Belvoir agrees merger with The Property Franchise Group

Six years after AIM-quoted franchised lettings company Belvoir (LON: BLV) tried to secure a merger with AIM-quoted rival The Property Franchise Group (LON: TPFG), the latter has made an agreed bid.

Both companies have prospered since the original cash and shares approach, which valued TPFG at 130.5p/share based on a Belvoir share price of 109.5p. The agreed offer of 0.806377 TPFG shares for each Belvoir share values Belvoir at 277.4p/share based on a TPFG share price of 344p. TPFG shareholders will own 51.75% of the enlarged group. The combined value would be £214.4m, although the TPFG share price has fallen 14p to 330p.  

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Both shares have risen by more than 2.5 times since the previous approach with TPFG rising slightly more and it has slightly higher yield of 3.8%, compared with 3.5%. TPFG is paying a special dividend of 2p/share prior to the merger and says that the final dividend will be 7.4p/share and payable to the enlarged shareholder base.

The deal is described as a merger, but the TPFG management is in control with its chief executive and finance director both retaining their roles in the enlarged company and one executive director from Belvoir joining the board.

Belvoir chief executive Dorian Gonsalves and finance director Louise George are being paid off, but they will remain with the group for 12 months to help with integration.

Gresham House holds 16.2% of Belvoir and recently added to its stake. Canaccord Genuity is the second largest shareholder with 7.2%. Both these investors are large shareholders in TPFG. Unicorn and Liontrust are large shareholders in Belvoir but do not have a notifiable stake in TPFG. Shareholders holding 31.2% of Belvoir, including directors, are backing the bid and they may have encouraged the deal.  

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The combined group will manage around 152,000 tenanted properties through a range of brands and they both have property sales operations. Belvoir has a more advanced financial services business that TPFG will benefit from.  

Cost savings could enhance earnings. Short-term there will be savings on one AIM-quotation with medium-term opportunities for other savings.

The Belvoir share price is 1p higher at 257.5p.

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