An equity firm has launched a bid to take over the parent company of The Guild of Property Professionals, Fine & Country, and online business easyProperty.
The latter seems likely to close within weeks, as the online sector looks set to unravel further.
The offer for eProp, by Tosca Acquisition, comes amidst disagreements among the major shareholders and an admission that there are “no clear signs” of easyProperty ever turning a profit.
There are some 600 shareholders in eProp, which Tosca Acquisition is valuing at around £17.85m.
The shareholders will be offered some 50p per share.
easyProperty itself will be the subject of a strategic review.
The document says: “In particular, the degree of financial investment and management attention required by the eProp Group to compete with the market leaders in online estate agency have proven uneconomic at a time when the market share of the online model as a whole has stalled and there remain no clear signs of it becoming profitable.
“The eProp Directors are conscious that many of the larger online platforms are in financial distress or have fallen away, and sentiment about the hybrids is declining.
“It is against this backdrop that the eProp Directors have explored a range of strategic options for easyProperty, the eProp Group’s online division, which may entail significant related headcount reductions, regardless of the outcome of the offer.
“The independent eProp directors understand that many eProp shareholders and employees will share their disappointment that the eProp Group’s online division, similar to many of its peers, has not performed in line with expectations.”
Toscafund also underlines that while there has been disagreement among the current owners of eProp, it backs the management.
eProp CEO Jon Cooke and chief operating officer Marcus Whewell are not selling their shares. It is understood that the biggest shareholder after Toscafund is Malcolm Lindley.
Tosca’s offer document says that the eProp Group expects to report its financial results for last year by the end of this month.
Revenues of £10.82m and an operating loss of £0.87m are expected.
Toscafund has invested in eProp since December 2015 and says it has developed a “productive relationship with its management team”.
But, intriguingly, it says that there is “disagreement between the significant shareholders of eProp concerning the optimal strategy for the company, to the detriment of eProp shareholders as a whole”.
Tosca’s offer to buy the whole company comes after it acquired 1,941,275 shares in eProp from director Robert Ellice.
It was Ellice who originally acquired the ‘easy’ licence to launch the easyProperty brand in the UK. He laid on a ‘funeral parade’ through London, marking the supposed death of high street agents. This publicity stunt was held before any involvement between easyProperty with Fine & Country and the Guild.
Because the acquisition of his shares by Toscafund takes its stake to above 30%, it must by law offer for the entire business.
This morning, eProp CEO Jon Cooke told EYE: “eProp Services plc largest shareholder, Toscafund Asset Management, has confirmed their formal offer to acquire the remaining share equity in the eProp business, allowing other shareholders the option of selling their shares.
“As part of this process, Tosca have confirmed their support of the current eProp Services’ plc management team, and that there is no intention to make changes to the management structure or the direction of travel for The Guild and Fine & Country.
“The announcement also confirms support of a review of easyProperty.
“Since easyProperty’s relaunch as a licensing business to independent estate agents in 2017, the market conditions have significantly changed, in particular the outlook for the hybrid/online sector.
“In 2017, it was widely predicted the online sector would reach at least 20%-30% by 2019/20. However, it is currently contracting with all the major players suffering commercial and financial challenges.
“The original rationale around the easyProperty licensing business was to give its GPEA customer base a vehicle to access the hybrid/online opportunity, using a brand and digital platform.
“Many of our members and licensees embraced this, and together we have thoroughly tested the online model.
“However, we have now reached the conclusion that it is not viable in its current form, given the market dynamics. This has prompted an immediate strategic review of easyProperty which will be completed by end of June.
“This review could lead to either us working with a joint venture partner, a sale of easyProperty or a potential closure. At this stage we haven’t finalised any of these options as ongoing negotiations are taking place.”
Toscafund continues to back other online estate agents. Only last month, it acquired over 3m shares in Purplebricks, giving it a stake of over 5.6%, while it also backs HouseSimple.