31st Mar 2005 17:26
Redstone PLC31 March 2005 31 MARCH 2005 REDSTONE PLC £25.55 MILLION ACQUISITION OF XPERT GROUP LIMITED FIRM PLACING OF 288,000,000 NEW ORDINARY SHARES AND PLACING & OPEN OFFER OF 128,726,337 NEW ORDINARY SHARES AT 6.25P PER SHARE TO RAISE £26 MILLION •Redstone plc, the national communications services provider, announces today the acquisition of Xpert Group Limited ("Xpert"), for a total consideration of £25.55 million, payable as to £2.78 million by the issue of new Ordinary Shares in Redstone, €940,952 by the issue of Loan Notes with the balance to be satisfied in cash. •Xpert is an independent, privately owned converged IP network and communications solutions provider with expertise in contact centres, voice and video applications, IP networks, security and business critical servers. Revenues for the year ended 30 April 2004 were £27.4 million. Xpert currently employs approximately 200 staff across nine locations in the UK and Ireland. •The combined businesses of Redstone and Xpert will operate as a "one-stop shop" communications services provider covering data, voice, building and telecommunications services for both public and private sector organisations across the UK and Ireland, including the key vertical markets of education, health, government, retail and financial services. •Redstone announced its interim results for the 6 months ended 30 September 2004 on 16 December 2004. These results showed a significant rise in Order Intake of over 40 per cent. compared with the same period in the previous year. Since then, Redstone has continued to win orders and, for the 11 month period ended 28 February 2005, had achieved year-on-year order intake growth of 38 per cent. "Order Intake" underpins approximately 50% of Redstone's revenue the balance of business being existing telecommunications and support services. For the nine month period ending 31 January 2005 Xpert had achieved year on year order revenue growth of 15 per cent. •Redstone and Xpert operate in a substantial market, with the IP telephony sector market alone being estimated at £800 million in 2005 (Source: Datamonitor). The Board believes that the Acquisition will be earnings enhancing (excluding goodwill amortisation) and that the outlook for the Enlarged Group is strong. •The Directors believe there are a number of significant benefits that the Enlarged Group will have over Xpert and Redstone by themselves, including: - strengthened relationships with key partners such as Cisco, Avaya, BT Group and HP, resulting in some cost savings; - additional cost savings expected from office and infrastructure rationalisations; - the potential for Redstone to sell both telecommunications and SmartB (Redstone's Smart Buildings portfolio) solutions to Xpert's existing customer base; and - a greater presence both in the above mentioned vertical markets and geographically. •The Acquisition is being funded by way of a Firm Placing of 288,000,000 New Ordinary Redstone shares and a Placing and Open Offer of a further 128,726,337 New Ordinary Redstone shares at a price of 6.25 p per share, to raise a total of £26 million. Both the Firm Placing and Placing and Open Offer have been fully underwritten by Evolution Securities Limited. •As a result of its size, the Acquisition constitutes a reverse takeover and is therefore conditional, inter alia, on the approval of Redstone's shareholders. •It is expected that trading in the Existing Ordinary Shares of Redstone will recommence tomorrow, 1 April 2005, following the suspension of the shares on 14 March 2005. •Dealings in the New Ordinary Shares of Redstone being issued pursuant to the Acquisition, the Firm Placing and the Placing and Open Offer are expected to commence on 28 April 2005. Ian Brown, Chief Executive of Redstone, commented: "This is a transformational deal and a significant milestone in Redstone'saspiration to secure a leadership position within the communications marketplaceand be an active participant in the consolidation of the communications servicesindustry. The operational and geographic fit of Xpert and Redstone make perfectcommercial sense. This, combined with the target markets both companies share,will enable the combined businesses to look forward to the future withincreasing levels of confidence." ENQUIRIES: Redstone Plc Tel. +44 (0)845 200 2200Ian Brown, Chief ExecutiveTim Perks, Chief Financial Officer Evolution Securities Limited Tel. +44 (0)20 7071 4300Rob Collins ICIS Limited Tel. +44 (0)20 7651 8688Tom Moriarty or +44 (0)7802 442486Archie Berens Neither the Existing Ordinary Shares nor the New Ordinary Shares have been, orwill be, registered under the United States Securities Act of 1933 (as amended)or under the securities laws of any state of the United States nor do theyqualify for distribution under any of the relevant securities laws of Canada,Australia, the Republic of Ireland or Japan nor has any prospectus in relationto the New Ordinary Shares been lodged with or registered by the AustralianSecurities and Investments Commission. Accordingly, subject to certainexceptions, the New Ordinary Shares may not be, directly or indirectly, offered,sold, taken up, delivered or transferred in or into the United States, Canada,Australia, the Republic of Ireland or Japan. Overseas Shareholders and any person (including, without limitation, nomineesand trustees) who have a contractual or other legal obligation to forward thisannouncement into a jurisdiction outside the UK should seek appropriate advicebefore taking any action. Evolution Securities Limited, which is authorised in the United Kingdom by