In an unprecedented business move, Purplebricks, a trailblazing online estate agency that once boasted a staggering peak valuation of £1.3 billion, has been bought by rival company Strike, supported by entrepreneur Charles Dunstone, for a mere £1.
This transaction has raised serious concerns for the jobs of its 750-strong workforce, who now need a more stable future.
Launched in 2014, Purplebricks was heralded as a game-changer for the property market, offering a disruptive, cost-effective model.
However, after a series of profit warnings which saw its market value plummet to just £30m, the company put itself up for sale in February.
The news of the sale prompted a severe reaction in the markets, leading to a 40% slump in Purplebricks’ share prices on Wednesday.
This caused the company’s market capitalization to drop dramatically, settling at just above £2 million. Shareholders were left reeling as the drastic price fall virtually obliterated their stakes.
Under the conditions of this deal, Strike is poised to implement a cost-saving drive that will involve a significant downsizing of the Purplebricks employee base.
In addition, Strike has stated that while they are dedicated to business growth, they would also initiate redundancy consultations, a process they plan to conduct with the assistance of Purplebricks.
The Purplebricks board expressed disappointment with the deal’s valuation, though they admitted that no superior offers were forthcoming during the sale process.
The board also revealed that all potential buyers discussed workforce changes as part of their proposals.
The financial terms of the agreement dictate that Purplebricks will utilize approximately £5.5m of its funds to cover expenses and costs not assumed by Strike, leaving shareholders with a modest £2m in proceeds from the sale.
Paul Pindar, Chair of Purplebricks, expressed his frustration with the financial outcome of the deal, stating, “There was no other proposal or offer which provided a better return for shareholders, with the same certainty of funding and speed of delivery necessary to provide the stability the company needs.”
Purplebricks’ significant shareholders include German publisher Axel Springer, owning 26.5%; JNE Partners at 11%; Momentum Global Investment Management at 7%; Pindar himself at 5%; and Hargreaves Lansdown Asset Management at 5%.
Dunstone, the founder of businesses such as Carphone Warehouse and TalkTalk, viewed the acquisition as a “positive outcome” for the housing market.
According to the Sunday Times, his estimated worth in 2022 was £815m, showing a £40m increase from the previous year.
Helena Marston, CEO of Purplebricks, expressed her belief that the deal represents a “solvent outcome” that also “preserves” the company’s brand. As a result, she will step down from her position following the deal’s conclusion.
Commenting on the acquisition, Dunstone said, “Purplebricks has dramatically changed the industry by driving down the cost of estate agency fees, and we aim to combine its significant brand recognition with an even more disruptive model.
In bringing together the two brands, we will supercharge Strike’s mission to democratize house selling by empowering customers.”
It is worth mentioning that Purplebricks was one of the early companies backed by the then-renowned stock-picker Neil Woodford.
The company made its debut on London’s junior market, Aim, in December 2015.