Connells has struck an agreed offer for Countryside, the owner of Hamptons International, after raising its bid to £130m, bringing together two of Britain’s biggest estate agency groups.
The boards of Connells, which is part of Skipton building society, and Countrywide, the UK’s biggest listed estate agency group, said they had agreed terms of a recommended cash offer at 395p a share. Connells made an initial offer of 250p a share in early November and raised this to 325p a share a month later. The shares traded at 145p before the initial bid was made.
The deal will bring together Countrywide’s 60 well-known high street brands, including Gascoigne-Pees, Bairstow Eves and King & Chasemore, with Connells’ 25 brands – Allen & Harris, Bagshaws Residential, Fox & Sons, and Barnard Marcus in London. Countrywide has 651 branches, while the Connells group has 581.
The takeover is backed by the majority of Countrywide’s shareholders and is a lifeline for the business, which has struggled under debts of £91.9m and has been closing branches after years of mounting losses. The deal is expected to complete in the first three months of 2021.
It scuppers a rival move made by the UK private equity firm Alchemy, a Countrywide shareholder which proposed a £90m cash injection into the firm in October in return for a controlling stake, and had the support of Peter Long, Countrywide’s executive chairman. Long quit in late November after opposition from shareholders to the plan, and the former William Hill boss Philip Bowcock was appointed chief executive.
Before Alchemy’s move, LSL Property Services, which owns Your Move, abandoned a planned all-share merger with Countrywide in March.
All of Countrywide’s lenders will be repaid in full, said Connells, pledging to invest in the group’s technology and branch network to turn the business around. It said there would be some job losses as the two head offices in Leighton Buzzard and Milton Keynes were merged, but vowed to retain staff in the branches.
The offer is far below Countrywide’s £750m valuation when it floated on the stock market in March 2013 amid a buoyant property market. The company amassed debts when it went on an acquisition spree in 2014 and 2015, buying up high street brands at a time when others invested in online estate agency services. Long blamed its woes on the “completely wrong” strategy pursued by the former chief executive Alison Platt, who sought to run the estate agent like a retailer from a central base, triggering an exodus of middle management.
David Livesey, Connells’ chief executive, said: “We have the right management team, strategy and investment firepower to work with the talented teams at Countrywide and lead Countrywide into a bright future.”
David Watson, the acting chairman of Countrywide, said: “Following a thorough evaluation of options and extensive consultation with the company’s major shareholders, we have been encouraged by their recognition of the need to put in place a sustainable capital structure and a willingness to support the company, which is a great business that has been constrained by too much debt.”
The UK housing market has been surprisingly buoyant this year despite the Covid-19 pandemic. It ground to a halt for a few weeks during the first national lockdown but bounced back in the summer, helped by a stamp duty cut.
Demand from buyers looking for bigger homes in leafy locations has surged as many office workers switched to working from home. But forecasters expect the market to cool next year, when the stamp duty cut expires, with unemployment expected to rise sharply.