The troubled Countrywide group has announced a £90m investment by Alchemy Partners, a private equity company that specialises in investing in distressed and undervalued or underperforming businesses.
In an unexpected trading statement this morning Countrywide said it will receive the investment in return for a streamlined board including the removal of chairman Peter Long, and a new chief executive officer instead of Paul Creffield.
The investment, in the form of a recapitalisation, is conditional upon consent from a meeting of Countrywide’s shareholders to be held shortly. Proceeds of the investment will be used to pay off some of its existing debts, currently £91.9m.
Alchemy will hold between approximately 50.1 and 67.7 per cent of the newly-enlarged share capital of the firm, depending on the results of an open offer and tender offer contained in the capitalisation proposals.
The new chairman of Countrywide is to be Carl Leaver, who will join the board at the end of the capitalisation process. The new chief executive is to be named before the end of the year.
Today’s statement admits that the company is at “a critical inflection point” and is in urgent need of recapitalisation to reduce its net debt and lessen its exposure to lenders.
It admits the company is in particular burdened with excessive debt, requiring “significant capital investment” to complete its turn-around plan dating back two years, and also needs further investment to combat the current weak macro-economic outlook.
Carl Leaver, the proposed new chairman and the former head of digital at Marks & Spencer, says in this morning's statement: "With the right capital structure and Alchemy as a supportive controlling shareholder, I am confident that there is a very bright future for Countrywide. I look forward to helping to harness the capability of the Countrywide team to deliver for customers and, ultimately, creating value for shareholders."
The outgoing chairman, Peter Long - under whose leadership Countrywide's share value has fallen dramatically - adds: "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 £90 million fund raise, Countrywide now has a sustainable capital structure that will allow it to thrive. I am delighted that Alchemy have committed to this significant investment in the company and I wish them and everyone at Countrywide the greatest of continuing success."
This is what Alchemy has today told Countrywide shareholders of its plans:
"Alchemy intends to accelerate Countrywide's turnaround through, among other things, the injection of capital, the introduction of a new senior management team with an appropriate incentivisation structure (which is expected to be proposed to Shareholders in due course following implementation of the Proposed Transaction), and the establishment of a streamlined governance framework, while always ensuring compliance with applicable regulatory requirements.
"As part of the Proposed Transaction, it is proposed that the Company will transfer to a standard listing on the Official List, which is expected to facilitate Alchemy's objectives for a more flexible and streamlined private equity style governance approach.
"Alchemy has confirmed that it is supportive, and recognises the importance to Shareholders, of the Company's shares remaining listed on the standard listing segment of the Official List and to trading on the main market for listed securities of the London Stock Exchange following implementation of the Proposed Transaction. Alchemy has confirmed that it has no intention to cancel the Company's listing following implementation of the Proposed Transaction.
"Alchemy anticipates conducting a detailed review immediately following implementation of the Proposed Transaction, pursuant to which the current management and governance structures then in place will be assessed in detail (including as against any applicable regulatory requirements). In the event that any other individuals are redeployed following the implementation of the Proposed Transaction, Alchemy has confirmed that it will seek to ensure that they are treated in a manner consistent with the individuals' existing contractual and statutory employment rights and any applicable regulatory requirements. Alchemy's investment in Countrywide represents an exciting new chapter in the evolution of the business."