Persimmon ' s agreed £643 million takeover of its smaller rival Westbury is likely to result in a "few hundred" job losses as head office functions are consolidated and some regional offices closed.
The company, which will become the UK's leading housebuilder by volume, is bidding 560p a share in cash for Westbury. On top of this, Westbury shareholders will also be entitled to keep the 6.1525p interim dividend.
Persimmon, which announced it was in bid talks with Westbury earlier this month, expects to extract synergy savings of £25 million in its first full year of ownership, building to £40 million by 2007. The one-off charge associated with the integration will cost Persimmon about £12 million.
The bulk of the savings will be achieved through the closure of around eight regional Westbury offices and its headquarters in Cheltenham.
John White, Persimmon's chief executive, said a "few hundred" jobs would be lost as a result of this move, although he stressed that a lot of key employees and senior Westbury management would be moving across to the enlarged Persimmon group.
"It's inevitable that some jobs will have to go if we are to achieve our savings targets and drive the combined business forward," he noted.
The enlarged group will have annualised sales of about £3 billion and build around 16,700 homes in 2006. The deal is expected to be earnings enhancing - before one-off costs - in the year to December 2006.
Combined annual profits will exceed £650 million on an earnings before interest, tax and ammortisation (EBITA) basis.
In the West Midlands Persimmon has the former Cape Hill brewery in Birmingham and is part of the £500 million Lawford development in Telford.
It has sites across the region including at Burton-on-Trent, Bromsgrove, Evesham, Leamington Spa, Malvern, Stoneleigh, Stratford-upon-Avon, Sutton Coldfield, Walsall, Warwick and Wolverhampton.
Westbury has sites at Alrewas, Atherstone, Burton, Cleobury Mortimer, Cheltenham, Hagley, Handsworth in Birmingham, Rugby, Shifnal, Stourport-on-Severn, Telford, Walsall and Wolverhampton.
One of the biggest tasks facing Persimmon will be how to close the margin gap between the two companies.
Its operating margin on its UK housebuilding business is about 22-23 per cent, compared to around 14 per cent for Westbury.
Said Mr White: "We're confident we can close the gap over the next few years. We have a strong management team and a good track record of squeezing out costs and delivering value for shareholders."
He said the firm had demonstrated this on its last major purchase, the £610 million Beazer acquisition in 2001.
Persimmon's net debt will rise following the deal with proforma gearing estimated at about 80 per cent. This will fall back to around 50 per cent at the end of 2006. Westbury is a great fit with Persimmon. It will give us a land bank of about 77,000 plots and secure our medium and long-term building requirements," he added.
It gains 15,000 plots of land with planning consent to add to its existing landbank of 62,000 plots,
The acquisition will particularly benefit Persimmon's upmarket housebuilder Charles Church, which will increase its output from 1,000 units per annum to around 3,000. "We'll see increased benefits through the size and scale of our combined operations," said Mr White.
Persimmon plans to keep the Westbury name where partnerships on social housing and affordable accommodation is concerned, but phase it out on private housing.
