Purplebricks, the formerly flying online estate agent that reached a peak valuation of more than £1.3bn, has been sold to Charles Dunstone-backed Strike for £1 with all of its more than 750 staff at risk of redundancy.
The company, which had threatened to shake up the property market with its low-cost model, put itself up for sale in February after issuing a series of profit warnings that sent its market value down to just £30m.
Shares in Purplebricks fell more than 40% on Wednesday, giving the company a market capitalization of just over £2m, as the sale nearly wiped out shareholders.
As part of the deal, Strike intends to embark on a cost-cutting campaign that includes “reducing the employee base” at Purplebricks.
“While this will require extensive planning, Strike has indicated that it would like to complete that planning and begin a redundancy consulting process, with the assistance of the Company, that will likely involve all Company personnel as soon as practicable and possibly prior to completion (of the deal). Purplebricks said.
“However, Strike has assured the Board of Directors that its firm intent is to grow the business, which will require continued support from employees and that any employee affected by the dismissal will be treated fairly and equitably, consistent with Strike’s culture of respect.”
The company’s board of directors said all advanced conversations with potential suitors included “some proposals to reduce or change the company’s workforce”.
Purplebricks admitted it was “disappointed” with the value of the deal, which would have resulted in Strike taking on most of its obligations, but said no better offers emerged during the sale.
Under the terms of the deal, Purplebricks will use around £5.5m of cash it has on its balance sheet to pay expenses and costs not covered by Strike, leaving shareholders with around £2m of sale proceeds.
“I am disappointed with the value-for-money outcome, as a 5% shareholder and for the shareholders who have supported the company under my and the board’s supervision,” said Paul Pindar, president of Purplebricks.
“However, no other proposal or offer has provided a better return for shareholders, with the same certainty of financing and speed of delivery needed to provide the stability the company needs.”
The company’s five largest shareholders are German publisher Axel Springer, who owns a 26.5% stake, JNE Partners (11%), Momentum Global Investment Management (7%), Pindar (5%) and Hargreaves Lansdown Asset Management (5%).
Dunston, who has founded companies including Carphone Warehouse and TalkTalk, said the deal represented a “positive outcome” for homebuyers and sellers.
He is a Partner at Freston Ventures, Joint Major Shareholder of Strike. His fortune was estimated at £815m in 2022 as his fortune has swelled by £40m, according to the Sunday Times.
Purplebricks’ strategic review launched in February — which included looking at raising equity money — also reportedly sparked interest from company co-founder Michael Bruce.
Bruce, who co-founded the company with his brother Kenny in 2012, heads the intellectual assets of Boomin, an equity portal he founded after stepping down as CEO of Purplebricks in 2019. Funding.
Purplebricks chief executive Helena Marston said the deal allowed the company to secure a “solvable outcome” that “also preserves” its consumer brand name in the marketplace. You will resign after completing the deal.
Dunston said: “Purplebricks has dramatically changed the industry by lowering the cost of an estate agency (fee) and we aim to combine their great brand recognition with a more disruptive model.
“By combining the two brands, we will advance Strike’s mission to democratize home selling through customer empowerment.”
Purplebricks launched in 2014 and got early support from former star stock picker Neil Woodford. It was introduced to the London entry-level market, Aim, in December 2015.