Countrywide has agreed to sell Lambert Smith Hampton for £38m to John Bengt Moeller.
Bengt Moeller owns Great Global Holdings, the US and Europe-based, retail-focused commercial real estate firm.
Countrywide said the sale will strengthen its financial position and enables it to focus on its core residential services business.
The deal value represents a multiple of six times LSH’s estimated adjusted EBITDA for the 12 months ending 31 December 2019.
Completion is subject to the approval of Countrywide shareholders at the company’s general meeting scheduled for 23 December. If approved, the sale is expected to take place on 31 December 2019.
Ezra Nahome, chief executive at LSH, told EG: “In the UK, we have become moribund by Brexit but a lot of other people are looking beyond it and looking at opportunities in the UK. Despite the economic uncertainty, with transactional market volumes and earnings depressed, it is an opportune time to make a mark in our sector.
“John [Bengt Moeller] has got a lot of property interests, not just retail. It is fair to say he is a low key international investor. But he had his team have been looking at the UK property market services space for some time.
“LSH has also already been pushing boundaries into Europe, we have recently opened an office in Milan. Time will tell whether we will take this across the pond and open in the US.”
In an analyst call, Countrywide executive chairman Peter Long said: “This is an important transaction for us. The proceeds from the sale will significantly improve our capital position and enable us to materially reduce our net debt. It will also make trading in our shares more attractive.”
In its half-year results to 30 June 2019, the firm’s net debt stood at £90m. The firm expects net debt to fall to around £55m by the end of 2019, adjusting for £34.4m in net proceeds from the sale of LSH.
At the end of 2018, the firm’s net debt stood at £70.7m, down from £196.4m at the end of 2017.
‘Challenging market’
Long added that commercial real estate was “not a strategic priority” for Countrywide. He said: “LSH is operating in a challenging market which has resulted in a deterioration of its financial performance. It has also eaten into valuable management time so it made absolute sense to seek a buyer for the business. It has always operated as a standalone business so carving it out from the rest of the group will not be difficult.”
LSH suffered a 20% drop in transactional revenue in the first six months of the year. The wider business-to-business division at Countrywide, of which LSH is one of the largest parts, reported a £5m fall in adjusted EBITDA to £7.6m.
Countrywide said the decline was “all attributable to Lambert Smith Hampton” and reflected an “extremely challenging” UK commercial transactional market.
The firm has also announced an amended credit facility with its lenders to continue with its turnaround plan in a “challenging and uncertain market environment”.
The changes include provisions for a minimum credit facility of approximately £95m to September 2022.
Long said: “The banks are supporting us heavily by easing our covenants as we continue our turnaround and trade in a challenging market. This will enable us to focus on our core residential services where we see huge opportunities.”
In addition, Countrywide told the stock exchange that it is simplifying its share capital. The firm has proposed to consolidate every 50 existing ordinary shares in the company into one.
The UK estate agency chain bought LSH for £34.1 in a pre-pack administration deal in 2013.
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