Country & Metropolitan, which has made no secret of its ambitions to expand, has gradually bought 4.7% of Tay Homes’ shares and is understood to be setting up high-level meetings with the other major shareholders to talk about buying the rest of the business.
Country & Metropolitan chief executive Stephen Wicks said he had spoken to Tay non-executive director Richard Tice in the past fortnight. He said: “We had a brief chat in which he gave the impression that if we wanted to come and talk to the board, they would be interested in what our ideas would be.”
He added: “It is very early stages but we might give them scope to put the two companies together. It is a very interesting proposition. They are more than twice our size, so I suppose it would be a reverse takeover.” Yorkshire-based Country & Metropolitan is worth £7.2m and Tay Homes, which is based in Leeds, is valued at £21.3m.
Wicks, whose company builds mainly in Yorkshire and the South-east, believes that the firms would be a good fit: “In Yorkshire, we both do large-scale communities but they specialise in volume new build, so we wouldn’t be treading on each other’s toes. They are also in Scotland and the Midlands, where we aren’t.”
Tice refused to comment, as did Tay Homes finance director Stephen Evans, who simply said: “We have noted that they’ve acquired shares and obviously we had to announce when they had over 3%. Apart from that, there’s nothing to say really.”
Reaction among City analysts to the move was positive. One said: “Everyone has talked about consolidation. And although this is at the minnow end, it could well trigger larger deals.”
However, a source close to Tay suggested that the deal would have minimal impact on large investors. “It doesn’t matter whether you’re a £7m business or a £20m one, you still don’t register with most fund managers. Tay are among a raft of housebuilders that have to do something. But the question is, would putting two small companies together help – because you’re still sub-£100m in market worth and it is still bloody difficult to attract investment.”
Tay Homes has been surrounded by speculation since the spring of last year, when its chief executive John Swanson was replaced by Bill Bannister, and chairman Norman Stubbs stood down to be replaced by 3.75% shareholder John Maunders. Maunders had sold his own housing business to Westbury and brought Bannister, his chief executive, with him. The changes came after a failed takeover by housebuilder Sunley, of which Tice is chief executive. Sunley still holds 10% of Tay’s shares.
The new management announced considerable write-downs in the year to 30 June 1999 and a loss before tax of £12.9m. It also cut around 100 jobs. Interim figures to 31 December 1999 showed a £614 000 pre-tax profit, but the company’s share price has languished around 70p, compared with a year-high of 120p.
Tay’s market capitalisation is now less than the value of its net assets and the company last week bought back £1.4m of its shares, prompting speculation that it was preparing a management buy-out.