theFSA, is acting exclusively for Redstone plc and no-one else in relation to thematters described in this announcement and will not be responsible to any otherperson for providing the protections afforded to customers of EvolutionSecurities Limited or for advising any such person on the contents of thisannouncement or any matter referred to herein. This announcement does not constitute an offer or an invitation to purchase orsubscribe for any securities. Redstone plc Acquisition of Xpert Group Limited Firm Placing of 288,000,000 New Ordinary Shares andPlacing and Open Offer of 128,726,337 New Ordinary Shares at 6.25 pence per New Ordinary Share by Evolution Securities Introduction On 14 March 2005, the Board of Redstone announced that it was in negotiationsrelating to an acquisition which would constitute a reverse takeover under theListing Rules. Dealings in the Existing Ordinary Shares were suspended on thatdate. The Board announces today that these negotiations have concluded and that it hasconditionally agreed to acquire the entire issued share and loan capital ofXpert for a total consideration of £25,550,000, such consideration to besatisfied as to £2,775,000 by the issue of the Consideration Shares, €940,952 bythe issue of the Loan Notes and with the balance to be satisfied in cash. As theAcquisition is a reverse takeover, it requires the approval of Shareholders atan Extraordinary General Meeting, notice of which is set out in a circular ("theCircular") being posted today to Shareholders. In view of this latest announcement and the publication of the Circular, it isexpected that trading in the Existing Ordinary Shares will recommence tomorrow. The Directors propose to finance the cash element of the Acquisition andadvisers' fees associated with the Acquisition and the Issue by way of an issueof 416,726,337 New Ordinary Shares at 6.25 pence per share. The Issue comprises288,000,000 Firm Placing Shares, which have been placed firm and 128,726,337Open Offer Shares which have been placed subject to a right of recall to satisfyvalid applications from Qualifying Shareholders under the Open Offer, in eachcase, with new and existing investors. Of the gross amount proposed to beraised, therefore, approximately £18.0 million is proposed to be raised by wayof the Firm Placing and approximately £8.0 million by way of the Placing andOpen Offer. Qualifying Shareholders are being given the opportunity toparticipate in this fundraising by way of the Open Offer which is being made byEvolution Securities on the Company's behalf. Under the Open Offer, 128,726,337New Ordinary Shares are being offered to Qualifying Shareholders on the basisof: 6 Open Offer Shares for every 13 Existing Ordinary Shares held at the Record Date and so in proportion to any number of Existing Ordinary Shares then held. The Issue Price represents a discount of 13.8 per cent. to the prevailingmid-market price of 7.25 pence per Existing Ordinary Share immediately prior tothe suspension of dealings in the Existing Ordinary Shares on the London StockExchange on 14 March 2005. The Issue has been underwritten by EvolutionSecurities. The principal purpose of the Issue is to satisfy the consideration payable underthe Acquisition. The balance will be used to satisfy advisers' fees inconnection with the Acquisition and the Issue of approximately £3.0 million withthe remainder of £225,000 being utilised for general working capital purposes. The Issue is conditional upon, inter alia, the approval of the Acquisition, theapproval of the Issue by Shareholders (each of which is to be sought at anExtraordinary General Meeting, notice of which is set out in the the Circular)and Admission. The Firm Placing, the Placing and Open Offer and the Acquisitionare inter-conditional. Redstone Group Operations and Current Strategy Redstone is a national communications services provider, offering a "one stopshop" communications proposition for businesses, incorporating systemscommunications solutions, support and connectivity services, andtelecommunications services. To facilitate the delivery of its portfolio ofservices and solutions, Redstone has a number of strategic partnerships with keyindustry suppliers including Cisco Systems (Cisco), Avaya and BT Wholesale.Redstone currently employs approximately 290 personnel and operates from anetwork of 8 regional offices delivering services to a wide range of commercialand public sector customers. Key vertical markets for Redstone and theircontribution to Order Intake for the year ended 30 April 2004 were: education(32 per cent.), retail (18 per cent.), health (6 per cent.), financial services(6 per cent.) and government (7 per cent.). The balance of orders (31 per cent.)came from other commercial sectors. "Order Intake" underpins approximately 50per cent. of Redstone's revenue; the balance of the Company's business beingexisting telecoms and support services. Within these aforementioned sectors,customers who have placed orders with Redstone since 1 April 2004 include MorleyCollege, Guys & St Thomas NHS Trust and Acton Housing Association. System Communications SolutionsRedstone operates as a network and systems integrator delivering bothindependent and tailored solutions to its customers based on leadingmanufacturers' technology. The range of solutions includes telephony systemsnotably those based around "next generation" Internet Protocol technology, voiceapplications including call recording, data connectivity via local and wide areanetworks, wireless and GSM solutions, email and converged messaging, and CCTVand access control solutions. The latter