Persimmon looks South East with purchase of rival

Persimmon yesterday said it is paying £35.7m for Hillreed Homes, a Kent-based builder operating across the South East.

While the York-based housebuilder has been active in the land market, Hillreed is its first acquisition since the onset of the credit crunch.

Hillreed typically builds three to five-bedroom houses worth £250,000 to £1m, completing around 100 sales a year.

It comes with a land bank of around 3,400 plots, which Persimmon said includes “strong strategic land holdings”.

Persimmon chief executive Mike Farley said: “Hillreed’s focus on high quality family housing is highly complementary to our existing Persimmon, Charles Church and Westbury Partnerships brands and its attractive landbank adds to our already strong regional business in the important South East market.

“The acquisition of Hillreed demonstrates our commitment to continued land investment in support of Persimmon’s growth strategy.”

Housebuilders have been increasingly focusing their attention on the South East, where property prices have held up better than other parts of the UK, such as Yorkshire and the North East.

Hillreed has about 75 employees – 50 site staff and 25 office staff – and was established in 1975. Persimmon plans to retain the Hillreed name on most sites, although one will be converted to the Charles Church brand.

Persimmon managing director Jeff Fairburn said the deal comes with outlets in Kent, Sussex, Guildford and Hampshire.

“It really falls into our acquisition strategy and helps us get some outlets which we can take legal completions off straight away,” he said. “We’ve not got to wait for planning permission.

“It’s a quality operator and these are good quality outlets.”

He added Persimmon continues to consider bolt-on acquisitions.

“We would not rule out acquisitions but it’s about land acquisition and this fits the criteria.”

Persimmon has committed to a long-term shareholder return programme, which will see it pay out 620p per share over the next decade – £1.9bn in total.

Panmure Gordon analyst Rachael Applegate said: “The acquisition looks sensible to us, from both a pricing and geography perspective, and Persimmon comments the product mix is a good fit with its existing business.

“We continue to rate Persimmon as ‘hold’, but believe that management’s decision to commit capital should be seen as a signal of ongoing market stability.”