Countrywide shares soar despite more branch closures

Countrywide shares soared yesterday, rising 47 per cent on the previous close at one point as investors relished the prospect of new owners and a new board.

Within 90 minutes of Countrywide revealing it had received an indicative takeover approach from High Street rival Connells, its share price rocketed from 145p to 218p. It slipped back slightly but still ended the day 40 per cent above its opening position - afternoon trading for most shares was buoyed by optimism over a Coronavirus vaccine.

Connells is offering 250p per Countrywide share in cash, which would value Countrywide at around £82m.

The Connells move prompted the troubled agency group to postpone a meeting of shareholders scheduled for next week to approve a rival £90m investment from private equity group Alchemy which - if supported by shareholders - would have give Alchemy majority ownership of the agency. 

Countrywide also held merger talks earlier this year with LSL Property Services, which owns Your Move, Reeds Rains and Marsh & Parsons.

Numis Securities, a broker, said the premium offered by Connells' offer over the previous share value for Countrywide looked more attractive than the Alchemy offer, which would have left shareholders as minority owners. 

Numis added: “We will wait to see if Alchemy returns with a counter offer, although the premium offered by Connells makes it look unlikely.”

Countrywide has lost over £500m pre-tax over the last three years and has embarked on a series of branch closures, which it has been reluctant to discuss in public. One list of closures - unconfirmed by Countrywide - suggests over 50 branches have closed in 2020 so far.

In a recent trading statement Countrywide has admitted it is in urgent need of recapitalisation to reduce net debt and lessen its exposure to lenders.  Connells claims that if Countrywide cannot recapitalise, there is a risk it could enter administration with investors losing all or most of their investment.

Connells is carrying out due diligence to assess the feasibility of making a firm offer for Countrywide.

Both the Connells and Alchemy proposals involve a clear-out of top management at Countrywide.

Countrywide’s share value was as high as 355p as recently as January, and in past years it was worth many times that amount.