Related Party Transaction & Change of Name (7766W)

TIDMROE

RNS Number : 7766W

Roeford Properties PLC

25 November 2010

ROEFORD PROPERTIES PLC

("the Company" or "Roeford")

Proposed Transfer of Residential Housebuilding Team

Change of Name

and

Notice of General Meeting

1 Introduction

A Circular was yesterday despatched to shareholders containing details of the proposed transfer ("Transfer") from Mar City Developments Limited ("Mar City) to Mar City Homes Limited ("MCH"), a recently incorporated wholly owned subsidiary of Roeford, of a team of approximately 23 people ("the Residential Housebuilding Team") pursant to the terms of a Business Cooperation Agreement. The consideration for the Transfer is dependent upon the profits before tax generated by the Residential Housebuilding Team over the two years ending 31 December 2012.

The maximum consideration payable is GBP800,000. Any consideration payable will be satisfied by the issue of new Ordinary Shares at a price of 0.45 pence per share, being the average closing middle-market price for the five business days prior to 24 November 2010 (being the date of the Circular). Therefore, the maximum number of Consideration Shares that could be issued is 177,777,777, representing approximately 47.7 per cent. of the issued Ordinary Share capital as enlarged by the Consideration Shares (and assuming no further issue of Ordinary Shares). Mar City is wholly owned by Maggie Ryan (Chairman of Roeford and her husband). Therefore assuming no other new shares are issued and on the basis that they do not acquire any further Ordinary Shares in the meantime, the issue of the maximum number of Consideration Shares would increase the combined percentage interest in the Ordinary Shares of Maggie Ryan and her husband from 79.5 per cent. to 89.3 per cent..

All of the Directors of Roeford have interests in Mar City. Maggie Ryan is a director and she and her husband own all of the shares in Mar City. Mark Grady is also a director of Mar City whilst Mick Donovan is an employee. Due to their respective interests in Mar City, the Transfer is classified as a related party transaction under the AIM Rules. In addition, because the maximum consideration payable is in excess of GBP100,000, the Transfer constitutes a substantial property transaction under section 190 of the Companies Act 2006 and therefore is subject to the approval of Shareholders in a general meeting to be held on 17 December 2010. Due to the lack of independent directors, the Board has instructed WH Ireland, as the Company's nominated adviser, to consider the merits of the Transfer and to advise the Board accordingly.

MCH has also entered into the Managed Services Agreement with Mar City whereby, following Completion, Mar City will provide certain facilities and services to MCH to enable it to deploy and manage the Residential Housebuilding Team.

The Board is proposing to change the name of the Company to Mar City plc.

2 Background to and reasons for the Transfer

Over 25 years, Mar City has established a track record for delivering a broad range of property developments including for educational, healthcare, commercial and residential use in both the public and private sectors. In recent years Mar City has successfully focused primarily on its residential house building activities and in particular on high quality, sustainable developments. The Board considers that Mar City is now an established housebuilder in the UK market.

Mar City and the Roeford Board now both believe, for reasons explained further below, that the residential housebuilding business will have better prospects in a publicly quoted vehicle such as the Company and Mar City wishes to focus its strategy instead on the other areas of its business.

The Transfer will provide the Company with the opportunity to acquire a skilled and experienced team of people responsible for developing this profitable line of business for Mar City.

3. Future prospects

As part of the Business Cooperation Agreement, it is anticipated that following completion on 31 December, members of the Residential Housebuilding Team, having been transferred to MCH, will be made available to Mar City in order for Mar City to fulfil its existing contractual obligations. These are expected to have been fulfilled by March 2012 These services will be provided for a fee based on the cost to MCH of employing the Residential Housing Team plus a margin. The exact fee will vary in the future depending on the exact nature of projects undertaken but it is intended to be on arm's length terms.

