Slater Hogg & Howison-owner Countrywide has swept into the commercial property market with a £34.1 million rescue deal for one of the sector’s oldest names.
The UK’s biggest estate agency business, which only returned to the stock market earlier this year, is snapping up 240-year-old consultancy Lambert Smith Hampton (LSH) through a pre-pack administration deal.
The move will effectively wipe out debts left over from an ill-fated management buy-out just before the market crashed. However, current shareholders will lose out as the bulk of the purchase price will be used to pay off a private equity firm which owns the debt.
Industry sources said LSH may have found itself squeezed in the middle ground between global commercial property players and niche operators.
Countrywide currently focuses on residential property and its move into the commercial arena will be seen as a vote of confidence in a sector badly hit by the financial crisis.
While LSH has struggled with debts dating from the time of the buy-out from WS Atkins in 2007, Countrywide believes that the firm’s operational performance remains robust.
Recent high-profile deals handled by London-headquartered LSH, which has offices in Edinburgh and Glasgow, include the sale of BBC Television Centre for £200 million.
Countrywide said: “There is clear growth potential in the UK commercial property market.
The company also believes that activity in the commercial markets is starting to improve and now is the right time to build on its position in his market.”
In addition to the Slater Hogg business, which has 25 branches covering the south of Scotland, Countrywide’s brands include Bairstow Eves, Gascoigne-Pees and Hamptons International. It has a total branch network numbering more than 1,300. Group chief executive Grenville Turner said: “We have a successful track record of acquiring and managing businesses.”
LSH has a range of major clients across the banking, finance, transport, telecoms and retail sectors, including more than half of all London borough councils. It also recently handled the sale of 800 former railway sites raising £300m.
Accounts for last year show that it made an operating profit of £5m on revenues of £64.1m. Gross assets as of last month were £17.7m.
Founded in 1773, it is described as one of the largest commercial property consultancies in the UK and Ireland with 26 offices and 861 employees.
Countrywide is acquiring LSH after reaching an agreement with Sankaty, which owned the company’s debt, and involves LSH first going into administration. A source close to the deal admitted shareholders would be hit as the bulk of the £34.1m purchase price would go to Sankaty.
Countrywide said that as part of the deal, LSH would be discharged from any legacy debt from the MBO and placed “on a firm financial footing”. It is subject to approval by the Financial Conduct Authority.
The Lambert Smith Hampton brand will be retained along with chief executive Ezra Nahome.
He said: “This heralds a new, exciting chapter for LSH and being part of the Countrywide group will provide us both with significant opportunities.”
Shares in Countryside, which has a market value of about £1.2 billion, closed down 13.5p at 544.5p.
Investors have shown a renewed appetite for property stocks as the sector stages a recovery thanks to low interest rates and initiatives to stimulate occupier demand.
Last week, estate agent Foxtons saw its value increase by more than £100m in just a few hours after it floated in London.