Foxtons, the estate agent renowned for its minis – not to mention its bar-esque offices and competitive (to put it lightly) attitude to selling houses – is understood to have decided on a price of 190p to 230p a share when it floats later this year. That values it at somewhere between £550m and £650m.
That isn’t bad, considering private equity firm BC Partners bought its 75% stake in the company for £360m in 2007 – just before the property crash. As the sky fell on the property industry and Foxtons’ valuation plummeted, BC Partners called the acquisition ‘a mistake’ – but having hung on to its stake anyway, it now looks like it’ll make a tidy little profit.
The business was originally expected to be valued at between £450m and £500m. But after the successful flotations of rival estate agent Countrywide and housebuilder Crest Nicholson – as well as the upcoming IPO of property search website Zoopla – Credit Suisse and Numis, the banks appointed to lead the float, are apparently more optimistic about Foxtons’ chances.
Presumably BC Partners is keen to get it out of the way as soon as possible. Government initiatives such as Help to Buy have driven interest in the property market – as well as prices – to record levels.
But after surprisingly positive results from housebuilders suggesting the industry has already recovered – and vociferous criticism of Help to Buy from almost everyone (except aforementioned housebuilders) – there’s a chance George Osborne will u-turn on his plans to introduce the second phase of the scheme, which will provide government guarantees on 95% mortgages for all properties, not just new builds.
That could be catastrophic for prices in the residential property sector: much of its fragile recovery (and the share prices of newly-floated companies) depends on that support from the government.
So in order to achieve maximum value, BC Partners will need to get this IPO over with very soon. Get out while the going’s good, as they say. If Osborne bows to his critics, the consequences will be dire: as they also say (in the private equity world) - 'buy well, sell well, and don't f*ck it up in between'...