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”.
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.
“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.
“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.”