are part of Redstone's Smart Buildings(SmartB) portfolio where Redstone has an established leadership position in themarket and specifically in the retail development sector with customers such asHammerson plc and British Land plc having implemented solutions at severalleading shopping centres including the Bullring in Birmingham, the PeacocksCentre in Woking and West Quay in Southampton. SmartB(R) is Redstone's innovative solution for incorporating common buildingutility services such as CCTV security, access control and alarm systems onto acommon IP platform running over the same infrastructure network as voice anddata traffic. Benefits include cost savings over traditional approaches ofrunning disparate systems, improved efficiency through the simplification ofmanagement systems, and providing differentiation for landlords in marketingtheir buildings to prospective tenants. Having established a strong track recordin the retail property sector, Redstone has embarked upon marketing SmartB toits other key vertical markets where it is anticipated to be equally compelling. Services & Connectivity SolutionsRedstone delivers a wide range of professional, support and management servicesto its customer base whether as part of providing a systems solution orindependently. These services include project management, helpdesk supportthrough to full on site management of IT networks and remote monitoringservices. In addition, Redstone provides internet connectivity solutions throughits dedicated ISP network either via dial up, ISDN, DSL, or dedicated circuitconnections. These services are increasingly being used to build Wide AreaNetworks for businesses to link multiple sites together. Telecommunication ServicesRedstone has an innovative outsourcing partnership with BT Wholesale expiring in2012 that allows it to deliver a comprehensive range of telecommunicationsservices to its customers. These include outbound telephony, inbound marketingnumber services (e.g. 0845/0870 numbers), line rentals, circuits and "Away fromthe Office" solutions. Redstone has won several substantial contracts withcompanies such as Tarmac plc, Reed Executive plc and RHM Foods plc. New ServicesAs part of Redstone's announced extension of its partnership with BT Wholesale,Redstone will soon be launching an innovative range of Intelligent Networkservices based on technology from Huawei Limited. This platform will allowRedstone to offer a range of new services for users of inbound marketing numbersservice. When combined with Redstone's existing core telephony capability thenew services will provide an attractive range of converged voice solutionsparticularly for businesses running contact centres. Revenue VisibilityDuring the 6 month period ending 30 September 2004, system communicationssolutions accounted for 20 per cent. of revenues, services and connectivitysolutions 17 per cent., and telecommunication services 63 per cent. Some 71 percent. of revenues during this period were repeat in nature. Acquisition StrategyWhilst Redstone reported significant order intake growth in the period to 30September 2004, its aspirations to develop into a leading communicationsservices business cannot be fulfilled through organic means alone. For thisreason, and as announced previously, Redstone has been pursuing acquisitionswith the principal aim of adding to its customer base into which it can sell itsbroad portfolio of communications services. Information on Xpert Xpert is an independent, privately owned converged IP network and communicationssolutions provider with expertise in contact centres, voice and videoapplications, IP networks, security and business critical servers (eachdescribed below). Xpert, like Redstone, provides end to end communicationssolutions and services from design, implementation and project managementthrough to maintenance, support and managed services. Xpert targets many of thesame vertical markets as Redstone with the following split of revenues for the12 month period ended 30 April 2004: financial services (24 per cent.), health(22 per cent.), education (15 per cent.), government (8 per cent.), and retailand commercial (31 per cent.). In total, 29 per cent. of revenues for the sameperiod were repeat in nature, and 45 per cent. of revenues came from servicesand connectivity solutions. Xpert currently employs approximately 200 staffacross nine locations in the UK and Ireland. In the year ended 30 April 2004, the Xpert Group achieved a turnover of £27.3million and a loss before taxation of £3.93 million. As at 30 September 2004,the Xpert Group had net assets of £7.59 million. Xpert has well-established partnerships and a strong track record with severalmajor communications, processing and networking technology manufacturers. In theUK they include: Cisco for voice and data networking, Avaya for voice switchingand Mitel for voice and data solutions, in Ireland Hewlett Packard (HP) forstorage and enterprise servers. These partnerships in many cases shouldstrengthen any of Redstone's existing arrangements with those organisations. Contact CentresXpert provides customers with contact centre software solutions such as workflowmanagement, intelligent voice routing, integration with customer managementinformation systems and customer relationship management systems as well as theinstallation of predictive diallers. Voice, Video and DataThrough its partnerships with manufacturers such as Cisco and Avaya, Xpert hasproven expertise in designing and implementing innovative converged voice, videoand data network solutions across the UK. Xpert, like Redstone, has beenactively