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Franchise agencies continue war of words over merger terms

Statements from The Property Franchise Group and Belvoir continue to ramp up the war of words between the two agency groups which cannot - so far - agree on merger terms.


A statement this morning from TPFG to shareholders and the City says it believes the current offer by Belvoir “significantly undervalues” TPFG.



It also sets out the reason why the merger terms should be rejected:


“The cash element of the Possible Merger Offer was proposed to be funded through a new revolving credit facility, significantly increasing the level of debt within an enlarged Group. The Board does not feel that given the market outlook and uncertainty around the potential tenant fee ban that increased leverage is in the best interest of the Company's shareholders. TPFG had net debt of £0.7m as at 30 June 2017 and continues to have strong cash generation”;


“TPFG has a progressive dividend policy and has had a significantly stronger dividend cover than Belvoir over the last three years. The Board believes that the increased leverage that would be introduced as part of the Possible Merger Offer could put pressure on the dividend going forward”;


“The proposed Board structure under the Possible Merger Offer gives undue weighting and control to Belvoir's existing board and is representative of a takeover, not a merger of equals. The Board remains confident in the strong and stable executive management team of TPFG which has led the business since IPO and believes they are best placed to deliver further growth to TPFG shareholders”;


“ At the time of the interim results released on 14th September 2017, the Board announced that progress across the business had been encouraging, including at the EweMove business where a new managing director had been appointed.  The Board continues to believe that this challenger "hybrid/online" business will continue to grow strongly and are pleased to report that it has performed in line with management expectations since the half year and has been cash generative during this period.” 


“The Board is confident in delivering further growth and returns to TPFG shareholders through both capital appreciation and its progressive dividend policy and sees no merit in any further discussions with Belvoir. This announcement has been made without the consent of Belvoir.”

It is not uncommon for one side of stalled merger talks to release details of its proposals in a bid to move shareholders of the others side to consider their position. Belvoir’s original release of details yesterday morning - which you can see here - is believed to have taken TPFG by surprise.

One source close to the discussions suggested one sticking point surrounds a future position for TPFG chief executive Ian Wilson, whose name was conspicuous by its absence from a suggested new board for the merged company, revealed yesterday by Belvoir.

The wider market appears largely unmoved by the merger possibility.

Over the past month Belvoir’s share price has risen modestly from 107.5 on September 19 to 109.5 at close of play yesterday; TPFG’s was down very slightly over the same period from 131.5 on September 19 to 130.5 at the end of Thursday’s trading.

Belvoir was founded in 1995 and listed on the stock market in 2012; it operates a nationwide property franchise group with 300 offices across four brands offering a range of specialist services in property rental, property management, residential lettings, buy to let, property sales and property-related financial services. It reported revenue of £9.9m in 2016.

TPFG operates a property franchise business managing 50,000 properties through over 370 offices and six franchise brands - one of them EweMove, the online estate agency. It reported revenue of £8.3m for the year ended 31 December 2016. 

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    I would say Ian W has more ‘stature’ than Dorian G as CEO of a combined group.

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    I thought TPFG were owned by Legal & General?

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    I want to join your business, but only if I can kick out your CEO. Otherwise my share price wont increase. Come on!


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