Published on : Fri, 25 Nov 2005 21:04GMT
by : Sadat Sayeed

LONDON - Persimmon has announced that it intends to take over smaller rival Westbury in a deal worth £643 million. This deal will propel Persimmon to the top of the housebuilders' list, thus relegating Barratt Developments to a second place.

Persimmon had offered 560 pence-a-share for Westbury and analysts are of the opinion that the nod for this deal by the board would avert any bidding war. The combined sales of both the companies stand at 17,000 units. This margin is 3,000 more than the corresponding figures at Barratt. "I think a number of companies will look at this deal and begin to examine their own business and strategy in the light of the current market.

I do think that some of the smaller builders will find it increasingly difficult to compete," said John White, the chief of Persimmon. He added that the biggest housebuilder tag would not mean automatic success and that the company would work towards delivering quality products in the country.

White also said that the market was just shaping up in a fine manner and that the August rate cut had definitely helped it in a significant way, "It is hard work but it is fine. I would say we are getting back to normal conditions, unlike the situation we had two years ago when prices just went up and up and we sold everything off plan," he said adding that the Westbury deal was not made just because the company was for sale. Instead the jelling of the two businesses was the logic behind the take over. In the backdrop of this announcement, Persimmon shares jumped by 26 pence to £10.84 in early trading.

Analysts say that the deal does make a lot of sense for Persimmon and that the price being offered by it was fair by market standards, "It is a good price for both sets of shareholders," said Rachel Waring, an analyst at Numis Securities.