This morning, The Property Franchise Group spelled out its reasons to the City for rejecting Belvoir’s ‘takeover’ bid, saying its proposals did not represent a “merger of equals”.

TPFG said that the proposed management structure gives “undue weighting and control” to Belvoir “and is representative of a takeover.

The full statement is here:

Further to the Company’s announcement on 19^th October 2017, the board of directors of the Company (the “Board”) sets out below the reasons for the rejection of the possible merger offer (the “Possible Merger Offer”) as announced by Belvoir Lettings plc (“Belvoir”) on the same day.

The Board, holding in aggregate 49.3% of the ordinary shares, believes that the Possible Merger Offer significantly undervalues TPFG and had accordingly unanimously rejected the unsolicited approach made by Belvoir previously on the terms disclosed.

In coming to this view, the Board considered, and continues to believe, that, notwithstanding the scale that would be achieved in combining the two businesses, the Possible Merger Offer terms should be rejected in light of the following principal reasons:  

·      The Possible Merger Offer values the Company’s shares on a nil premium, based on a valuation of 130.5 pence for each TPFG share on the closing mid-market share price on 18^th October 2017. 

·      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 14^th 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.