Britain's Vistry is set to become the third-largest housebuilder in the country after agreeing today to buy rival Countryside for about £1.25 billion to bolster its affordable housing business.
Countryside shareholders would get 0.255 new Vistry shares and 60 pence in cash for each Countryside share.
The deal has an implied value of 249 pence per Countryside share, about 9.1% above Friday's closing price.
Countryside in June put itself up for sale amid mounting pressure from investors after it turned down a $1.9-billion bid from San-Francisco based investor Inclusive Capital (In-Cap).
Its third-largest shareholder In-Cap said in a separate statement today it would no longer pursue Countryside and that it was supportive of the Vistry deal.
Countryside also issued a profit warning earlier this year following setbacks from a costly expansion.
Vistry CEO Greg Fitzgerald said the deal would create a business with the scale and expertise to accelerate profitable growth and "expand the delivery of much needed affordable housing across England".
Vistry's Partnership business works with local authorities and housing associations to build affordable homes.
It has been a strong performer at a time when the UK housing sector is staring at a potential slowdown amid a cost-of-living crisis.
HSBC last week had warned that the UK housing market was on the cusp of a downturn as it downgraded the sector, although it maintained a 'buy' rating for Vistry, citing a promising partnerships business.
Vistry was formed about two years ago after Bovis Homes merged with Galliford Try's Linden Homes.
Vistry said the combined group's Partnerships business would target an operating margin of 12% and it might look at the option of separating its Partnerships and Housebuilding divisions if the expected value of the combination was not achieved by 2025.
