The consolidation process in the housebuilding sector moved up another notch as Bovis Homes snapped up Merseyside housebuilder Elite Homes for almost £72m.
Bovis Homes will pay £25.7m in cash to Elite and take on £46.2m of the company’s debt. The deal will increase Bovis Homes’ landbank with planning permission by more than 800 plots, to 12,470.
Elite sells homes across north-west England and Yorkshire. Last year it posted pre-tax profit of £6.4m on sales of £58.4m.
Malcolm Harris, Bovis Homes’ chief executive, said: “This acquisition represents a good opportunity to consolidate our presence in the north of England, developing our position in this important market as part of our longer-term regional expansion plans.”
City analysts said the economies of scale in what is traditionally a low margin region would benefit Bovis Homes in the long term. Simon Brown, an analyst with stockbroker Evolution, said: “It is a small deal in overall terms, but it shows that the attractions of acquiring planned land in bulk will maintain the trend of steady industry consolidation.”
The City also thought Bovis Homes had achieved a good price for Elite, as its shares rose after the announcement on Friday; other housebuilders shares performed poorly.
It is a small deal in overall terms, but it shows the attractions of acquiring planned land in bulk
Simon Brown, analyst
Last time out, Bovis Homes posted a 10% rise in pre-tax profit to £58.4m for the six months to 30 June.
In common with other housebuilders, Bovis Homes’ share price plunged from its April high of 1,220p.
Shares are trading at about 673p, above last month’s year low of 637p, giving the company a market capitalisation of about £815m.
Bovis Homes has recently been seen as a potential takeover target but, to date, has been protected by its high share price.
For more on housebuilding consolidation search www.building.co.uk/archive