By Geoffrey Smith
Investing.com -- Shares in Countryside (LON:CSPC) popped higher on Monday morning in London, after it agreed to be bought by rival Vistry (LON:VTYV), a deal that will create one of the U.K.'s biggest homebuilding groups.
The two groups said that Vistry will pay 0.255 Vistry shares and 60 pence in cash for each Countryside share, valuing the latter at just over 1.2 billion pounds ($1.4 billion). That's equivalent to 249 pence per share, and a premium of around 9% to Countryside's closing price on Friday.
Vistry shares, which closed at a 22-month low on Friday, fell 0.4%.
Countryside shares rose only 5.5% in response to the news, however, the morning was overshadowed by broad selling across all European markets in response to Russia's decision to shut down the Nord Stream 1 gas pipeline to Germany on Friday, a move that raised the prospect of Europe having to do without Russian gas this winter.
The Nord Stream news adds to the problems facing the U.K. economy by aggravating the energy crisis and worsening the outlook for the pound, raising both operating and capital costs for all U.K. companies.
The merger would create a top-tier homebuilder in the national market with an annual completion rate of over 14,000 houses, and should lead to the generation of at least 50 million pounds a year in recurring savings and operational efficiencies within two years of the deal closing, according to the groups' statement to the London Stock Exchange.
The proposed merger is a victory for U.S.-based activist investor Browning West, which owns just over 15% of the group and had been pressing for such a step since it acquired its stake.