the once successful online property agency with a turnover of over £1.3 billion, has been sold for £1 to Strike, a Charles Dunstone-backed competitor whose more than 750 employees are at risk of being made redundant.
The company threatened to shake up the property market with its low-cost model and went on sale in February after issuing a series of profit warnings that saw its market value drop to just £30m.
Purplebricks shares fell more than 40% on Wednesday, giving the company a market cap of just over £2 million as the fire sale nearly wiped out shareholders.
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As part of the agreement, Strike plans to embark on a cost-cutting effort that includes “reducing the workforce” at Purplebricks.
“While this will require extensive planning, Strike has indicated that it intends to exit this planning and begin a redundancy consultation process which, with the support of the Company, will likely involve all of the Company’s employees as soon as possible and possibly before the deal is finalized.” ] ‘ said Purplebricks.
“However, Strike assured the board that it has firm intentions to grow the business, which will require continued support from employees, and that all employees affected by the layoffs will be treated fairly and equally, consistent with Strike’s culture of respect.”
The company’s board of directors said all further discussions with potential applicants included “some proposals to reduce or otherwise replace the company’s workforce”.
Purplebricks admitted they were “disappointed” with the value of the deal, which would have resulted in Strike taking on the majority of his commitments, but said there hadn’t been a better offer in the sales process.
Under the terms of the deal, Purplebricks will use around £5.5m of cash on its balance sheet to pay for expenses and costs not covered by Strike, leaving shareholders around £2m in proceeds from the sale.
“I am disappointed with the financial results, both as a 5% shareholder and from the shareholders who have supported the company under my leadership and the board,” said Paul Pindar, President of Purplebricks.
“However, there was no other offer or offer that offered shareholders a better return with the same funding security and delivery speed needed to provide the stability the company requires.”
The company’s top five shareholders are German publisher Axel Springer, JNE Partners (11%), Momentum Global Investment Management (7%), Pindar (5%) and Hargreaves Lansdown Asset Management (5%) with a 26.5 stake %.
Dunstone, who founded companies including Carphone Warehouse and TalkTalk, said the deal was a “positive outcome” for home buyers and sellers.
He is a partner at Freston Ventures, a joint controlling shareholder of Strike. According to the Sunday Times, his fortune has increased by £40million to an estimated £815million in 2022.
Purplebricks’ strategic review, launched in February – which included consideration of a capital raise – reportedly attracted the interest of the company’s co-founder, Michael Bruce.
Bruce, who co-founded the company with his brother Kenny in 2012, oversees the intellectual assets of Boomin, the property portal he founded after leaving Purplebricks’ CEO in 2019. Boomin went into liquidation last year after failing to raise new funds.
Purplebricks CEO Helena Marston said the deal has allowed the company to achieve a “solution outcome” that “protects” the consumer brand name in the marketplace. He will resign once the deal is finalized.
“Purplebricks has dramatically transformed the industry by lowering real estate agent costs [fees] and we want to combine its significant brand awareness with an even more disruptive model,” said Dunstone.
“By bringing the two brands together, we will advance Strike’s mission to democratize home selling by empowering customers.”
Founded in 2014, Purplebricks received early endorsement from former star stockbroker Neil Woodford. It was launched at London’s Aim teen market in December 2015.