Foxtons aims to raise £55m through flotation

ESTATE agency chain Foxtons yesterday confirmed plans to cash in on surging London house prices by floating on the stock market.

Foxtons is to float on the Stock Exchange. Picture: PA
Foxtons is to float on the Stock Exchange. Picture: PA

The company, which trades from about 40 offices in and around the British capital, plans to raise £55 million through an offer of new shares in a flotation expected to value it between £400m and £500m.

Private equity owner BC Partners will sell some of its stake, while Foxtons’ directors are also expected to earn a windfall of up to £100m.

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Foxtons is capitalising on a buoyant London market, inflated by demand from cash-rich foreign buyers and UK government stimulus schemes such as Help to Buy.

A successful flotation would mark a substantial turnaround in fortunes for BC Partners, which also owns mobile phone retailer Phones4U.

BC Partners bought Foxtons for about £375m at the peak of the market in May 2007 from founder Jon Hunt, just months before the credit crunch sent house prices plunging – a purchase it described as a “mistake”.

The company was taken over by its lenders in 2010 in a deal that slashed its debt, before the private equity firm regained control last year.

Foxtons, known for its distinctive fleet of Mini Coopers, typically sells properties for between £200,000 and £1.4m in upmarket parts of the capital.

It made underlying profits of £38.3m last year on revenues of £120m.

Underlying profits in the first six months of this year were up 14.3 per cent on a year earlier to £19.4m, while revenues rose 10.5 per cent to £62.6m.

Foxtons said it is well placed to benefit from any improvement in the housing market. It said: “The limited geographical area of London – and in particular its prime residential areas – combined with low levels of house building in London and planning restrictions on new building or redevelopment of property, have led to a constraint on the supply of residential properties in London and created excess demand which has resulted in resilient prices.”

Foxtons plans to open five to ten branches a year between 2014 and 2018, and could also expand in the south-east of England in the longer term.

Its first branch opened in 1982, and by 2001 it had ten branches. It now has 40 offices in London and two in Surrey.

The housing market has been given a boost in recent months by UK government schemes such as Help to Buy, which offers loans to allow people to buy new-build homes with a deposit of just 5 per cent.

Foxtons expects to float on the stock market next month, after which around half of its shares will be in public hands.

Directors are expected to earn a windfall by selling some of their reported 20 per cent stake. It will also raise about £55m through a placing of new shares to wipe out debt.

Foxtons also owns a mortgage broking business called Alexander Hall.

The UK’s biggest estate agency chain, Countrywide, also rejoined the stock market earlier this year, valued at more than £800m.