30th May 2022 18:58
(Alliance News) - A potential counter bid for Countryside Partnerships PLC could be on the cards after Inclusive Capital Partners LP made two approaches to the housebuilder's board with a potential takeover offer, both of which were rejected.
San Francisco, California-based investor Inclusive said the offer - at 295 pence per share - represented a "compelling proposition for Countryside shareholders".
The offer reflects a 24% premium from Countryside's closing share price of 238.60 pence on Friday last week. The stock closed up 19% at 284.00p on Monday.
In-Cap currently owns 45.8 million shares in Countryside, reflecting a 9.2% interest in the group.
Countryside on Thursday last week told In-Cap it would not engage with the investor to provide access to due diligence materials. In-Cap said this is its second attempt to engage with the group over the past two months.
Countryside later on Monday clarified that it had rejected both In-Cap proposals, on the grounds they did not reflect the group's shareholder value creation after taking into account Countryside's unique market position. It also advised shareholders to take no action.
In-Cap now has until June 27 to announce a firm intention to make an offer or pull out.
AJ Bell's Russ Mould commented that the bid was "testament to the appeal of the UK housebuilding sector" which should benefit in the long term from supportive supply and demand, regardless of the economic backdrop.
Mould explained: "It is easy to argue times are looking tougher for the builders and developers but before the news of the 295p-a-share cash offer, Countryside's shares were trading on barely eight times (potentially depressed) forward earnings and 1.3 times historic book, or net asset, value. At first glance, that prices in a lot of bad news and not much good.
"The multiples implied by the 295p offer price put Countryside on 1.7 times net asset value (NAV) per share and just under ten times forward earnings. The whole UK housebuilding sector trades on 1.2 times and just over eight times, with balance sheets that are showing net cash in aggregate."
Further, Mould noted that housebuilding sector looks potentially good value as it "trades at one times NAV or less, and they are expensive when they trade at two times or more".
"Countryside was trading toward the lower end of that range, and several FTSE 100 and FTSE 250 builders still do. Even Inclusive Capital's 295p-a-share offer does not take Countryside's stock to the top of that 1.0x to 2.0 times range for historic NAV so a counter bid, or at least a higher offer to clinch the deal, cannot be ruled out completely," Mould added.
By Arvind Bhunjun; [email protected]
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