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Business Comment

Mark Leftly: Hoare Govett has a chance for absolution in Countrywide's float

Outlook The news that the UK's biggest estate agent by revenue, Countrywide, is looking to again sell shares on the London Stock Exchange has been painted as marking one or more of the following:

a) the return of flotations: very few new equities have been launched since the onset of the credit crunch, but Countrywide is poised to join the recently listed Direct Line and housebuilder Crest Nicholson as an exciting FTSE 250 entrant;

b) the rise of the housing market: if the owner of Arabian mansions-to-golf courses agent Hamptons International and the 113-year-old Bairstow Eves is hopeful of raising £200m to pay off loans, there must be some real signs of a property boom;

c) the triumphant comeback of Countrywide itself: overloaded by debt when it was bought for what now seems an astonishing £1.1bn in 2007, the group was rescued two years later by Oaktree Capital and has now been largely rebuilt.

As far as stories about equities can be poignant, these are almost tear-jerking yarns of victory in the face of adversity, the mighty falling to their knees only to stand tall once more.

But they also mask another fascinating back-from-the-brink tale: the quiet revival of Hoare Govett, the venerable stockbroker that in the post-war years was run by the legendary City gent Kit Hoare, but more recently found itself as a barely regarded, and certainly unloved, offshoot of state-owned Royal Bank of Scotland.

One of the bookrunners named on the Countrywide float is Paul Nicholls, the head of what is now Jefferies Hoare Govett. This means that his firm, which acts as a conduit between companies and shareholders, is in pole position to pick up the estate agent as a broking client once the flotation is completed.

Such a talked-about FTSE newbie would be a fine addition to any broker's client list, but for Hoare Govett this would represent something far greater: absolution.

RBS dumped Hoare Govett for a token sum to the United States's Jefferies in February last year, as chief executive Stephen Hester retreated from that nasty practice of investment banking. Outside of an RBS that lumped all investment bankers together, Hoare Govett had successfully resisted that toxic image: rivals saw the broker as an honourable institution, evoking images of an aristocratic City that would stick to its word, work hard for its clients, and seal a deal over a glass of Scotch and a handshake.

Although that sepia-tinted view of pre-Thatcher stockbroking no longer represented the reality, Hoare Govett remained one of the great names in the industry. But even the most fiercely loyal feared for Hoare Govett's future under the leadership of a tough US investment bank.

Certainly, Hoare Govett was struggling before and after the Jefferies takeover, having been made one of the scapegoats for G4S's embarrassing failure to buy Danish cleaner ISS for £5.2bn, while clients like beer cans maker Rexam and GlaxoSmithKline also wielded the axe.

Even RBS dispensed with the services of its former subsidiary, which seemed to confirm rumblings that Hoare Govett had been understaffed and under-supported after being snapped up as part of the then Sir Fred Goodwin's absurd pursuit of ABN Amro in the first months of the crisis.

However, despite losing so many big name corporates, Hoare Govett now has 75 clients, about 10 more than when it became a part of Jefferies.

There has been a focus on areas where Jefferies already has strength, such as natural resources, resulting in Hoare Govett picking up the likes of Severstal spin-off Nordgold and Asia-focused oil explorer Salamander Energy.

Most instructively, Hoare Govett regained a former client, Cairn Energy, last month. Hoare Govett had lost Cairn as the broker did not have an analyst covering oil exploration and production when owned by RBS; Jefferies gave the broker the expert manpower that the client demanded.

Countrywide has yet to decide which of the three bookrunners – the others being Goldman Sachs and Credit Suisse – will be made its broker, and there is even the long shot that the estate agent could look elsewhere if the trio do a bad job on the flotation.

But the fact that Hoare Govett's historic name is now being linked to client wins rather than losses, barely a year after its nadir, marks its story out as a bit of a modern City fairy tale.