The Board considers that considerable capacity has been taken out of the house building sector in recent years as a result of the recent economic downturn. As the economic climate improves the Board believes that the Group will be well placed to benefit from an upturn in new housing developments, the requirement for which remains undiminished in the Board's view, particularly in the affordable social housing sector.

The Board is confident that further project development opportunities can be secured over the coming months without the requirement for an equity fundraising. These projects may be undertaken directly by the Group or by way of joint ventures. Other partners to the joint ventures could include local authorities, Registered Social Landlords and owners of development land such as Mar City itself.

As the Company will from Completion be actively trading and in view of the on-going relationship with Mar City, it is the intention of the Board to seek to appoint at least one independent non-executive director over the next few months.

4. Change of name

The Board considers that the Mar City brand is well-known and highly regarded and that there will therefore be significant commercial advantage to the Company in being able to use the Mar City name. Therefore, if Shareholders approve the Transfer, a resolution will be put to the General Meeting to change the Company's name to

Mar City plc

Under the Companies Act 2006 and the Company's Articles of Association, a change of name requires the passing of a special resolution of shareholders at the general meeting.

If the necessary resolution is approved, the change of name will be effective once Companies House has issued a new certificate of incorporation on change of name. This is expected to occur on or around 17 December 2010, being the day of the GM. The tradable instrument display mnemonic ("TIDM") of the Company is expected to change to MAR effective from 7.00 a.m. on 22 December 2011.

5. Principal terms of the Business Cooperation Agreement

Under the Business Cooperation Agreement, Mar City has agreed, subject to the passing of Resolution 1 at the General Meeting to transfer all of the employees comprising the Residential Housebuilding Team to MCH and MCH has agreed to assume all of the future liabilities of such employees. The transfer of the employees will be governed by TUPE, with the effect that MCH will, from Completion, be legally obligated to pay salaries and maintain all other terms of employment of the Residential Housebuilding Team. MCH will provide the Residential Housebuilding Team to Mar City following Completion to enable Mar City to fulfil its existing obligations on residential housebuilding projects. These obligations are expected to be fulfilled by March 2012. MCH will charge a fee for this will enable MCH to discharge the costs of employment.

As part of the arrangements, Mar City has undertaken (unless MCH agrees otherwise) not to solicit any members of the Residential Housebuilding Team from the Group nor to compete with it in relation to the residential housebuilding business for a period of three years from Completion. Mar City has also given certain warranties to MCH.

In consideration of the undertakings and obligations of Mar City, the Company has agreed to pay consideration based on a multiple of 2.5 times the pre-tax profit of MCH during the two years ending 31 December 2012 and subject to a maximum consideration of GBP800,000. This consideration will be satisfied by the issue and allotment to Mar City of the relative number of Consideration Shares, credited as fully paid, at a price of 0.45 pence per share.

6. Principal terms of the Managed Services Agreement

Under this agreement, Mar City has agreed to provide, with effect from Completion, certain facilities and services to MCH. These will include the provision of premises for the Residential Housebuilding Team together with office equipment, IT and telecoms support and payroll support to enable the Group to operate the new residential housebuilding business until it is in a position itself to provide such facilities. In consideration for providing such facilities and services, MCH will pay Mar City a fee based on the cost of supply to Mar City plus a margin at market rates. Initially, the fee will be GBP44,000 per month, payable monthly. The Managed Services Agreement can be terminated by either party on not less than six months' prior notice.

7. Circular

Copies of the Circular have been posted to shareholders and are available to the public, free of charge, at the Company's registered office and at the offices of WH Ireland at 4 Colston Avenue, Bristol BS1 4ST during usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) for one month from the date of this document. This document is also available on the Company's website, www.roefordproperties.co.uk.

8. Recommendation

WH Ireland, having consulted with the Board, has advised the Board that it considers the terms of the Business Cooperation Agreement and the Managed Services Agreement to be fair and reasonable insofar as Shareholders are concerned and that the passing of Resolutions to implement the Business Cooperation Agreement and the change of name are in the best interests of shareholders and the Company as a whole.

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