Countrywide’s warning of disappointing earnings and subsequent fall in share price has intensified talks between the company and Tosca Fund, which is attempting to acquire elements of its business including Lambeth Smith Hampton.
The £4bn UK private equity firm is aiming to buy LSH as well as its sister company and high-end estate agency Hamptons from the listed firm.
Tosca has been hatching a plan to buy out LSH and Hamptons since the start of this year and has also held discussions with EQT over merging the company with GVA. EQT is currently considering a sale of GVA having appointed Bank of America Merrill Lynch to test market appetite in May.
Countrywide’s share price has collapsed by more than 37% since yesterday’s announcement, and by more than half since the start of the year, increasing interest from prospective purchasers of parts of the company and the potential for a break-up.
Countrywide announced yesterday that its earnings are due to fall by £20m year-on-year for the first half of 2018, despite operational improvements, and that this was unlikely to recover in the second half of the year due to the depressed residential market.
It is attempting to refinance, put in place a long-term capital structure and cut its levels of debt by 50% through additional equity finance.
LSH is a relatively outperforming element of Countrywide. Last year the agency firm’s revenue grew by 0.2% and its EBITDA jumped by 9.6%.
Tosca’s rationale for combining LSH and Hamptons is the desire to provide an end-to-end service for housebuilders and public sector clients, advising on regeneration, land assembly and planning right through to selling the end product. The two businesses currently operate relatively independently under the Countrywide umbrella. They each employ around 1,500 staff.
Were Tosca successful in bringing GVA in to any eventual deal it would create a powerhouse in terms of its public-sector client roster as well as regional and regeneration expertise.
Under the leadership of chief executive Ezra Nahome, LSH has been through a series of corporate changes since he took the helm in 2009. He was part of the management team that bought the company from Atkins in 2007. Debt issued by Bank of Scotland to fund that deal was subsequently inherited by Lloyds following the banks’ merger.
The debt was then sold to private equity groups including Caird Capital and Sankaty before Countrywide bought the company out of a pre-pack administration in 2013 for £34.1m.
LSH was put up for sale at the end of 2016, but at that time no bids were received that Countrywide deemed appropriate and the process was dropped.
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