McGrath real estate to be sold, delisted but John McGrath to stay on

The move ends tortuous years on the ASX, after the company listed during the last property boom but failed to live up to the hype and endured multiple board and management changes.

McGrath Estate Agents CEO John McGrath. Picture: Supplied

Sydney real estate identity John McGrath has struck a deal to sell his listed company to international giants Knight Frank and Bayleys, but he will stay on running the firm.

The move will see him go back to the private world in which he made his name as the city’s “Mr Property” before the company struggled to translate its success on to the listed market.

“I would like McGrath to be Australia’s number one brand, this (deal) will give us the leverage, support, and intellectual property to help us topple Ray White and become Australia’s number one brand,” Mr McGrath told The Australian.

The move ends tortuous years on the Australian Securities Exchange for McGrath after the company listed in 2015 at the tail end of the last property boom but failed to live up to the hype and endured multiple board and management changes.

The recovery of the property market more recently has allowed McGrath to stabilise its operations and build up a valuable rental book.

The listed McGrath has entered into a scheme implementation deed with a consortium of Knight Frank and Bayleys — which is well known throughout New Zealand — under which the consortium has agreed to acquire McGrath’s shares.

Founder and chief executive John McGrath whose stake in the company is valued at around $22m said he intends to elect to receive the unlisted scrip alternative for his 23.3 per cent stake, and he will continue as chief executive, backed by his existing management.

The well-known property figure will look to recover the fortunes of his famed brand out of the public eye after he took back the helm of his company two years ago after previously installing a series of chief executives.

McGrath founder John McGrath

He walked away from the 2015 float with $37m in cash and held a 27 per cent stake in the company when it was valued at about $281m before its listing.

If the McGrath board agrees at the scheduled board meeting slated for mid-June, the company plans to delist the organisation, which has 135 offices on the eastern seaboard.

“I am keeping my shares, my job is not done,” Mr McGrath declared on Monday. “I am not taking a dollar off the table, I will be retaining all my shares, I will be in it for the long haul.”

McGrath shareholders including the Chinese-backed Aqualand with 15.8 per cent and investor and developer Shane Smollen with about 7.4 per cent will have the option to receive 60c cash per McGrath share, or an unlisted scrip alternative, or a combination of both. McGrath shareholders will also be entitled to a permitted dividend prior to implementation of the scheme, which will not cut into the price.

McGrath shares jumped by 11c on Monday to 58c, just under the bid price. Industry players expressed some surprise at the move by Knight. Frank and its NZ partner but the British firm is well-known for its luxury operations worldwide and has repeatedly sought to expand locally.

The firm also has a global reputation in commercial real estate and its rivals in that field, including CBRE and Colliers, also sell residential real estate.

Observers said that the deal would provide Chinese group Aqualand with a potentially lucrative exit as it had wanted to lower its exposure to the listed real estate agency.

The value of the company lies partly in its rental operations with observers saying these would have accounted for much of the price that has been paid.

The company’s board, who control about 48.1 per cent of the register, unanimously recommends shareholders vote in favour of the deal, in the absence of a superior proposal and subject to an independent expert report.

Mr McGrath said the talks with Knight Frank, who have for many years openly declared that they want to establish a major residential presence in Australia, had been ongoing for several months.

He said under the plan no Bayleys New Zealand offices would open in Australia, and neither would there be any McGrath office openings in the so-called Land of the Long White Cloud.

“Our strategy in Australia doesn’t change, it might just speed up, our goal is to increase the number of agents, now we will have two dream partners.”

“We are delighted to have received this offer from a consortium comprising a leading global property firm in Knight Frank, which has a strong residential real estate offering throughout the world, and leading New Zealand full-service real estate agency in Bayleys,” Mr McGrath added.

“We share common values and cultures and see the potential partnership with McGrath as a positive development for our industry, and for McGrath agents and team members, our franchise partners and customers, who will benefit from the consortium’s global networks, access to high net worth clients and real estate expertise in support of our vision and growth plans,” he said.

“My role as CEO will continue and, if the scheme is approved, I look forward to continuing to work with the great team at McGrath but also in taking advantage of the opportunities afforded by international partners Knight Frank and Bayleys,” he said.

McGrath chair, Peter Lewis, said the scheme was an excellent outcome for McGrath shareholders, customers, agents and staff. “The scheme consideration is at a significant premium to historical trading prices, offering McGrath shareholders with certainty of value and the opportunity to realise their investment in full for cash,” he said

Knight Frank chief executive James Patterson said the buyers were excited at “potentially partnering with McGrath, which is a well-established residential property business with a wide reach within Australia”.

“The acquisition would allow Knight Frank to have a leading position in residential and commercial real estate in Australia, creating a full service real estate capability to support and advise clients and customers,” he said.

Mr McGrath said he would be ‘delighted’ to talk to any Knight Frank residential staff if the scheme proceeds.