City analysts have given a guarded welcome to Vistry Group PLC (LSE:VTY)’s £1.25bn takeover of Countryside Partnership PLC but cautioned that it will provide a short-term drag.
Specifically, it will be earnings dilutive initially, though it does strengthen the hand of the combined group in the area of public-private partnerships, analysts at investment bank UBS pointed out in a very brief note to clients.
Analysts at City firm Liberum said: “[The] combination should enhance growth prospects and Vistry holders should benefit from the recovery in Countryside as operational performance is improved. Management has a good track record here in what was achieved at Bovis, before the Linden acquisition.”
In a separate sector note, the Liberum analysts, however, provided a hint as to why the combination may also have some merit as the UK heads into what is likely to be a sharp recession.
They pointed out that the housebuilding sector has endured its worst period of performance since the global financial crisis 14 years ago as interest rate expectations have increased alongside inflation.
“We were confident that stock market valuations were overly pessimistic but without successful government intervention this is much harder to argue,” the broker's analysts said.
“On the positive side, forced selling is much less likely now than in 2008, job vacancies are high and new build is much cheaper to run," they added.