Countrywide (CWD.L), the UK’s largest listed estate agency group, has agreed to rival Connells’ £134m ($183m) takeover proposal after it raised its offer for the second time, outbidding private equity firm Alchemy. Countrywide’s shares soared roughly 12.5% Thursday early afternoon.
“Under the terms of the acquisition, each Countrywide Shareholder will be entitled to receive 395 pence in cash for each Countrywide Share,” the firm said.
Countrywide’s board had rejected a 250p per share cash offer Connells put on the table earlier this year. Connells then made an offer of 325p per share, a significant 30% increase, and then upped this to 395 pence.
The deal is expected to complete in the first quarter of 2021. The recommended bid values debt-laden Countrywide at about £134.4m, or about £223.1m including debts.
Countrywide, which owns Hamptons International, Barnard Marcus and Gascoigne-Pees, had also previously turned down refinancing plans that included a £90m cash injection from private equity firm and existing shareholder Alchemy Partners.
“All of Countrywide's lenders will be repaid in full and Connells will provide additional investment in Countrywide's technology, branch network and people, stabilising and enhancing Countrywide's business for the benefit of its customers, employees and other stakeholders,” Connells said.
It added that the two parties “have highly complementary businesses.”
Connells said it does not plan to make “material” changes affecting Countrywide’s 651-strong branch network or its 9,000 employees.
But it said there are likely to be cost savings and some staff cuts across head office, IT and administrative operations, though it did not provide any numbers.
David Livesey, Connells Group CEO, said his firm’s revised offer of 395 pence per “has received strong shareholder support including by way of irrevocable undertakings from major Countrywide shareholders.”
“Our primary motivation is to invest in and grow the Countrywide business. We believe that 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,” he added.
Meanwhile, David Watson, acting non-executive chairman of Countrywide, said the company had thoroughly evaluated its options and held extensive consultations with its shareholders.
WATCH: Will Interest rates stay low forever?
He said Countrywide was encouraged by Connell’s “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.”
He also said the new offer will allow Countrywide shareholders “to realise their investment in cash at a price that fairly values the opportunities and risks of the business” and that the deal “put the company on a stronger footing, securing the future of the business, its customers and its employees.”
Countrywide has issued a number of profit warnings in recent years, following a poor company restructuring in 2015. The devastation caused by the coronavirus pandemic has also affected the company due to declining property sales. It has been struggling under a £90.2m pile of debt and has been scrambling for a solution.
Countrywide sells and rents properties through around 60 high street brands including Bairstow Eves and King and Chasemore. It first floated on the stock market in 2013.
Meanwhile Connells, a subsidiary of Skipton Building Society, has almost 600 branches across the UK.
WATCH: Will interest rates stay low forever?