There is growing speculation that Connells is preparing to make a new improved offer to buy Countrywide, after the UK’s largest estate agency group rejected a takeover approach from its smaller rival.
Countrywide issued a statement yesterday saying that the board had “unanimously rejected” an £82m bid proposal from Connells at 250p a share.
The board has decided instead to continue with Alchemy’s revised proposal, which would see the private equity firm injecting £70m into Countrywide, while taking a controlling stake of at least 50% in return.
Alchemy’s plans include a £35m share issue to Alchemy and a £35m share issue via open offer.
Countrywide shareholders would be given the option to sell their shares at a higher price of 250p each, but with certain major investors committing not to sell out.
Alchemy also plans to lower the £50m repayment to Countrywide’s lenders that was agreed in its initial plans.
The previous proposals would have seen Alchemy Partners invest £90m in return for a controlling stake of between 50.1% and 67.7%.
Connells yesterday said it is considering its options regarding the takeover proposals made last month and urged Countrywide shareholders to “take no action” on the revised Alchemy plans, with a further announcement to be made in due course.
A senior source representing Connells yesterday refused to confirm or deny that Connells is preparing a fresh bid for Countrywide, but did say that Alchemy’s latest proposal “remains an unattractive offer”.
“If you read between the lines, it is still a very complex offer, which is highly conditional on securing stakeholder approval, and so they could struggle to get it done,” the anonymous source told EYE. “It is by no means a slam dunk for Alchemy.”
A number of Countrywide branches have been forced to close their doors for good this year, while other offices have delayed reopening following the first coronavirus lockdown, as the company faces a fresh financial crisis.
But a potential period in the hands of private equity ownership could be the final nail in the coffin for Countrywide, it has been suggested.
The source added: “One only has to look at Debenhams and the fact that they never recovered from private equity ownership.”
Connells has been given until the close of play on Monday to either declare a firm intention to make an offer for Countrywide or announce that it does not plan to make an offer for the group.
Comments (17)
From my – admittedly limited – experience of CW I would guess that just about all the quality staff have jumped by now. Certainly true of the brands we have experience of.
This is Alistair Osborne of the Times take on it who has been very much up to speed on events
“Alchemist Phil
Another rewiring job at the Countrywide house. And at least the ex-bookie Philip Bowcock has made a better job of it than former boss Peter Long. He’s rejected the 250p-a-share cash bid from rival estate agent Connells and got a second proposal from buyout firm Alchemy.
True, rewiring the Mars space probe would be less complex. It now involves £70 million of Alchemy underwriting and share transactions at three different prices: none of them the present 241p share price. There’s a tender offer at a Connells-matching 250p, a firm placing to Alchemy at 225p and an open offer at 100p.
Already kingmaker investor Hosking Partners has spotted that the sequence of these transactions skews the maths and deliverability. It all falls over too if Alchemy fails to take control or if the debt holders kick off. A higher Connells cash bid would be easier. But at least it’s no Bowcock-up. “
I’m not sure many are aware of the team that sits behind Alchemy; there are some serious ex-Countrywide operators there who have arguably more credibility than some of the other names suggested in this thread.
I fear that without the correct leadership it could be another vanity exercise which Cwide can ill afford at this stage . . .
I think Alchemy made a huge mistake arriving with their initial proposal which was too greedy .They were even trying to pass on the £8m underwriting costs to the existing shareholders.
Maybe they thought the shareholders were as gullible as the BODS.
Customers certainly wouldnt want them selling a house for them having recommended a sale to proceed 38% lower a month ago
Alchemy should have arrived on the scene a few months earlier when shareholders might have been more receptive when the SP was below 100p .
I guess they didn’t anticipate that the market was going to continue steaming ahead in the autumn.
Now that Creffiled and Long are off the map shareholders just want to see the arrival of some fresh BODS not being ransacked by rape and pillage merchants
And there’s the problem which of the people with the credentials to do the job, will get the job? This person, that team will always have supporters and detractors and without a doubt those who have left in recent years will be capable of changing the fortune and atmosphere.
Operationally; brand and branch level the staff are apparently getting on with it so the correct leadership isn’t necessarily a whole team of people more 1, 2 or 3 people up at the very top
Good point MarkJ. The storm clouds are gathering over furlough and other cash taken by businesses. PIE should be compiling a name and shame list of propcos that pay dividends or make significant profits and haven’t returned 100% of Government cash.
There aren’t many who have done the right thing: Rightmove, some of the house builders, Hunters a while ago, Belvoir today. They deserve recognition for it as most business owners will grip onto furlough money with sticky fingers as it’s increasing their profit margins which is obscene.
I dont know if Countrywide still has branches closed and staff furloughed….as previously reported
but the latest version of the Furlough scheme from November 1st 2020 onwards states that HMRC will be publishing the names and claim sizes (banded not exact numbers) of employers claiming from the month of December onwards.
