Foxtons Group Plc announced on Wednesday that it has agreed to acquire Birmingham-based lettings agency FleetMilne as it pushes to expand non-cyclical, recurring lettings earnings and enter the UK's second-largest city for the first time.
The London-listed estate agent group said the acquisition of FleetMilne Birmingham would extend its footprint beyond the London commuter belt and provide a platform for growth in a market it described as having "significant growth opportunities", underpinned by redevelopment activity, new homes and build-to-rent schemes, and improving connectivity with London, including the planned HS2 rail link.
Lettings account for around 95% of FleetMilne's revenue, which Foxtons said aligned closely with its strategy of acquiring lettings-focused, earnings-accretive businesses.
Foxtons said it would pay initial consideration of £3.2m, with a further £0.8m deferred for 12 months and contingent on performance targets being met.
The acquisition would be funded from the group's existing revolving credit facility.
FleetMilne generated unaudited revenue of £1.5m and profit before tax of £0.2m in the 12 months ended 30 September, before any revenue or cost synergies.
Foxtons said the deal was expected to be earnings accretive from 2026 onwards and that, over the medium term, it was targeting a total return on investment of 20% in Birmingham, in line with its return hurdles.
"This is a significant move for Foxtons as we expand outside of the London commuter belt for the first time," said chief executive Guy Gittins.
"Our successful acquisitions in London's commuter towns have shown how our industry-leading platform can unlock value, making Birmingham - a major market with strong long-term potential, supported by extensive redevelopment and increasing connectivity with London - a natural next step.
"With the Foxtons operating platform behind it, FleetMilne provides a strong foundation for organic growth and enables further bolt-on acquisitions as we build scale and deliver attractive returns."
Foxtons said FleetMilne would become its Birmingham hub, enabling further bolt-on acquisitions with high returns on investment, supported by revenue and cost synergies delivered through its operating platform.
The directors of FleetMilne would remain with the business following completion to lead the next phase of growth.
"Having built FleetMilne over the past 20 years into a leading lettings business in central Birmingham, it was important to find a partner who shared our ambition for the market and our commitment to outstanding service," said Nicola Fleet-Milne, managing director of FleetMilne.
"Foxtons is the right partner for the next stage of our journey, and I am genuinely excited about what we can achieve together.
"Foxtons' scale, technology and expertise will give us the tools to accelerate our growth in Birmingham and enhance the service we provide to landlords and tenants."
At 0856 GMT, shares in Foxtons Group were flat at 52.5p.
Reporting by Josh White for Sharecast.com.