Country & Metropolitan, the small housebuilder trying to take over larger rival Tay Homes, says it has the backing of at least one major institution.

The firm, which this week announced a pre-tax profit rise of 49% to £751 000 for the six months to 29 February, has a 5% stake in Leeds-based Tay.

Chief executive Stephen Wicks said he would like to strike an agreed bid with the Tay board but added that the two parties have not met to discuss the issue since C&M announced its stake in mid-April.

Wicks said one large institution was now lined up to buy shares in C&M that would be used to help fund any deal, but he emphasised that the bid was at an early stage.

“These things don’t happen overnight,” he said. “But the Tay shares are still going nowhere. Something will happen at Tay before the end of the year.”

Tay Homes shares slipped back 3.4p to 70.5p last week, making the company worth £19.7m. C&M is valued at £7.42m.

Wicks said that if a deal was completed, C&M would sell some Tay land and would not top up the landbank as much as Tay has done. C&M, which received its listing in November, has stuck by a promise made then to try to grow through acquisition.

C&M has also acquired a 9% stake in CW Residential, a small developer listed on the Alternative Investment Market. “We are evaluating our situation at both companies,” said Wicks.

Group profit was boosted by £900 000 of gross profit from the sale of four acres in Bedford to Connolly Homes. Its turnover fell from £10.9m to £8.2m.