.

While Countryside previously rejected In-Cap’s offer of £1.5bn, an industry source said the looming downturn meant the eventual sale price may not be that high.

Countryside, which was founded in 1958, has lagged behind its rivals and failed to cash in on the recent house market boom, with its shares tumbling 50pc since the start of the year.

The company’s woes were capped by the departure of chief executive Iain McPherson in the wake of a profit warning in January.

A subsequent review by chairman John Martin, who stepped in as interim chief executive, uncovered a litany of failings in its projects across the country.

In particular, the review said Countryside had “failed to realise the benefits” of its Westleigh Group subsidiary following a £135m takeover in 2018.

Vistry has also seen its market value slide this year amid a wider downturn for the sector as interest rates rise and house prices begin to cool.

But its decline has been less severe than many of its rivals and bosses lifted the outlook for full-year profit thanks to robust demand for its homes.

Vistry and Countryside Properties declined to comment.