Fairview has mothballed its plans for a management buyout, blaming the “uncertain” housing market conditions in London.
A source close to the deal said that the Fairview management, led by founder and chairman Dennis Cope, had asked the company’s independent directors for a three-month suspension because of fears about the state of the market.
The company’s shares fell 10% to 125.5p last Thursday, the day of the announcement.
A source close to the deal said: “The management do not want to send out the message that all bets are off. It was management-led and there was no question of problems over financing or price.”
It is understood that the executive management and independent directors had reached an agreement on the terms of the deal and an “in-principle price” – expected by analysts to be worth about 200p per share – before the management called off the talks. The negotiations, which were announced on 27 April, are thought to have taken longer than expected.
Sources close to the deal said there was “disappointment all round” that a deal had not been concluded.
Independent director Michael Whittles said: “It’s not a case of doom and disaster, but there has been a downturn in the market, particularly in Fairview’s core markets of the South-east.
“The management were very concerned that they could be very quickly breaking their bank covenants. They felt that there was too much risk and uncertainty around to take on what would be a highly-geared vehicle at the moment.”
In its statement, Fairview said: “While the current market conditions are softening, the buoyant conditions experienced in the first half mean that the results for the first half are strong and a further announcement will be made shortly.
“The board believes that while there has been a noticeable slowdown in sales enquiries in recent weeks, it is too early to conclude whether or not this will lead to any significant decline in sales prices.
“It remains to be seen whether September brings the usual seasonal resumption of greater activity following the traditionally quieter summer months.”
The management team was backed by investment trust 3i.
