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December 2008 / January 2009

Connells ponder expansion after
Rightmove stake sale

City correspondent

CONNELLS have raised a £30 million 'war chest' for spending on acquisitions, following the sale of their remaining 18 per cent stake  in Rightmove.

The sale,  announced on December 12, was of 21.2 million shares at 155p per share. The announcement  sent the Rightmove share price down 20p to 163p, as the deal was seen as further evidence of gloom in the housing market and lack of confidence in Rightmove, which has shed users as agents go out of business.

Stephen Shipperley group executive chairman of Connells, told Estate Agency News  the sale raises cash for possible expansion of the Connells operation. Connells has renewed its agreement with Rightmove until 2012 and he remains on the Rightmove board.

He said: "This sale is not a vote of no confidence in Rightmove. We have renewed our listing agreement until 2012 and I remain on the Rightmove board  as long as other board members and shareholders agree.

“We sold the shares because currently  we see greater opportunities in buying property market related  businesses than in holding shares.

"It’s like someone raising cash to buy property in the current market , because there are bargains around. Currently, it’s a distressed market for estate agency businesses and other property related businesses and we want to take advantage of the situation."

He denied there were any specific targets in mind, but Connells will be looking at different sectors of the market, including asset management businesses, letting businesses, as well as expanding its estate agency business into new areas of the UK.

Unlike most of their competitors, Connells are  set to make a profit during 2008, adds Shipperley. He said: ”We are on course to make about £10 million trading profit in 2008 and we do not have any debt.”

Mr.Shipperley predicts a "tough market" in 2009, with volumes similar to this year. But  he believes prices are more than half way down to the bottom of the cycle. He said," If the peak to trough fall in prices will be about 30 per cent, then we have already seen a fall of 20 per cent to 25 per cent which has not  yet been  recorded by the statistics.  This suggests that at most, prices will fall a further 10 per cent to 15 per cent at most during 2009."

David Livesey, Connells' group chief executive, added: "Currently, times are hard in our industry but we remain  very positive about the medium term outlook in the housing market. Whilst we will be cautious and selective,this sale puts us in a position to take advantage of opportunities when they arise."

Connells, a subsidiary of the Skipton Building Society, have 470 offices and their last big acquisition was the Sequence operation from Royal Sun Alliance  in the autumn of 2003.

square The Consensus Business Group, run by tycoon Vincent Tchenguiz, has sold its 50 per cent stake in Chesterton to the Mercantile Group, co-owner of the business. Consensus cites "strategic reasons" and is currently investing heavily in "green" businesses. The Mercantile Group, run by Salah Mussah, also owns the Humberts brand as it bought 34 Humbert offices from the receives in June this year. The two deals have made Mercantile a major player in the middle to upper sector of the estate agency market.