Alchemy plans investment in Countrywide – Countrywide has announced a proposed recapitalisation that includes a fully underwritten equity raising of approximately £90m. As part of this recapitalisation, funds advised by Alchemy Partners will invest up to approximately £90m in the company by way of a placing and open offer and by funding a tender offer. Following the recapitalisation, Countrywide will have a streamlined board, with a new chairman, Carl Leaver. Alchemy is also in discussions with a potential new chief executive officer.
The recapitalisation needs the approval of shareholders. If the proposed transaction is approved and implemented, Alchemy will hold between approximately 50.1% and 67.7% of the enlarged share capital.
Rationale and further detail
- The Group returned to profitable growth in 2019 and reacted decisively to the COVID-19 crisis, taking vital actions during the national lockdown in Q2 this year on branch closures, staff furlough, cost mitigations, capex reductions and HMRC deferrals, and since the easing of the national lockdown the Group continues to trade strongly.
- The Group is at a critical inflection point and is in urgent need of recapitalisation to reduce its net debt and lessen its exposure to its lenders. In particular:
- the Group remains burdened by excessive debt;
- completion of the turnaround plan announced in March 2018 and the delivery of the Company’s ongoing strategic goals require significant capital investment; and
- the weak macro-economic outlook demands a resilient balance sheet.
- a strategic investment by Alchemy, a private equity firm with direct experience of Countrywide and its industry;
- an equity raising of approximately £90 million by way of a Firm Placing and Placing and Open Offer of, in aggregate, 66,684,215 New Ordinary Shares at an issue price of 135 pence per New Ordinary Share, which is being fully underwritten by Alchemy, and allows Qualifying Shareholders to participate via the Open Offer;
- an opportunity for Qualifying Shareholders to realise all or some of their investment in the Company by accepting a Tender Offer under which the Purchasing Bank (acting as principal) will conditionally offer to purchase up to 10,345,132 Existing Ordinary Shares at 180 pence per Existing Ordinary Share, following which the tendered shares will be repurchased by the Company and cancelled and New Ordinary Shares will be placed with Alchemy at 180 pence per New Ordinary Share;
- entry into the Term Loan Facility Agreement, pursuant to which the Group’s lenders will provide access to a “covenant-lite” term loan facility of £75 million upon implementation of the Capital Raising and which, together with the Capital Raising, will enable the Group to reduce its net debt by £50 million;
- a streamlined Countrywide Board upon implementation of the Proposed Transaction, including a new Chairman, Carl Leaver, and a new Chief Executive Officer (expected to be announced in Q4 2020), allowing for the planned retirement of the current Countrywide plc Group Managing Director in 2021, and a simplified governance structure more appropriate for the Company’s size and strategy; and
- the transfer of the Company’s listing category on the Official List from premium to standard.
Proceeds of the Capital Raising will be used to:
- reduce Group debt by £50 million;
- fund investment in the Company to facilitate the completion of the turnaround plan announced in March 2018 and the delivery of the Group’s strategy; and
- provide what the Board believes will give the Group the necessary balance sheet resilience to withstand market uncertainty.
CWD : Alchemy plans investment in Countrywide