Connells is seeking to acquire Countrywide, it was announced this morning.
Connells has been given until 5pm on 7 December 2020 to announce a firm intention to make an offer for the company, or not.
A statement from Countrywide says: “Countrywide plc has received an indicative approach from Connells Limited to acquire the entire issued and to be issued share capital of the Company, in cash, at a price of 250 pence per Countrywide share. The Approach is at an early stage and Connells Limited has indicated that any offer is conditional upon, amongst other things, completion of confirmatory due diligence and the recommendation of the Board of Countrywide.”
In the light of recent discussions with shareholders, Countrywide has postponed a special general meeting to approve the shareholder resolutions pursuant to the proposed transaction announced on 22 October 2020 until further notice.
Countrywide last month announced plans to raise £165m, while removing key members of its board including the chairman and CEO, with a view to restructuring its existing debt in order to reduce its debt burden and exposure to creditors.
Countrywide revealed that it would raise £90m of the funds 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.
However, the proposed transaction with Alchemy has been opposed by Catalist Partners, a significant shareholder in the company.
Today’s statement from Countrywide added: “Countrywide shareholders should take no further action in connection with the proposed transaction, including the making of payments of application monies, and the submission of application forms, documents of title, proxy forms and voting instructions, until further notice.
“In the meantime, the board will continue to engage with its shareholders to examine all potential options to deliver a sustainable capital structure for the company and to maximise shareholder value.”
Countrywide’s half-year earnings results showed that the group’s revenues fell to £173.8m this year as compared to the £241.6m recorded in H1 2019.
Following the Countrywide announcement that it has received an indicative approach at a price of 250 pence per share in cash from Connells Limited, Connells has released the following statement:
“The board of Connells Limited notes the announcement by Countrywide plc this morning and confirms that Connells has made an indicative approach to Countrywide in relation to a possible all-cash offer for Countrywide at a price of 250 pence per Countrywide share, a premium of 72% to the closing price of 145 pence per share on the business day prior to this announcement.
“Connells, one of the UK’s largest high street estate agency and property services providers, approached the board of Countrywide on 26 October 2020 in relation to the Possible Cash Offer and is currently carrying out due diligence on Countrywide in order to determine the feasibility of making a firm offer for Countrywide.
“The board of Countrywide has indicated that Countrywide is in urgent need of recapitalisation to reduce its net debt and lessen its exposure to its lenders. The board of Countrywide believes that, in the absence of a recapitalisation, Countrywide is unlikely to be able to execute its business strategy over the short and medium term and there is a risk that it could end up in administration, with Countrywide shareholders losing all or a substantial portion of their investment.
“Countrywide’s lenders have expressed an unwillingness either to provide Countrywide with additional financial covenant headroom or to extend the term of their debt commitments to Countrywide without an agreement by Countrywide to reduce the commitment of the lenders under the current credit facilities agreement by at least £50 million. Furthermore, they have indicated that they would not be supportive of a disposal strategy as a means by which to de-leverage Countrywide’s balance sheet.
“Connells believes that Countrywide needs a new management team, with real estate agency expertise, and a new strategy to turnaround the business. The enormous scale of the challenge that the new team will face can be seen by the fact that they will need to reverse the performance of a business that has lost over £500 million pre-tax over the last three calendar years.
“Connells also believes that significant and sustained investment is required in Countrywide’s technology, network and people to put the business back on a solid footing in a challenging market. This required investment will reduce Countrywide’s standalone profitability and cash flow in the short and medium term.
“The proposed transaction with Alchemy would have resulted in Countrywide shareholders suffering material dilution at a discounted price and being exposed to significant ongoing risk. The business would have been operated by an unproven and, at least in part, unidentified management team, with an uncertain strategy, reduced shareholder protections, high cost debt, and ongoing exposure to a challenging market environment.
“Connells’ Possible Cash Offer, if made, would mean that Countrywide’s shareholders could avoid the significant costs and risks associated with either the Alchemy Proposal or remaining an independent company, and would instead receive an immediate cash premium of 72% to the unaffected Countrywide share price.
“Connells will assess the making of any firm offer for Countrywide in light of the current difficult market conditions, its due diligence findings, the level of additional investment that will be needed by Countrywide and the extent of the turnaround required in the business.
“A further announcement will be made in due course.”
Comments (10)
I suspect once this sorry saga comes to its inevitable conclusion someone will use this one proud market leading behemoth as an example of how not to run a company of this size detailing the quite appalling decision making in recent years. For example in appointing individuals with absolutely no experience whatsoever in running a business in this sector and then continuing to make one bad decision after another mostly with borrowed money until even the banks said enough. As already mentioned by others the people responsible for this train wreck have pretty much all cleared off with a fat pay cheque and you assume with either a ” not me guv ” or ” I kept telling them ” attitude whilst no doubt safe in the knowledge that legally there will be no comeback on them whatsoever for making 100’s of good people redundant and decimating the branch network in the process. As a former long standing CWD employee I am genuinely saddened to see what has become of a company I was so proud to work for.
Its a great time to buy-who ever does end up buying. UK companies are cheap and CWD despite recent failures I imagine, like everyone else, has very large outstanding sales pipelines.
Aborted sale, mismanagement, Cost of servicing debt …. They may have a pipeline but its pennies on the pounds they are hemorrhaging.
Lets face it, they are buying it for the FS, Surveyors and lettings book.
The high street office on large will be culled.
Great move by Connells. No doubt the board of CW will all walk away with handsome payoffs which is almost criminal.
Agreed….. but DD is likely to uncover a few more black holes, and Connells will have to make sure the toxic bit is ring-fenced or this could all end in tears?
Countrywide could still be a great company if it was run properly and at this level it has to be a bargain. Connells have consistently performed well and are in very good shape financially. I doubt LSL will come back with a bid, they have their own problems and if they do how do you take them seriously after messing around the first time. Good luck Connells and Countrywide, I think the timing will prove to be spot on if they take control at the dawn of 2021 but they have to let estate agents run the show not a bunch of management consultants and failed retailers.
Connells have to be a great choice , strong leadership team capable of actually delivering a comprehensive Merger and they have a proven estate agency heritage with a track record of succeeding ,
What took them so long?
Or did they only have the confidence to put in an offer after someone else had? (Which would be ironic…..)
LSL your turn now.
Opportunity knocks
This shoddy deal was always likely to spring someone from the woodwork looking for some value where revenue is flowing through the door
This set of BODS must be a complete embarrassment to the brands
Just imagine what clients of LSH must be thinking who use LSH services to negotiate property deals on their behalf when the parent comapny recommended a sale at a grossly undervalued price
The cavalry have arrived in the shape of Connells and shareholders mightily relieved that the shoddy deal recommended by the BODS gift wrapping the company to Alchemy is consigned to the dustbin .
Yet another round of abortive costs incurred in failed deals ( failed merger with LSL ,Failed sale of LSH)
The indicative offer a whopping 66% above closing market price on Friday (145p) One dreadful decision after another by this woeful set of BODS .
Hold onto your hollyhocks whilst the grown ups look to take control and potential bidding war