The 1am Email That Killed The Deal: Inside The Failed Sale Of Lambert Smith Hampton
On 30 December, with New Year's Eve festivities about to get into full swing, the management and advisers of estate agency chain Countrywide were preparing to secure the completion of a vital deal: the £38M sale of commercial property business Lambert Smith Hampton. The money raised would be used to repay a £34M loan, a big chunk of the debt that was weighing down a company whose share price had dropped sharply as it struggled to adapt to the modern property marketplace.
But at 1.25am on 31 December, an email dropped into the company’s inbox that put a big dent in the plans of Countrywide, the UK’s largest estate agency chain. LSH’s buyer, Danish private investor John Bengt Moeller, was facing practical difficulties in arranging the transfer of the £38M. The transfer was imminent, but he needed more time, he said. Just 10 hours before a deadline of 11am, the deal was delayed.
This is the situation outlined by Countrywide in a legal claim against Moeller, seen by Bisnow, in which the company is seeking more than £10M in damages. In the claim it outlines how two further deadlines to complete the deal were missed by Moeller, after which the deal was terminated.
Moeller has not yet filed a defence, and when contacted by Bisnow, he referred the matter to his law firm, Davis Woolfe, which did not respond to a request for comment.
Following the aborted deal, Countrywide in October agreed a deal to raise £90M in rescue equity from private equity firm Alchemy Partners, under pressure as it was to reduce its debt. But this week, rival estate agency Connells revealed it had made an £82M offer to buy the firm outright.
In the meantime, the 1,300 staff of Lambert Smith Hampton, a stalwart of the UK commercial property agency that can trace its history back to 1773, are in limbo as to whether it will remain part of Countywide or be sold — if another buyer can be found.
In its legal claim, filed at the High Court on 23 September, Countrywide said it was claiming more than £10M in damages, but did not provide an exact figure. It said its claim would be the difference between the £38M Moeller agreed to pay and the value of LSH at the time of any judgment in its favour, or the amount it received if it was sold before then.
While that exact figure is yet to be determined, there is an indication LSH’s value may be well below £38M. In June, Countrywide said proceeds from the disposal would be £14M less than it had anticipated at the end of 2019.
Countrywide’s claim said that after receiving approval from its shareholders on 27 December, the deal to sell LSH to Moeller was supposed to complete by 11am on New Year’s Eve. When that didn’t happen, a new deadline of 6 January was set, which was also missed.
A final deadline of noon on 16 March was set and when payment was not made by this date, the sales and purchase agreement entered into by Countrywide and Moeller was terminated. Other parties have reportedly expressed an interest in LSH, but no buyer has subsequently been found.
Countywide’s claim makes clear just how important the sale of LSH was in terms of stabilising the company’s finances. The company has £47M of debt, and the sale would have allowed it to repay most of this, in particular one £34M credit facility.
“For the avoidance of doubt, the defendant was aware that the claimant wished to sell its shares in LSH as part of a corporate strategy to repay debts and reduce its leverage ratio, and that, if the defendant failed to complete the purchase of those shares, the claimant would not be able to reduce its borrowing in this way,” Countrywide said in the claim.
Moeller is yet to file a defence to the claim, and did not respond to a request for comment for this piece. But he did outline his version of events in an interview in his native Denmark in September.
Moeller, whose registered address is in Monaco, according to the Countrywide claim, is one of the investors behind a £100M tourism development on the island of Møn in southeast Denmark.
Responding to questions by Danish publication Real Estate Watch about whether he had the finances to undertake such a project, Moeller blamed the coronavirus pandemic for the deal’s collapse.
“[The] calculation upon which the acquisition was based has changed significantly from the deal we originally signed in November 2019,” he said.
“To us, other aspects of LSH remain an immensely interesting business, and Great Global Holdings [one of Moeller’s companies] is still willing to acquire the group provided that the terms reflect the current economic situation.”
Davis Woolfe did not respond to a specific question about the fact the deal was delayed twice in December and early January, before the coronavirus emerged as a major issue.
Real Estate Watch wrote that Moeller rejected any suggestion that the LSH deal fell through because he did not have the necessary finances to complete the transaction, arguing that sales and purchase agreements are not signed without proof of funds.
“It’s a firm requirement prior to entering deals of that magnitude, as the costs for due diligence can obviously end up being very significant if the deal falls through,” Moeller said.
Moeller, an unknown name in UK real estate before the LSH transaction, began his career in 1980 at the Industrialization Fund for Developing Countries, a Danish government-owned fund advising companies looking to work in developing countries, he told Real Estate Watch. He moved to Ecuador, advising Danish companies doing business in the South American country.
While there, he moved into construction with Danish company Flexplan. In 1985 he moved to Danish real estate developer Kay Wilhelmsen, and in 1986 he arrived in London, where he oversaw the development of two office buildings on the eastern fringe of the City of London.
After leaving the company in 1989, he has pursued personal property company projects in Germany and the UK, he said in the interview.
For LSH and its staff, the future remains unclear. After the deal with Moeller collapsed, Countrywide said it would continue to look for a buyer for the company, which is led by chief executive Ezra Nahome. But in the prospectus accompanying its rescue recapitalisation, Alchemy Partners said it expected to retain LSH as part of Countrywide.
It remains to be seen what Connells would plan for LSH if it did complete a takeover of Countrywide.
LSH has been traded more than any other commercial property services firm of equivalent size.
In 1999, it was bought by engineering firm Atkins for £50M, but the company sold it back to management for £30M in 2007.
That deal was backed by debt from Lloyds Banking Group, and in 2012 that debt was bought by private equity firm Sankaty, which ultimately took control of the company and sold it to Countrywide in 2013 for £34M.
The company remains profitable, producing earnings before interest, tax, depreciation and amortisation of £2M in the first half of 2020, down 17% on the previous year, in line with other major brokerages.