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Serviced Office Group plc

Purchase of Consort Property Holdings Limited

Serviced Office Group plc ('SOG') is an AIM-Listed provider of flexible office space, which currently operates a total of 17 centres, providing a total of 2,993 workstations. 

            

The board of Serviced Office Group plc ('SOG') is pleased to announce today that it has agreed to acquire the remaining 50 per cent. of the issued shares in Consort Property Holdings Limited ('Consort') not currently owned by SOG from UBS AG London Branch ('UBS') (the 'Acquisition'). Consort is a joint venture company that is currently held 50 per cent. by SOG and 50 per cent. by UBS. 

On completion of the Acquisition SOG will hold 100 per cent. of Consort. Consort owns the freehold to four serviced office properties located at Beckenham, Crawley, Teddington and Chiswick. SOG currently manages each of these four centres on behalf of Consort.   

On 31 December 2008, the four properties owned by Consort were together valued at £15.5 million while Consort had total bank debt of £12.3 million. The balance sheet effect of the above transactions will be to add £2.5 million to the net assets of SOG. For the year ended 31 December 2008, Consort achieved an EBITDA of £0.9 million. Following the Acquisition SOG will recognise 100 per cent. of Consort's earnings.  

SOG is financing the Acquisition through the issue of £1,000,000 principal amount of convertible loan notes (the 'Loan Notes'). The Loan Notes will be convertible into ordinary shares of SOG at 3.5p; the conversion price of 3.5p represents a premium of 33 per cent. to the closing middle market price of 2.63 pence per ordinary share of the Company on 29 June 2009, being the last practicable date prior to this announcement. The ordinary shares to be issued following conversion of the Loan Notes will represent approximately 32.5 per cent. of the Company's current issued ordinary share capital. 

The acquisition and issue of the Loan Notes is conditional upon, inter alia, Royal Bank of Scotland (which provides funding to both SOG and Consort) consenting to the acquisition and renewing the combined group's facilities.  

The conversion of the Loan Notes into ordinary shares is conditional upon shareholder approval and a capital re-organisation of the Company's ordinary shares to amend their nominal value from 5p to 1p, at the next Annual General Meeting of the Company. If the required approvals for the Loan Note conversion and the capital re-organisation are not obtained at the next Annual General Meeting of the Company, the Loan Notes will be repayable on 1 September 2009 with a redemption premium of 15 per cent. If repayment is not made in full on 1 September 2009 any outstanding amount will carry interest at 15 per cent. per annum pending repayment.

The Loan Notes will be issued to Sir Tom Farmer, Tickgold Limited (or associates of Tickgold Limited) and Peter O'Reilly, all of whom are, or are associated with, substantial shareholders in the Company. As such, under the AIM Rules, the issue of the Loan Notes is deemed to be a related party transaction. The Directors consider, having consulted with Evolution Securities Limited, its Nominated Adviser, that the issue of the Loan Notes is fair and reasonable as far as SOG's shareholders are concerned.

The directors and certain major shareholders of SOG have irrevocably undertaken to vote in favour of the resolutions to allot shares under the Convertible Loan in respect of their beneficial holdings of shares in SOG amounting, in aggregate, to 63,777,751 shares, representing approximately 72.47 per cent. of the existing issued ordinary share capital of SOG.

Further to the above, the Company has reached agreement with Michael Kingshott to enter into good faith negotiations to allow Mr Kingshott to subscribe for £100,000 of ordinary shares based on the market price at the time of subscription once the Company is out of a closed period, and if necessary, the capital reorganisation having been approved. 

Michael Kingshott, SOG Chairman, comments:

'In these difficult economic times we are seeing a movement in the number of enquires for short term accommodation as more and more medium size SMEs are beginning to appreciate the flexibility and competitive costs of serviced offices   compared with  conventional and often inflexible longer term leases.

 We are benefiting from our strong operational management team as well as the scalability of our operations. Both our managed services as well as our IT and Telecommunications division continue to benefit from our expansion.'

30 June 2009

ENQUIRIES:

Serviced Office Group plc	Tel: 020 7583 8833
Michael Kingshott, Chairman
Evolution Securities Limited	Tel: 020 7071 4300
Bobbie Hilliam
College Hill	Tel: 020 7457 2020
Gareth David

    

            

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