Purplebricks has reached a deal to sell its business for £1, marking the end of the road for the upstart online estate agent that promised to disrupt the UK property market.
The deal with online estate agency Strike would see Purplebricks’ business, assets and most of its liabilities change hands, while the company would retain up to £5.5mn in cash to return to shareholders including German media group Axel Springer.
Founded in 2014 by brothers Michael and Kenny Bruce, Purplebricks aimed to undercut the fees charged by traditional estate agents with a cheaper online model but struggled to gain traction. The company announced in February it was looking for potential buyers after its turnround plan failed to pan out.
“I am disappointed with the financial value outcome, both as a 5 per cent shareholder myself and for [other] shareholders,” said Paul Pindar, chair. “However, 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.”
David Reynolds, analyst at Davy, said the deal “feels like a profoundly distressed sale. Clearly the consideration of £1 reflects that.”
“I think they have just struggled to execute the promise of the business model, that was a digital disrupter to UK estate agency,” he added.
The buyer, Strike, is backed by a venture fund led by Carphone Warehouse co-founder Sir Charles Dunstone, who said he is still determined to shake up the estate agency sector.
“We remain committed to the online model, which offers customers a much better experience at a far lower cost,” Dunstone said. “Purplebricks has dramatically changed the industry by driving down the cost of estate agency and we aim to combine its significant brand recognition with an even more disruptive business model.”
The company’s well-known brand was a key asset for Purplebricks, despite criticism that it has spent too much on marketing without translating the outlay into sales or profits.
Purplebricks’ share price has plunged 99 per cent since it launched on London’s junior Aim market in 2015, with the backing of then-star fund manager Neil Woodford. The Bruces left the business in 2019 after acknowledging it had expanded too rapidly.
Axel Springer has agreed to support the deal, which requires shareholder approval, Purplebricks said. The German group owns about a quarter of the business, having initially invested £125mn in 2018 at a share price of £3.60.
Purplebricks plans to delist from the London market after the completion of the deal. The company had warned shareholders earlier this month that they would likely get back less than the value of their shares from any sale.
The company said it had considered other options, including an equity fundraising, but the board concluded only Strike’s proposal could be enacted in time to resolve “short term funding issues”.
Reynolds said: “It is a bit of an emblem of UK digital innovation . . . that has ended in a rather inglorious fashion.”
