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Purplebricks, the once high-flying online estate agent that reached a peak valuation of more than £1.3bn, has been sold to Charles Dunstone-backed rival Strike for £1 with all of its more than 750 staff put at risk of redundancy.
The company, which had threatened to shake up the property market with its low-cost model, put itself up for sale in February after issuing a string of profit warnings that resulted in its market value plunging to just £30m.
Shares in Purplebricks plunged more than 40% on Wednesday, giving the company a market capitalisation of just over £2m, as the fire sale all but wiped out shareholders.
As part of the deal, Strike intends to embark on a cost-cutting drive that includes “reducing the employee base” at Purplebricks.
“While this will require comprehensive planning, Strike has indicated it would like to complete this planning and initiate a redundancy consultation process, with the company’s assistance, that would likely involve all of the company’s employees as soon as practicable and possibly prior to completion [of the deal],” Purplebricks said.
“Strike has however assured the board that its firm intention is to grow the business, which will require continued employee support and that any employees affected by redundancy will be treated fairly and equitably, consistent with Strike’s culture of respect.”
The company’s board said all of the advanced talks held with potential suitors involved “some proposals to reduce or otherwise change the company’s workforce”.
Purplebricks admitted it was “disappointed” with the value of the deal, which would result in Strike assuming most of its liabilities, but said no better offers emerged during the sale process.
Under the terms of the deal, Purplebricks will use about £5.5m in cash it has on its balance sheet to pay expenses and costs not covered by Strike, leaving shareholders around £2m in proceeds from the sale.
“I am disappointed with the financial value outcome, both as a 5% shareholder myself and for shareholders who have supported the company under my and the board’s stewardship,” the Purplebricks chair, Paul Pindar, said.
“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 to provide the stability the company needs.”
The company’s five biggest shareholders are the German publisher Axel Springer, which holds a 26.5% stake, JNE Partners (11%), Momentum Global Investment Management (7%), Pindar (5%) and Hargreaves Lansdown Asset Management (5%).
Dunstone, who founded businesses including Carphone Warehouse and TalkTalk, said that the deal represented a “positive outcome” for homebuyers and sellers.
He is a partner at Freston Ventures, the joint main shareholder in Strike. He was worth an estimated £815m in 2022 as his wealth swelled by £40m, according to the Sunday Times.
The strategic review of Purplebricks kicked off in February – which included looking at an equity fund raise – reportedly sparked interest from the company’s co-founder Michael Bruce.
Bruce, who co-founded the business with brother Kenny in 2012, presides over the intellectual assets of Boomin, a property portal he founded after standing down as chief executive of Purplebricks in 2019. Boomin was forced into liquidation last year after failing to secure new funding.
Helena Marston, the chief executive of Purplebricks, said the deal has allowed the company to secure a “solvent outcome” that also “preserves” its consumer brand name in the market. She will resign after completion of the deal.
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 democratise house selling by empowering customers.”
Purplebricks launched in 2014 and received early backing from Neil Woodford, the former star stockpicker. It floated on London’s junior market, Aim, in December 2015.