Shares in property services group Countrywide (CWD) ‘roofed’ by 46% to 212p after it revealed it had received a bid approach from estate agency firm Connells at 250p per share, a 72% premium to Friday’s closing price of 145p.
Countryside’s announcement is short on detail, save to say that the offer is subject to due diligence and that there is no certainty an offer will be made.
The firm says that 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.’
URGENT NEED FOR CASH
This is explained in more detail in the Connells announcement, which says Countrywide 'is in urgent need of recapitalisation to reduce its net debt and lessen its exposure to its lenders.’
According to Connells, ‘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.’
The statement goes on to say Countrywide’s lenders have demanded a £50 million reduction in the firm’s debt level before they are willing to extend further credit, and are against a strategy of disposing of assets in order to de-leverage.
Connells also claims Countrywide needs a completely new management team, with ‘real estate agency expertise’, after the business racked up losses of over £500 million between 2017 and 2019.
EXISTING SUITOR
Connells’ approach is sure to upset private equity group Alchemy, which just last month put forward its own rescue deal for Countrywide. The investment firm claimed its proposal provided ‘the greatest certainty of the company’s future and a clear route forward for the business’, while being ‘in the best interest of shareholders’.
Alchemy proposed injecting £90 million of capital via a share placing at 135p followed by an offer to buy a smaller amount of Countrywide shares at 180p with the aim of owning between 50.1% and 67.7% of the capital.
The firm would then enter a four-year, 'covenant-lite' refinancing period with its lenders allowing it to raise £75 million which, together with the capital raise, would allow it to reduce its net debt by £50 million.
Alchemy also proposed creating a ‘streamlined board’, parachuting in a new chairman and an as-yet unnamed new chief executive.
The recapitalisation was due to be voted on at the general meeting scheduled for 18 November, but in light of discussions with shareholders and the Connells approach the Countrywide board has postponed the meeting until further notice.
