Connells has revealed why its purchase bid represents the best outcome for Countrywide, stating that the ailing behemoth needs both a new management team with real estate agency expertise, and a new strategy to turnaround the business to ‘avoid administration’.
In a statement issued just two hours after Countrywide told its investors a bid from Connells was under way, the estate agency says “the enormous scale of the challenge that the new team will face can be seen by the fact that they will need to reverse the performance of a business that has lost over £500 million pre-tax over the last three calendar years.
“Connells also believes that significant and sustained investment is required in Countrywide’s technology, network and people to put the business back on a solid footing in a challenging market.
“This required investment will reduce Countrywide’s standalone profitability and cash flow in the short and medium term.
“In the absence of a recapitalisation, Countrywide is unlikely to be able to execute its business strategy over the short and medium term and there is a risk that it could end up in administration, with Countrywide shareholders losing all or a substantial portion of their investment.”
Connells has also dismissed Alchemy’s plan, pointing out that if it had gone ahead, Countrywide would have been operated by an “unproven and, at least in part, unidentified management team, with an uncertain strategy, reduced shareholder protections, high cost debt, and ongoing exposure to a challenging market environment.”
It is positioning itself as the cash-rich white knight able to rescue Countrywide, help maintain its independence from City sharks and also help its existing shareholders avoid the dissolution of shares that the Alchemy deal represented.
Connells says it will assess the making of any firm offer in light of the current difficult market conditions, its due diligence findings, the level of additional investment that will be needed by Countrywide and the extent of the turnaround required in the business.
Industry analyst Andrew Stanton (left) says, “It is not the cash that Countrywide shareholders should look at, it is the strength and the ability of the management team at the top of Skipton Building Society, and Connells group, that is the biggest incentive to go with this deal. Countrywide plc has been a wounded dinosaur for many years; Connells’ profit driven expertise could transform this. Back to basics being replaced by back to profits.”