involved in the deployment of IP telephony solutions and as a result ofthe forecast growth in this technology has started investment in the developmentof its own XML applications for certain vertical markets. IP NetworksXpert has a similar skill set to Redstone in the design, integration,implementation and support of significant local and wide area networkinfrastructures connecting up to 10,000 devices into a common IP platform. Xperthas expertise in deploying content delivery networks for e-learning, mediastreaming and corporate communications in the education, retail and financialservices sectors. SecurityXpert provides security solutions including e-mail security and employeeinternet management utilising MessageLabs products for anti virus services andWebsense for the application of internet usage policy. Xpert also serves the physical access control over IP market and its expertisecomplements Redstone's innovative SmartB approach. Xpert has for example inpartnership with others, implemented a solution that provides biometric securityaccess control for airside staff in many of the major airports in Ireland. Business Critical ServersXpert provides solutions for high-end processing and storage environments. Xpertimplements and supports technology from Hewlett Packard including storage areanetworks and provides consulting for disaster recovery and risk management. Through a partnership with the retail division of BT (BT Retail), Xpert alsosupplies telecommunications circuits as part of an overall solutions package forcertain clients. Xpert has an established product portfolio to address the needsof both public and private sector clients. In 2004, Xpert was the second largestsupplier of Cisco technology to the NHS and is winning work in the "Grids forLearning" programmes managed by Local Education Authorities across the country. The Enlarged Group The Enlarged Group will continue to provide all of the services that arecurrently provided by both Redstone and Xpert. Consequently, the Enlarged Groupwill operate as a "one stop shop" communications services provider for publicand private sector organisations across the UK and Ireland. It will operate outof over 10 locations and employ approximately 500 personnel. As set out above the Enlarged Group's business will be centred around the keybusiness verticals of education, health, government, retail and financialservices where both Xpert and Redstone have an established track record. TheEnlarged Group will concentrate on providing data, voice, building andtelecommunications solutions and services in these markets. The Directors believe that there are a number of significant benefits that theEnlarged Group will have over Xpert and Redstone by themselves. These include: • strengthened relationships with both companies' key partners being Cisco, Avaya, BT Group and HP which the Directors believe will result in some cost savings; • the cost savings that the Directors expect to be able to make from office and infrastructure rationalisations; • the ability for Redstone to start selling both telecommunications and SmartB solutions to Xpert's existing customer base; and • the greater presence that the Enlarged Group will have in its key vertical markets and geographically. Details of the Acquisition Redstone today entered into a conditional agreement to acquire the entire issuedshare and loan capital of Xpert free from liens, charges, encumbrances and thirdparty rights, for a total consideration of £25,550,000. The consideration is tobe satisfied as to £2,775,000 by the issue of the Consideration Shares, €940,952by the issue of the Loan Notes and with the balance to be satisfied in cash, ineach case to be paid or issued upon (or immediately after) completion of theAcquisition. The Consideration Shares to be issued will rank pari passu with the OrdinaryShares of Redstone in issue at the date of their issue and Redstone will procurethat such Consideration Shares are admitted to listing by the UK ListingAuthority and to trading by the London Stock Exchange. Due to the amount of the consideration payable in respect of the Acquisition inrelation to the aggregate market value of the Existing Ordinary Shares and thegross capital of the respective parties, the Acquisition is classified under theListing Rules as a reverse takeover. The Acquisition therefore requires theapproval of Shareholders at the Extraordinary General Meeting, notice of whichis set out at the end of the Circular. Background to and reasons for the Acquisition Redstone has stated its aim to become one of the leading communications servicesproviders in the UK. Its "one stop shop" communications capability has proven tobe a source of competitive advantage for it in maintaining customers and winningnew business. Technology changes have driven the worlds of data, voice, buildingand telecommunications together into a common IP environment. Further, as theoverall markets for communications services have matured, consolidation istaking place. Redstone has previously announced its intention to be an activeparticipant in that consolidation because it believes it is in the best longterm interests of its Shareholders. The Directors believe that the acquisitionof Xpert is a significant step in fulfilling Redstone's aspirations to developthe business in that direction. Current trading and prospects of the Enlarged Group On 16 December 2004, Redstone announced its interim results for the six monthsending 30 September 2004. These results showed a significant rise in OrderIntake of over 40 per cent. compared to the same period in the previousfinancial year, as