Shares in Irish housebuilding groups, Abbey and McInerney, jumped yesterday following confirmation last Friday that British housebuilder Persimmon was in talks to buy its smaller rival, Westbury.
The proposed deal helped lift the share price of the two Irish companies, both of which have extensive operations in the UK, by highlighting the potential value in the sector, which is trading on very low multiples.
Abbey added 3.5 per cent to €9.42 yesterday while McInerney gained 3.7 per cent to €9.25.
"Public markets will have to recognise the value in the sector at some stage, particularly as the sector is proving its ability to manage through the current market slowdown, or the sector will mostly end up going private," said Merrion analyst John Mattimoe.
"The latest consolidation move in the UK should give further support to the recent re-rating of the UK sector and the valuations of both Irish companies will benefit from this," he added. The news could also benefit Kingspan, which added 2.6 per cent to €10.35 yesterday.
Analysts noted that Westbury is involved in the British timber frame industry through its brand, Space 4. A takeover of Westbury by Persimmon, which is one of the largest players in the UK housing sector, building 12,000 units a year, could raise the profile of timber frame construction.
This would benefit Century Homes, which was acquired earlier this year by Kingspan, and has operations in Britain. At present, 11 per cent of new houses in England and Wales are built using timber frames compared to more than 60 per cent in Scotland and 27 per cent in Ireland.
If Persimmon and Westbury agree a deal, the merged entity would be the biggest builder of houses in Britain, overtaking the current market leader, Barratt Developments. While neither company would comment on their discussions, it is understood the takeover proposal values Westbury at around £630 million to £645 million sterling.
Westbury has long been tipped as a bid target, with analysts saying it lacked critical mass, while Persimmon has been looking for acquisitions to take advantage of economies of scale.
