Thursday 22 October 2020 12:29 pm

Countrywide shareholder to oppose £90m lifeline from private equity investor

Estate agent chain Countrywide (LON: CWD) has secured a £90m lifeline from private equity firm Alchemy in an “urgent” bid to reduce debt, however a significant shareholder is planning to oppose the deal.

The firm, which owns Bairstow Eves and Hamptons International, said it is at a “critical inflection point” and is in “urgent need of recapitalisation to reduce its net debt and lessen its exposure to its lenders”. 

Read more: Estate agent Countrywide warns on impact of housing market slowdown

Shares dived more than 11 per cent as Countrywide also said it is burdened by excessive debt, and requires a resilient balance sheet due to the weak macroeconomic outlook. 

The firm will also receive a £70m loan from its lenders following the capital raising, it said. 

However, investor Catalist Partners, which owns a 10.5 per cent stake in the firm, said it is planning to vote against the proposals, claiming the deal would be “destructive for shareholders”.

In a statement this afternoon the investment firm said: “Catalist Partners notes Countrywide’s announcement this morning.

Read more: Countrywide and LSL confirm ‘ongoing’ merger talks

“As one of the company’s largest shareholders, Catalist strongly opposes this unnecessary, ill-judged and dilutive transaction which, while clearly a very attractive deal for Alchemy, is destructive for shareholders and only serves to fund the continuation of a flawed “back to basics” business plan.”

The latest proposals come after rival group LSL abandoned a potential £500m merger with Countrywide in March, terminating a deal that would have created the UK’s biggest estate agent, amid market uncertainty due to the coronavirus pandemic. 

Carl Lever will replace Peter Long as chairman, while a new chief executive is expected to be announced before the end of the year.

The proceeds of the raise will be used to reduce group debt by £50m and will fund the completion of Countrywide’s turnaround plan, which was announced in 2018.

Executive chairman Peter Long said: “Today’s news marks an exciting new chapter in the evolution of Countrywide. 

“When I stepped in as executive chairman, the objectives were very clear: to restore profitability and fix the balance sheet.

Read more: LSL abandons Countrywide merger amid coronavirus concerns

“The business returned to profitable growth in 2019 and with this proposed £90m fund raise, Countrywide now has a sustainable capital structure that will allow it to thrive.

“I am delighted that Alchemy has committed to this significant investment in the company and I wish them and everyone at Countrywide the greatest of continuing success.”