a result of the sales and marketing investments that havebeen made over the prior two years. Since that date, Redstone has continued towin orders and, for the 11 months ending 28 February 2005, had achievedyear-on-year Order Intake growth of 38 per cent. For the 9 month period ended 31 January 2005, Xpert had achieved year on yearorder revenue growth of 15 per cent. Further, between October 2004 and January2005, Xpert has either been appointed preferred supplier, or given an order(some of which are subject to contract), for orders totalling some £11 million,which includes orders from organisations operating in the education andhealthcare markets. Redstone and Xpert operate in a mature but substantial market with the IPtelephony sector market alone being estimated at £800 million in 2005 (source:Datamonitor). The Board believes that the Acquisition will be earnings enhancing(excluding goodwill amortisation), and that the outlook for the Enlarged Groupis strong. Xpert's customer base presents an immediate opportunity to cross sell bothtelecommunications services and SmartB solutions from Redstone. Also, Xpert'strack record with Avaya call centre solutions further strengthens Redstone's ownAvaya proposition with both existing and prospective customers. In addition,Xpert is developing other value added software applications for IP telephonytechnology to provide additional features and functionality for certain verticalmarket customers. Both companies' prospects are enhanced simply by being a larger entity with amore substantial presence in key vertical markets and an increased spend levelwith manufacturer partners which in itself is expected to help achieve increasedsales growth and win new accounts. In particular, the Directors believe that the combination of Xpert and Redstonewill give the Enlarged Group critical mass in its systems communicationssolutions business by becoming one of the top integration partners for Ciscowithin the UK and one of the top three integration partners for Avaya in the UKfor whom the Enlarged Group is expected to become a Platinum accredited partner.Other partnership opportunities include strengthening the Enlarged Group'srelationship with BT Group, and developing Xpert's existing relationship withMitel. Xpert also provides Redstone with the opportunity to expand into theIrish market via Xpert's existing Irish operation and exporting their historicalHP enterprise server skills into the UK marketplace. Xpert's stronger geographicpresence in the north of England also complements Redstone's stronger presencein the south and thus will further enable the Enlarged Group to service theneeds of its national customer base. It is expected that Xpert will remain as a separate operating entity for up to 3months post the completion of the Acquisition, following which it will beintegrated into Redstone in order to exploit operating and sales synergies,reduce costs and maximise the Enlarged Group's financial performance. Annualisedcost savings of £1 million have been targeted post the Acquisition. On the basis of the above, the Directors believe that the prospects of theEnlarged Group for the current financial year and beyond are good. Principal terms of the Issue The IssueUnder the Issue, the Company intends to raise £26.0 million, comprisingapproximately £18.0 million by way of the Firm Placing and approximately £8.0million under the Placing and Open Offer (in each case before expenses).Qualifying Shareholders are being given the opportunity to participate in thefundraising by way of the Open Offer, which is being made by EvolutionSecurities as agent for and on behalf of the Company. Under the Issue, 30.9 per cent. of the New Ordinary Shares are being offered toQualifying Shareholders pursuant to the Open Offer and 69.1 per cent. are beingplaced firm (subject, inter alia, to the conditions set out under the paragraphentitled "General" below) with certain of the Directors and new and existinginvestors to provide such investors with certainty as to the minimum number ofNew Ordinary Shares they will receive. The Directors believe that the provisionof certainty as to the minimum level of New Ordinary Shares that institutionalinvestors will receive has been an important factor in attracting theseinvestors to support the Issue. The Directors also consider that allShareholders should have the opportunity to participate in the Issue, partiallyto mitigate and reduce the dilutive effect on Shareholders as a result of theFirm Placing and, consequently the Issue also includes the Open Offer. The Issuehas been underwritten by Evolution Securities to provide certainty as to thelevel of funds to be received by the Company. The Firm PlacingThe Company proposes to raise approximately £18.0 million (before expenses)through the issue of the Firm Placing Shares at the Issue Price, whichrepresents a discount of 13.8 per cent. to the closing middle market price of7.25 pence per Existing Ordinary Share immediately prior to the suspension ofdealings in the Existing Ordinary Shares on the London Stock Exchange on 14March 2005. The Firm Placing Shares will represent 39.2 per cent. of theCompany's issued share capital immediately following Admission. The Firm Placing has been fully underwritten by Evolution Securities and isconditional upon, inter alia, the Resolutions being duly passed at the EGM andAdmission becoming effective on or before 8.00 a.m. on 28 April 2005 (or suchlater time and/or date as Evolution Securities may decide, but in any event byno later than 8.00 a.m. on 12 May 2005). The Placing and Open OfferRedstone intends to raise