3i takes £4 million hit as Countrywide bid fails

3i, a listed UK buyout firm, is set to be about £4 million out of pocket after its £978 million bid for UK estate agency Countrywide was rejected by shareholders today. A banking source close to 3i said the cost of a failed bid would be about £4 million in expenses and other costs.

Only 58 percent of Countrywide shareholders voted in favour of the cash-plus-shares bid this afternoon, despite 3i postponing the meeting by almost two weeks to give themselves more time to canvass support. The bid needed 75 percent approval to go through.

3i insisted it will not increase its current offer, and is now set to walk away from Countrywide.

Asset manager Standard Life led the opposition to the 3i bid, along with two hedge funds, Artisan Partners and Boussard & Gavaudan. The three groups, who together control about 17 percent of Countrywide, said the offer undervalued the company. Euan Stirling, an investment director at Standard Life, said: “It is pleasing that a significant number of Countrywide shareholders share our view that the offer did not represent the full value of the company.”
 
Countrywide chairman Christopher Sporborg, who had supported the bid, said: “The independent directors worked very hard over several months to get the best possible offer for shareholders. We are disappointed by the outcome of the court meeting, but we respect the views of shareholders. We now have to move on and the board will be discussing the best way forward for the company.”

The board of directors said it would have to give careful consideration to the implications of the failed buyout. The directors most closely associated with the 3i bid may pay for the failure with their jobs. Three directors of software group Misys were recently culled, after their management buyout failed last year. 

3i bid 490 pence per share in cash for Countrywide, plus about 0.17 of a share in Rightmove, a real estate website in which Countrywide owns a 21.5 percent stake. This equated to a total price of about £978 million.

News of the bid’s failure caused a jump in the Countrywide share price of as much as 3.6 percent, the biggest gain since the bid was announced in September. At 16:36 GMT, shares were trading at 536.5, up 2.2 percent, giving the company a market capitalisation of £962 million.