German media group Axel Springer has increased its stake in UK online-only estate agent Purplebricks, in a move that paves the way for a potential bid for the company.
According to a Purplebricks company filing on Monday, the media giant has more than doubled its stake in the business from 12.4 per cent to 26.6 per cent, having bought shares from co-founders Michael and Kenny Bruce and from Michael’s wife, Isabel.
Former chief executive Michael Bruce sold his entire 11.02 per cent stake to Axel Springer — as did his wife — following his departure from the company last month. Kenny Bruce, his brother, also sold a 2 per cent share to the group.
Axel Springer first invested in Purplebricks in March last year, in order to help the digital estate agent speed up its overseas expansion, particularly in the US, while the UK-focused business recovered from the “beast from the east” cold spell that had weighed on transactions.
When it made its initial stake purchase, Axel said it had no plans to increase that holding, having invested £125m. But its latest investment now puts it just behind veteran investor Neil Woodford as the largest shareholder in Purplebricks and smooths the way for a potential takeover offer for the company. The German media group would need only to agree a deal with Mr Woodford, who owns almost 30 per cent of the company.
Mr Woodford first invested in Purplebricks in August 2014, spending close to £20m before the company floated on the London Stock Exchange the following year.
Shares rose almost 7 per cent on Monday before falling back to close 2.3 per cent higher at 106.4p.
Purplebricks has suffered a difficult 18 months in which the company has scaled back its overseas expansion plans in order to cope with slowing sales and falling revenues in the UK. Shares have fallen more than 72 per cent over the past 12 months.
Last month, the company said it would pull out of Australia and reduce its US presence as it grappled with a worsening performance overseas, apologising for “too rapid” an expansion.
Following that, Woodford Investment Management said it would “be supportive of a decision to close the US operations” of Purplebricks, a move It said would “materially advance the prospect of group-wide profitability”.
The company apologised for having embarked on “too rapid” a push overseas. Non-executive chairman Paul Pindar said Purplebricks had made “suboptimal decisions in allocating capital” and that the company would “learn from these errors and not make them again”.
Purplebricks pitched had itself as an innovative and disruptive business model — replacing big commissions for selling properties with a fixed price for listing them, regardless of whether or not vendors sold their property.
The group was briefly worth £1.4bn at its 2017 peak, but by May its market value had fallen to less than three times that amount, while the company cut its revenue outlook by a quarter in February.