approximately £8.0 million (before expenses) from theissue of the Open Offer Shares which represents approximately 30.9 per cent. ofthe funds the Company intends to raise pursuant to the Issue. EvolutionSecurities has conditionally placed the Open Offer Shares subject to a right ofrecall in order to satisfy valid applications for Open Offer Shares receivedfrom Qualifying Shareholders. The Placing and Open Offer has been fullyunderwritten by Evolution Securities. Evolution Securities, on behalf of the Company, is inviting QualifyingShareholders to apply for Open Offer Shares under the Open Offer at the IssuePrice payable in full on application, on the basis of: 6 Open Offer Shares for every 13 Existing Ordinary Shares held by such Qualifying Shareholders and registered in their names on the RecordDate and so in proportion for any other number of Existing Ordinary Shares thenheld. Individual entitlements will be rounded down to the nearest whole numberof Open Offer Shares. Fractional entitlements to Open Offer Shares will not beallocated but will be aggregated and form part of the Placing. A Qualifying Shareholder's Basic Entitlement is, in the case of a Qualifyingnon-CREST Shareholder, equal to the number of Open Offer Entitlements as shownon his Application Form or, in the case of a Qualifying CREST Shareholder, equalto the number of Open Offer Entitlements standing to the credit of his StockAccount in CREST, with the entitlement being rounded down to the nearest wholenumber of Open Offer Shares. Qualifying Shareholders who so wish may apply forfurther Open Offer Shares in excess of their Basic Entitlement. Applications inexcess of the Basic Entitlement will only be satisfied to the extent thatapplications by other Qualifying Shareholders are made for less than their BasicEntitlement and may therefore be scaled down at the discretion of the Companyand Evolution. Application has been made for the Open Offer Entitlements to be admitted toCREST. It is expected that the Open Offer Entitlements will be admitted to CRESTby 5 May 2005. The Open Offer Entitlements will also be enabled for settlementin CREST on 1 April 2005. Applications through the means of the CREST system mayonly be made by the Qualifying Shareholder originally entitled or by a personentitled by virtue of a bona fide market claim. Qualifying non-CREST Shareholders will receive an Application Form with theCircular which sets out their maximum entitlement to Open Offer Shares as shownby the number of Open Offer Entitlements allocated to them (Basic Entitlement).Qualifying CREST Shareholders will receive a credit to their appropriate stockaccounts in CREST in respect of their Open Offer Entitlements on 1 April 2005,together with an Excess CREST Application Form. Shareholders should note that the Open Offer is not a rights issue. QualifyingCREST Shareholders should note that although the Open Offer Entitlements will beadmitted to CREST and be enabled for settlement, applications in respect ofentitlements under the Open Offer may only be made by the Qualifying Shareholderoriginally entitled or by a person entitled by virtue of a bona fide marketclaim raised by CREST's Claims Processing Unit. Qualifying non-CRESTShareholders should note that the Application Form is not a negotiable documentand cannot be traded. Qualifying Shareholders should be aware that in the OpenOffer, unlike in a rights issue, any Open Offer Shares not applied for will notbe sold in the market or placed for the benefit of Qualifying Shareholders whodo not apply under the Open Offer, but will be placed under the Placing for thebenefit of the Company (save to the extent that they are applied in satisfyingexcess applications from Qualifying Shareholders). GeneralThe Issue Price represents a discount of 13.8 per cent. to the prevailingmid-market price of 7.25 pence per Existing Ordinary Share immediately prior tothe suspension of dealings in the Existing Ordinary Shares on the London StockExchange on 14 March 2005. The Issue is conditional upon the Placing Agreement having become unconditionalin all respects and not having been terminated in accordance with its terms andAdmission. The Placing Agreement is conditional, inter alia, upon thesatisfaction of the following conditions: (i) the passing of the Resolutions at the Extraordinary General Meeting; and (ii) Admission becoming effective by not later than 8.00 a.m. on 28 April 2005(or such later time and/or date as Evolution Securities may decide being notlater than 8.00 a.m. on 12 May 2005.) Accordingly, if any of such conditions are not satisfied, or, if applicable,waived, the Issue will not proceed and any Open Offer Entitlements admitted toCREST will thereafter be disabled. None of the New Ordinary Shares have been marketed or been made available inwhole or in part to the public in conjunction with the application for Admissionother than pursuant to the Issue. The New Ordinary Shares will, when issued andfully paid up, rank pari passu with the Existing Ordinary Shares in allrespects, including the right to receive all dividends and other distributionsdeclared, made or paid thereon following Admission. Applications have been made to the UK Listing Authority for the New OrdinaryShares to be admitted to the Official List and to the London Stock Exchange forthe New Ordinary Shares to be admitted to trading on its market for listedsecurities respectively. It is expected that Admission will become effective and that dealings in the NewOrdinary Shares will commence on 28 April 2005. Related Party Transaction Owing to the size of its shareholding in the Company, Gartmore