Countrywide plc - May 2007

On 1 May 2007, Castle HoldCo 4 Limited, an acquisition vehicle backed by Apollo Management L.P. ("Apollo"), announced a final recommended revised offer for Countrywide plc ("Countrywide") valuing Countrywide's issued share capital at £1.1 billion. The offer was effected by means of a Court approved scheme of arrangement which became effective on 9 May 2007.

Countrywide is a leading residential estate agency and property services company in the UK, operating through five divisions: estate agency, lettings, financial services, surveying and valuation and conveyancing.

The Apollo offer was made after an earlier offer by Charlie Holdco 4 Limited, a 3i acquisition vehicle, lapsed in January 2007 when the required majority of Countrywide shareholders did not to vote in favour of 3i's offer. 3i's offer consisted of 490 pence in cash and 0.16518 Rightmove plc ("Rightmove") shares. The 3i offer was structured to allow Countrywide shareholders to receive Rightmove shares in part-consideration (comprising Countrywide's 21.5 per cent. shareholding in Rightmove) or to elect to sell their entitlement to Rightmove shares.

On 2 March 2007, Apollo announced a higher offer of 510 pence in cash and 0.16487 Rightmove shares. The Apollo offer was additionally structured to allow Countrywide shareholders to elect to receive an unlisted securities alternative, such that Countrywide shareholders could elect to continue to own up to 33 per cent. of Countrywide (through the acquisition vehicle) in the form of "stub equity".

Subsequently, Countrywide received a further non-binding proposal from a third party in relation to a possible competing offer for Countrywide. As a result, the company and its advisors conducted a series of private negotiations with Apollo, certain key shareholders and the third party, in which Apollo was able to exercise its right to match a third party's proposals as permitted by the inducement fee agreement. In May 2007, Apollo finally agreed to improve its offer to 530 pence in cash and 0.16487 Rightmove shares, with the stub equity element increased to 55 per cent. which the Board of Countrywide proceeded to recommend.

The transaction was unusual in a number of respects including the use of stub equity for the majority of the offer consideration, the high prevalence of hedge funds/alternative asset managers on the shareholder register (in particular Polygon Global Opportunities Master Fund, a hedge fund which, during the offer period, increased its shareholding to circa 30 per cent. through the use of shares and contracts for difference), and the conducting of a private auction process for a listed company.

Canaccord Genuity acted as Rule 3 advisor to Countrywide plc.