When one statement says a company is committed to selling a business it put up for sale almost a year ago and another – released just seconds apart – outlines how there are plans to grow the business, it is no wonder that shareholders have been left somewhat bewildered and angry.
Lambert Smith Hampton owner Countrywide has been trying to offload the commercial agency since 27 December 2019. There has been one aborted attempt and discussions with another potential buyer are understood to be ongoing. Countrywide’s existing shareholders want rid of the business and believe that a sale should raise funds to help pay down its “excessive” debt burden.
But Countrywide is also keen to sell a majority share in the business to private equity firm Alchemy Partners, hoping that a £90m injection from it will work some magic, paying off £50m of debt and setting the business back up for growth. Growth, which according Alchemy’s plans, includes expansion of the LSH brand both geographically and by service line.
This, say disgruntled shareholders, is not what they want and will not bring the business back to the sure footing it has been seeking since launching its turnaround plan in March 2018.
Shareholders say that the recommendation to sell between 50.1% and 67.7% of the business to Alchemy is not in their best interests, that the shares are being offered at below value and that the business could raise enough money from its existing shareholder base. They say that the sale to Alchemy will diminish shareholder value, take away protections for existing shareholders and put the wrong people in charge of running the firm.
One of Countrywide’s largest shareholders, Catalist Partners, said it strongly opposed the “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”.
Shareholders told EG that the business does not need to deleverage as urgently as proposed as it has no issues with its lender, and that it could raise a smaller amount of cash from the divestment of certain assets and its existing shareholders. Countrywide has underlying net debt of £91.9m and £76.8m of cash in the business.
The firm said that while it was currently meeting its working capital and funding requirements through a £125m revolving credit facility and £20m super-senior debt facility, which mature in 2022 and 2021 respectively, it did expect to break its liquidity and interest covenants in September next year. It said that the £90m raised through the sale to Alchemy, plus a new £75m loan would mean it would not breach these covenants. Should the proposed sale not be agreed, it said there would be a material uncertainty that “may cast significant doubt over the group’s ability to continue as a going concern”.
The firm’s shares closed the day down by more than 10% at 165p.
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