3i stands firm on Countrywide

Europe’s largest private equity firm is refusing to raise its bid for Countrywide, a UK estate agent, despite growing shareholder opposition.

3i is defying pressure to raise its £950m (€1.42 billion; $1.84billion) bid for Countrywide, the UK estate agency, despite a growing threat that shareholder opposition could derail the deal.

3i said in a regulatory news statement on Tuesday that it will not raise its bid for Countrywide, despite Standard Life adding its voice to the growing chorus of opposition from existing shareholders. The UK-based asset manager, which owns a 3.4 percent stake in Countrywide, said the bid “does not fully reflect the value of the company”.

Polygon, an activist hedge fund that foiled Fortess Investments’ proposed bid for telecoms firm telent last year, yesterday increased its stake in Countrywide from 7.6 percent to 8.8 percent. Like UBS, which has built an 8.14 percent stake, Polygon has yet to reveal its intentions, but it is also thought to be opposed to the bid.

US-based hedge fund Artisan Partners, which controls eight percent, was the first to criticise the bid openly, arguing that the premium being paid compared unfavourably with the recent private equity bid for US real estate business Realogy Corporation. Hedge fund Boussard & Gavaudan Asset Management, which owns a 5.1 percent stake, has also spoken out against the bid.

3i needs at least 75 percent of shareholders to vote in favour in order for the bid to be successful. If the Countrywide board, led by Christopher Sporburg, cannot persuade Polygon, UBS and Scottish Widows to support the bid, it is unlikely to receive this level of support.

Countrywide share price

In December 3i published a recommended offer for Countrywide that valued it at about 550 pence per share, or £941 million in total. This value has risen slightly since then as the offer includes a portion of shares in property website Rightmove, which have since increased in value.

The offer represented a 19 percent premium to Countrywide’s closing share price on September 13, the day before 3i said it had approached Countrywide about a deal.

Countrywide opened its books to 3i in October after receiving a suitable indicative bid. At 11:17 GMT Wednesday, Countrywide shares were trading at 505.5 pence per share, giving the company a market capitalisation of £863.7 million.

3i has reserved the right to increase its bid if a competing offer emerges.