Countrywide’s share price increased by just over 6% yesterday after Connells confirmed an £82m takeover bid for the estate agency group.
Countrywide’s share price closed at 230p, up 6.1%, as it continued on an upward trajectory.
Exactly one month ago, Countrywide’s share price stood at 155p, having dropped 15.9% in the space of an hour, after announcing that it needs to restructure its existing debt in order to reduce its debt burden and exposure to creditors.
But this still offered a marked improvement on the 54.5p recorded earlier this year – on 28 May – following a multi-month decline, driven primarily by the coronavirus pandemic and the collapsed sale of Countrywide’s commercial arm, Lambert Smith Hampton.
The latest boost in Countrywide’s share price was fuelled by Connells’ announcement yesterday morning that it had completed its due diligence work on Countrywide and reconfirmed its offer price of 250p per share in cash.
Connells also claimed that a cash injection of £90m by private equity rival Alchemy Group would not go far enough to rescue the struggling firm.
Countrywide revealed last month that it would raise £90m via a private share placement of 10.3 million shares to Alchemy, a private equity fund and shareholder, while also seeking a new £75m loan from its existing lenders to be repaid over four years.
But Countrywide this morning said that discussions with the company’s shareholders have indicated insufficient support for the Alchemy Transaction in its existing form, although it acknowledges the need for new capital and a readiness among shareholders to invest in the company.
Connells added that Countrywide faces a number of significant risks as a standalone business, with ‘potential to enter administration without a significant capital injection’.
Connells insist that its proposal would offer a ‘significant and tangible upside’ to Countrywide shareholders through a cash premium today, which is ‘far more attractive than the theoretical, distant and risky prospect of potential future benefits under a standalone strategy’.
David Livesey, the Connells Group chief executive, said: “Countrywide shareholders have repeatedly been promised jam tomorrow and it has never been delivered. There is no quick and easy fix for Countrywide. Turning the business around, especially in unpredictable market conditions, will be a difficult, expensive and lengthy process.
“Countrywide needs new ownership, not yet another speculative scheme that is based on hope rather than experience. Our proposal gives Countrywide shareholders significant immediate upside in cash, at a 72% premium to the undisturbed price, with none of the downside risks of remaining independent.”
Countrywide’s share price may have increased yesterday, but its recovery still has some way to go to match the heights reached earlier this year.
In late January Countrywide’s share price was 393p.