InvestmentLimited ("Gartmore"), which holds approximately 11.47 per cent. of the existingissued share capital of the Company is a related party of the Company for thepurposes of the Listing Rules. Under the Firm Placing it is proposed that56,000,000 Firm Placing Shares will be placed with Gartmore, at the Issue Price.The issue of these Firm Placing Shares to Gartmore will be a transaction with arelated party for the purpose of the Listing Rules and will require the separateapproval of Shareholders at the EGM. In accordance with the requirements of theListing Rules, Gartmore has undertaken that it will not, and will takereasonable steps to ensure that its associates (as defined in the Listing Rules)will not, vote on the ordinary resolution to be proposed at the EGM relating toits related party transaction. In addition, it is proposed that an aggregate of 4,960,000 Firm Placing Shareswill be placed with Messrs. Brown, Perks, Stafford-Deitsch, Payne and Vaughan atthe Issue Price, which will also be a transaction with related parties for thepurposes of the Listing Rules. However, this transaction is of a level whereShareholder approval under the Listing Rules is not required and instead,certain disclosures have been made to the UKLA and will be made in the Company'snext annual accounts. Extraordinary General Meeting The Circular contains a notice convening the EGM to be held at 10.00 a.m. on 27April 2005 at the offices of Osborne Clarke, One London Wall, London EC2Y 5EB,at which the Resolutions will be proposed for the purposes of approving theAcquisition and Implementing the Issue. At this meeting, ordinary resolutions will be proposed to: •approve the Acquisition; •increase the authorised share capital of the Company; •authorise the directors to allot and issue the New Ordinary Shares and the Consideration Shares; and •approve the issue of Firm Placing Shares to Gartmore, being a related party transaction. A special resolution will be proposed to disapply the statutory pre-emptionrights in respect of the allotment and issue of the New Ordinary Shares for cashpursuant to the Firm Placing and the Placing. EXPECTED TIMETABLE OF PRINCIPAL EVENTS Record Date for the Open Offer 24 March 2005 Posting date of this document and the Application Form 31 March 2005 Restoration of listing and dealings in the Existing Ordinary 1 April 2005Shares Open Offer Entitlements credited to Stock Accounts in CREST of 1 April 2005Qualifying CREST Shareholders Recommended latest time for requesting withdrawal of Open Offer 4.30 p.m. on 18 April 2005Entitlements from CREST Latest time and date for depositing Open Offer Entitlements into 3.00 p.m. on 20 April 2005CREST Latest time and date for splitting Application Forms 3.00 p.m. on 21 April 2005(to satisfy bona fide market claims only) Latest time and date for receipt of Forms of Proxy for the 10.00 a.m.on 25 April 2005Extraordinary General Meeting Latest time and date for receipt of completed Application Forms, 11.00 a.m.on 25 April 2005Excess CREST Application Forms and payment in full in respect of the Open Offer or settlement of relevant CREST instructions (as appropriate) Extraordinary General Meeting 10.00 a.m.on 27 April 2005 Expected date of Admission and expected date of commencement of 28 April 2005dealings in the New Ordinary Shares and the Consideration Shares Delivery in CREST of New Ordinary Shares to be held in by 5 May 2005uncertificated form Despatch of definitive share certificates in respect of New by 12 May 2005Ordinary Shares to be held in certificated form Each of the times and dates in the above timetable is subject to change. Alltimes are London times. DEFINITIONS The following definitions apply throughout this announcement, unless the contextrequires otherwise: "Acquisition" the acquisition of all of the issued share and loan capital of Xpert by Redstone pursuant to the terms of the Acquisition Agreement, further details of which are set out in Part VIII of the Circular. "Acquisition the conditional share purchase agreement dated 31 March 2005 andAgreement" made between the Company and the Xpert Shareholders relating to the Acquisition, further details of which are set out in paragraph 1 of Part VIII of the Circular. "Act" the Companies Act 1985, as amended. "Admission" the re-admission of the Existing Ordinary Shares and the admission of the New Ordinary Shares and Consideration Shares in each case to the Official List of the UK Listing Authority and to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with the Listing Rules and the Admission and Disclosure Standards of the London Stock Exchange. "Applicant" a Qualifying Shareholder or a person entitled by virtue of a bona fide market claim who lodges an Application Form under the Open Offer. "Application the application form for use by Qualifying non-CRESTForm" Shareholders in connection with the Open Offer, which accompanies the Circular. "Articles" the current articles of association of the Company. "Basic the number of Open Offer Shares for which a QualifyingEntitlement" Shareholder is entitled to apply, being 6 Open Offer Shares for every 13 Existing Ordinary Shares registered in its name at the Record Date. "Board" or the directors of Redstone whose names are set out on page 4 of"Directors" the Circular "BT BT Group plc acting through its BT Wholesale division.Wholesale" "certificated" a share or other security which is not in uncertificated form.or "incertificatedform" "Company" or Redstone plc, a public limited company incorporated and"Redstone" registered in England and Wales under the Act with registered number 