When this is released its going to shine a ray of light into many companies including CW.
They need to lose costs, amalgamate their brands and in the meantime protect the profit making parts of the business whilst turning the loss making elements around.
Inspired leadership, investment and training are required.
Super tankers take a while to turn and many founder in the process.
Can you imagine the sort of person required to inspire and motivate the whole of that team back to anything like normal?
The change management going from independent to corporate is difficult enough but once the moaners and malcontents have moved on, retired or got over themselves things settle down into a workable routine that’s not that much different to selling or letting as an independent, but the staff at the coalface must be worried beyond all fairness at what is playing out here.
My 2p for this morning is that unless CW can get hold of Bob Scarff or Iain McKenzie or someone with their experience and qualities, a sale to Connells is the only meaningful way to re-establish what CW was pre Platt.
A sales to Connells might not be their favoured option but I cannot see they’ve got very may options because of the task they’ve created for themselves
Robert
Don’t discount the Master Mariner Robin Paterson who has no doubt been sounding out investor support since the arrival of Alchemy on the scene
Currently chairman of Sothebys International A proven track record of estate agent leadership and turnarounds having previously worked the oracle on Hamptons before dispatching it on its way
More than capable of arriving here as his swansong and doing what is necessary
Hellofawad…I covered Robin with “or someone with their experience and qualities”. I was making the point that this is more about leadership than money. It’s a problem that will be fixed from the top down.
ADL the staff aren’t the problem, they’re passengers in all this. Minimum wage says they’ll get paid no matter what the market does, same as the staff at the Pru got paid in 89,90,91 and then one day a decision was made that changed all that.
Robert
Yes you did cover him in the sweeper.Just flagging his name up as a live contender .I think he would be ideal
He also worked the oracle at Barnard Marcus
My brief experience of the corporate world taught me the dangers of Director groupthink, in CW’s case the retail strategy that derailed everything.
Once the domain knowledge is gone, reigned or driven out its possible to get a great person at the top who then has no-one to support their vision, motivation or management prowess (Propertymark). The operational folk who hold the thing together aren’t listened too and there becomes a real void that’s hard to fill. CW are in a corner and need to listen to something other than they are telling themselves.
True
Paterson is a team builder sold out Hamptons for a reported £35-£45m in 2005 and took on Sothebys iny;in 2014 which would be a natural fit with Hamptons .
He has also recently taken on a non exec role chairman role at Stayo picking up the backlash on Airbnb
Stayo hopes to benefit from this by directly sub-letting blocks of apartments from freeholders, initially specialising in mid- to up-market London neighbourhoods offering a full concierge service.
Stayo currently has 43 units within 10 buildings across central London, although its target is to grow the portfolio to 300 units over the next three years, before expanding into other UK and European cities.
Robert
The staff in the brands are firing on all cylinders at the moment, their pay checks are not affected (directly) by the BODS.
If Connells make a revised offer I don’t think it’ll be entertained unless it’s an absolute knock out punch. As HillOfWad mentioned, no support from shareholders for this.
I imagine staff morale at the coal face strongest it’s been for a long time, figures coming in nicely and lots of commission being paid out.
There are a handful of effective management teams / MDs that could effectively manage a turnaround. H2 results should be discounted due to the stamp duty holiday as its a false result. Any firm that produced outstanding results in H1 this year and navigated the COVID storm has effective leadership. Problem is, the board has had chance after chance after chance to find the right person or team and they alway seem to get it wrong.
Another quiet day in Lake Wobegon.
For Alchemy to succeed they will need to garner support from 75% of CWD’s shareholders. This is acknowledged in the conditionality of Alchemy’s offer .
“..but with certain major investors committing not to sell out.”
That means that Hoskings with over 20% of the shareholding and Paterson with 10% hold all the cards .
Hoskings have already confirmed they rebuffed Alchemy’s approach to get them onside so what is it going to take to change their minds ?
Their preference is to raise some capital, inject some decent leadership into the BODS and look at dealing with the individual parts to create value
Sounds a very sensible approach .
Maybe Alchemy might offer Hoskings the recently rebranded Hamptons as a sweetner?. Smaller shareholders unlikely to be taking much notice of the BODS advice having only a few weeks ago recommended them accept a 38% lower figure
You really couldn’t make it up
Connells have until the 7th December to table a revised bid .It would be surprising if anything less than 325p per share would win the races
What is for certain is that all the predators will be keen to strike their blows before the end of December .The year end as the figures for H2 are liklely to be very favourable despite all the abortive costs incurred by the BODS and not conducive to getting shareholders to accept lowball offers
Probable outcome here another raft of abortive fees dealing with the corporate action on top of the £3.1m abortive costs incurred with the failed merger with LSL and the continuing saga of chasing the Dane for costs on the failed sale of LSH
All that hard graft by the branches grinding out the fees disappearing down a black hole at HQ .
What have shareholders and the staff done so wrong as to be burdened with this set of BODS?