Another week, another round of corporate activity. But the one that stands out is Persimmon’s £640m offer for Westbury Homes.
Another week, another round of corporate activity (pages 9 and 18). But the one that stands out is Persimmon’s £640m offer for Westbury Homes. Not since the legendary Wimpey–Tarmac asset swap of 1996 has construction created such excitement in the City.
The reason for the intense interest is that if Westbury accepts, Persimmon will be propelled into the FTSE 100 – the first time that a housebuilder or a contractor has made it there. Such a position looks good on the corporate CV, and it naturally acts as a magnet to investors. Other housebuilders are excited by the prospect too, because they believe the whole sector will be bathed in reflected glory, as will their shares. What’s more, Persimmon’s purchase is likely to lead to further consolidation; firms whose performance has been below par, such as Bovis and possibly Wilson Bowden, could now be ripe for plucking. The proposed deal also sends one more welcome signal: it is being seen as marking the bottom of the housing market – an interpretation supported by a recent RICS survey, which showed the largest increase in new buyer enquiries for two years.
Of course the deal has not been sealed, although the omens look hopeful: Westbury’s fit with Persimmon is seen as a good one. And we know that Persimmon knows how to play the acquisition game – it extracted £30m in cost savings when it integrated Beazer.
So, all in all, splendid news for housebuilders and the City. But any trend towards consolidation will raise a few concerns for the government. Last year, Persimmon built 12,360 units and Westbury 4361. Consolidation is bound to reduce this combined output, at least in the short term. And this is against a background of declining overall output: during the third quarter, housing starts were 1% down year on year, and completions were down 5% …
One rule to bind them all
Another week, another edict from the government on the Building Regulations. This time it’s a draft paper drawn up by climate change minister Elliott Morley. The thrust is that regulations should be more tightly enforced. Many firms in the industry would welcome such a move. A level playing field is essential for anyone who works hard and spends money complying with the rules. Is there anything more galling than seeing your rivals ignore regulations, beat you on price and get away with it?
It would no doubt be welcomed, too, by building control officers, who’d have the full weight of Whitehall behind them. But as our Reform the Regs campaign has shown, officers can’t cope with the number of changes they have to implement. If the regulations are to be rigorously enforced, then more resources are needed, as is a simpler regulatory regime. If you agree, why not support our campaign – organisations representing 70,000 companies and individuals have already, not to mention the dozens of emails and letters from readers. Email us at firstname.lastname@example.org and we just might make the government take note.
Denise Chevin, editor