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Belvoir makes new bid to push merger with Property Franchise Group

The latest volley in the war of words between Belvoir and The Property Franchise Group has been hurled - this time in a 7am statement to the City by Belvoir.

It makes another bid for the merger between the two companies to take place as “the [Belvoir] board is firmly of the view that it is the right time for industry consolidation and that scale will be important in order to leverage the growth opportunities in the sector, as acknowledged by the TPFG board, to the benefit of both companies' shareholders and franchisees.”

Details of the statement are below: 

The Possible Merger Offer was not an unsolicited approach to TPFG, contrary to what has been stated, rather it was in response to a willingness to engage in discussions expressed to the Board on more than one occasion by TPFG.

·  Similarly, the key terms of the Possible Merger Offer, being the issue of 0.7150 new Belvoir shares and 52.20 pence in cash per TPFG share, were structured to reflect that prior engagement.

·  The Board would like to make clear that, as stated in the announcement released by Belvoir on 19 October, the cash payment element of the Possible Merger Offer would be a maximum of 52.20 pence per TPFG share.  The cash element of the Possible Merger Offer could, therefore, be reduced with an associated increase in the number of new Belvoir shares issued per TPFG share, resulting in TPFG shareholders owning a higher proportion of the Enlarged Group (in accordance with the reservations to vary the form and mix of the consideration set out in that announcement (and further set out below)).  As such, the TPFG shareholders could participate more significantly in the equity of the combined businesses, depending on the variation of the key terms of the Possible Merger Offer.

·  The Board is firmly of the view that it is the right time for industry consolidation and that scale will be important in order to leverage the growth opportunities in the sector, as acknowledged by the TPFG board, to the benefit of both companies' shareholders and franchisees.  The Board therefore believes it important to have agreed indicative terms for a new revolving credit facility with a major UK lending bank, principally to fund up to the maximum cash element of the Possible Merger Offer but also to pursue other opportunities as they arise.

Prior to announcing the Possible Merger Offer, the Board undertook a careful and detailed analysis of the implications of debt funding on the Enlarged Group and, as stated previously, believe that the use of such a facility would provide an efficient capital structure, allowing annual reductions in borrowings whilst also providing for the continuity of a progressive dividend policy. 

·  The Board believes that at the maximum cash payment of 52.20 pence per TPFG share there will be no reduction in the dividend paid to the shareholders in the Enlarged Group, as compared with the current levels of dividend paid by both Belvoir and TPFG.

·  In addition, the Board believes that medium term operational synergies ought to be achievable which will benefit the shareholders of the Enlarged Group.

·  With regard to the composition of the board of the Enlarged Group, in addition to Mike Goddard, Richard Martin, Dorian Gonsalves and Louise George, the Board expects that two non-executive directors will be retained and could be drawn from either the Belvoir or TPFG boards. 

The Enlarged Board could therefore comprise 3 members of the Belvoir board and 3 members of the TPFG board.

Mike Goddard, Chairman of Belvoir, commented:

"The Possible Merger Offer was proposed with the intention of treating both Belvoir and TPFG shareholders equally, save for the possibility of the latter being able to take some money off the table as part of this process.

We understood this to be an important component for the TPFG shareholders prior to submitting our merger proposal to the TPFG board, however the proportion of cash can be reduced and the proportion of shares increased accordingly.

We are disappointed with the TPFG board's refusal to discuss the Possible Merger Offer and believe that the shareholders of both companies will recognise the potential benefits that the Enlarged Group ought to be able to generate in the medium term.  We recognise that the TPFG board speaks for approximately 49.3 per cent. of TPFG's shares but would hope as a matter of process that they will fully consider the merits of the Possible Merger Offer in the context of the TPFG shareholders as a whole.

The Belvoir board remain very willing to have an open and constructive discussion with the TPFG board about the Possible Merger Offer."

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