John McGrath Enters Into Scheme Implementation Deed With Bayleys & Knight Frank

‘I’m here for life’: John McGrath to stay despite proposed sale.

Sydney real estate operator John McGrath has declared he isn't going anywhere, after revealing the board is in discussions to sell his listed agency to global property giant Knight Frank and Bayleys.

"I'm here for life," McGrath said, adding the "best is yet to come" if the deal wins shareholder approval.

The McGrath operations will proceed as normal, albeit transitioning to a private entity. The branding will remain unchanged, encompassing a franchise division, in-house operations, project marketing, and the Oxygen Home Loans mortgage brokerage.

McGrath disclosed, "The consortium reached out to me recently to enquire whether I'd be interested in maintaining my position as the principal shareholder and continuing as the CEO. My response was a resounding yes, affirming my commitment to staying put."

This assurance prompted the consortium to present an offer to our board, with a strong interest in retaining my leadership within the company.

According to the agreement, McGrath shareholders will be given the choice to obtain 60 cents in cash for each McGrath share they own, opt for shares in the unlisted company, or a mix of the two.

Should the proposal go through, it will signify McGrath's transition from a publicly listed entity on the ASX to a private organisation.

McGrath was established in Paddington in 1988 and made its debut on the ASX in 2015, launching with great excitement at $2.10 per share. However, it has never reached that initial price again. Currently, it has a market valuation of $74.8 million, and the announcement of the deal has led to a 24.4% increase in its share price to 58.5 cents during the day.

Should the agreement proceed, McGrath will continue in his role as CEO of the division and will convert his majority ownership into unlisted shares. Collectively, McGrath's board holds 48.1% of the company's issued shares and plans to agree to the offer.

“In a publicly listed business, there’s a constant pressure to keep making and exceeding your previous numbers, so you tend to have to default a little bit more to a shorter-term thinking, and I think the opposite will now be the case, as Knight Frank is a long-term player,” McGrath said.

“This is absolutely far from the end of an era, but it’s definitely a new phase and one that, I think, will probably suit our company.”

Knight Frank is one of the largest residential specialist agencies in Europe but less so in Australia, while the New Zealand-based Bayleys is keen to expand into the east coast of Australia.

Knight Frank chief executive of Australia, James Patterson, said the group was “excited at the prospect of Knight Frank and Bayleys 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,” Patterson said.

Bayleys managing director Mike Bayley added that he views the partnership with McGrath and Knight Frank as a “collaboration of leading real estate companies servicing markets on both sides of the Tasman whilst providing unprecedented global reach”.

McGrath said the deal comes as the housing market is showing signs of improvement.

“Prices, certainly in the upper ends of the market have continued to be strong,” he said.

“At the lower end, with high-interest rates, they have had a little bit of a negative impact, but I think as rates come down over the next year or two we should see the bottom end of the market pick up again,” McGrath said.