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Countrywide's future uncertain as shareholders reject Connells bid

Countrywide has this morning rejected an £80m offer made for it by Connells Group.

On November 23 Connells announced that its due diligence work on Countrywide had been completed, and confirmed that its offer price was 250p per share for Countrywide. 

The making of a firm offer was dependent on the recommendation of the Countrywide Board and shareholder support.

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However, an unscheduled trading statement by Countrywide this morning says: “Following a thorough review of the Possible Cash Offer with its advisers, the Board has unanimously rejected the Possible Cash Offer.”

Yesterday, Connells' £80m bid for Countrywide was given a shot in the arm by international credit ratings company Fitch.

In a note to investor clients, New York-based Fitch - one of the world’s ‘big three’ credit rating agencies - said: “We believe that Countrywide's franchise is complementary to that of Connells and we estimate that post-acquisition, if completed, the latter's share of UK property transactions (currently around five per cent) would approximately double and could, over time, support a stronger company profile on additional diversification.”

But Countrywide says it is now looking instead at a revised proposal from Alchemy Partners, a private equity company which last month put in a £90m investment proposal which would have given it control of the company.

Today’s statement by Countrywide states:

“Alchemy Partners has recently submitted to the Countrywide Board an indicative revised proposal for an equity raising fully underwritten by Alchemy Partners, the key terms of which are as follows:

(a)  an opportunity for existing shareholders to sell their Countrywide shares at 250 pence per share to be fully funded by Alchemy Partners, which is pre-conditional upon commitments from certain shareholders not to accept the Possible Alchemy Offer;

(b)  a recapitalisation of the Company of approximately £70 million to be fully underwritten by Alchemy Partners, comprising:

(i)   a firm placing of approximately 15.6 million ordinary shares to Alchemy Partners for an issue price of 225 pence per share, generating gross proceeds of approximately £35 million; and

(ii)   an open offer of approximately 35 million ordinary shares at an issue price of 100 pence per share which would be implemented following completion of the Possible Alchemy Offer and the Firm Placing, such that the shares acquired by Alchemy Partners pursuant to the Possible Alchemy Offer and the Firm Placing would be entitled to participate in the Open Offer; and

(c)  the transfer of the Company's listing on the Official List from the Premium Listing segment to the Standard Listing segment."

This revised proposal would enable Countrywide shareholders to sell their shares to Alchemy Partners if they wished.

Alchemy has told Countrywide that its new proposal is conditional upon, amongst other things:

(i) the negotiation and execution of a revised Subscription Agreement between Countrywide and Alchemy Partners and the support of shareholders;

(ii) there being sufficient support in terms satisfactory to Alchemy Partners from Countrywide shareholders to give “irrevocable commitments” such that Alchemy Partners would control a majority of Countrywide's shares once the revised proposal has completed; and

(iii) Alchemy Partners reaching a revised agreement with Countrywide's lenders which results in a smaller repayment than the £50 million repayment previously proposed.

Countrywide's statement this morning concludes by saying: "The Board remains committed to engaging with all major shareholders to examine all potential options, including (but not limited to) the Revised Alchemy Proposal and a capital raise from existing shareholders of the Company. A further announcement will be made as and when appropriate".

Connells has responded to the Countrywide comments with its own statement this morning, saying: "The board of Connells Limited notes the announcement made earlier today by Countrywide plc of a possible and still highly conditional revised transaction involving Alchemy Partners. Connells is considering its options regarding the possible all-cash offer for Countrywide it had announced on 9 November 2020 and re-confirmed on 23 November 2020 and urges Countrywide shareholders to take no action in relation to the Possible Revised Alchemy Proposal. A further announcement will be made in due course."

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