Connells closes in on Countrywide acquisition
Countrywide, the estate agency group that owns Lambert Smith Hampton, has received an £82 million indicative takeover approach from competitor Connells.
Countrywide, the UK’s largest listed estate agent group with 731 branches, reports an indicative approach from Connells at 250p a share in cash – a premium of 72 per cent to the closing price of 145 pence per share on the business day prior to the offer 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. An acquisition would take Countrywide back into private ownership.
Countrywide is in urgent need of recapitalisation to reduce its net debt and lessen its exposure to its lenders. The board of Countrywide has stated 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.
Its also unlikely 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. Connells says 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 feels 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.
A firm offer for Countrywide will be subject to assessment by Connells with regards the level of investment needed and turnaround required in the business. The company will make an announcement once all due diligence has been completed.
Founded in 1936 and with around 600 branches nationwide, Connells group has grown into one of the UK's largest high street estate agency and property services providers.