03336134. "Consideration 38,275,862 Ordinary Shares to be issued as part consideration inShares" relation to the Acquisition "CREST" the relevant system (as defined in the Regulations) in respect of which CRESTCo is the operator (as defined in the Regulations) in accordance with which quoted securities may be held and transferred in uncertificated form. "CRESTCo" CRESTCo Limited, the operator of CREST "Enlarged the Redstone Group, as enlarged by the Acquisition.Group" "Enlarged Share the Existing Ordinary Shares, the New Ordinary Shares and theCapital" Consideration Shares. "Evolution Evolution Securities Limited.Securities" "Excess CREST the application form for use by Qualifying CREST ShareholdersApplication in connection with the Open Offer who wish to apply for OpenForm" Offer Shares in excess of their Basic Entitlement, which accompanies the Circular. "Executive each of Ian Brown and Timothy Perks.Directors" "Existing the Ordinary Shares in issueOrdinaryShares" "Extraordinary the extraordinary general meeting of the Company to be held atGeneral Meeting" 10.00 a.m. on 27 April 2005 (or any adjournment of it), noticeor "EGM" of which is set out at the end of the Circular. "Firm Placing" the conditional firm placing by Evolution Securities, as agent, on behalf of the Company of the Firm Placing Shares at the Issue Price pursuant to the Placing Agreement. "Firm Placing the 288,000,000 new Ordinary Shares which are the subject ofShares" the Firm Placing. "Form of the form of proxy for use by Shareholders in connection withProxy" the Extraordinary General Meeting. "FSA" the Financial Services Authority. "FSMA" the Financial Services and Markets Act 2000, as amended. "Group" or the Company and its subsidiaries and subsidiary undertakings."RedstoneGroup" "Issue" the Firm Placing, the Placing and the Open Offer. "Issue Price" 6.25 pence per New Ordinary Share. "Listing the listing rules of the UKLA.Rules" "Loan Notes" guaranteed loan notes of €940,952 of the Company to be constituted by a loan note instrument to be dated on or around completion of the Acquisition Agreement, further details of which are set out at paragraph 11.1(e) of Part IX of the Circular. "London Stock London Stock Exchange plc.Exchange" "New Ordinary the 416,726,337 new Ordinary Shares to be issued pursuant toShares" the Issue. "Non-executive each of Andrew Stafford-Deitsch, Oliver Vaughan, David PayneDirectors" and Christopher Roberts. "Notice of the notice of EGM which is set out at the end of theEGM" Circular. "Official the Official List of the UKLA.List" "Open Offer" the conditional offer made by Evolution Securities, on behalf of the Company, to Qualifying Shareholders to apply for the Open Offer Shares at the Issue Price on the terms and conditions set out in Part II of the Circular and, in the case of Qualifying non-CREST Shareholders, in the Application Form. "Open Offer the 128,726,337 new Ordinary Shares which are the subject ofShares" the Open Offer. "Ordinary ordinary shares of 1 pence each in the capital of theShares" Company. "Overseas Shareholders who have registered addresses in, or who areShareholders" citizens or residents of, countries other than the United Kingdom. "Placing" the conditional placing (subject to a right of recall to satisfy valid applications from Qualifying Shareholders under the Open Offer) by Evolution Securities, on behalf of the Company, of the Open Offer Shares at the Issue Price pursuant to the Placing Agreement. "Placing the conditional agreement dated 31 March 2005 between theAgreement" Company and Evolution Securities relating to the Issue, further details of which are set out in paragraph 2 of Part VIII of the Circular. "Qualifying Qualifying Shareholders whose Existing Ordinary Shares on theCREST register of members of the Company at the close of business onShareholders" the Record Date are in uncertificated form. "Qualifying Qualifying Shareholders whose Existing Ordinary Shares on thenon-CREST register of members of the Company at the close of business onShareholders" the Record Date are in certificated form. "Qualifying holders of Existing Ordinary Shares on the register of membersShareholders" of the Company at the Record Date, other than certain Overseas Shareholders who are not entitled to participate in the Open Offer as described in paragraph 5 of Part II of the Circular. "RCL" Redstone Communications Limited, a subsidiary of the Company. "Record Date" the record date for the Open Offer, being the close of business on 24 March 2005. "Registrars", Capita Registrars, whose details are set out on page 4 of the"Receiving Circular.Agents" or"Capita" "Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755). "Resolutions" the resolutions to be proposed at the EGM as set out in the Notice of EGM accompanying the Circular; and "Resolution" shall mean any one of them. "Shareholder(s) holder(s) of the Existing Ordinary Shares." "Share Option the existing share option schemes of Redstone details of whichSchemes" are set out at paragraph 7 of Part IX of the Circular. "Stock an account within a member account in CREST to which a holdingAccount" of a particular share or other security in CREST is credited. "UK Listing the Financial Services Authority, acting in its capacity as theAuthority" or competent authority for the purposes of Part VI of the FSMA and"UKLA" in the exercise of its functions in respect of the admission of securities to the Official List. "uncertificated" an ordinary share recorded on the Company's share register asor "in being held in uncertificated from in CREST and title to which,uncertificated by virtue of the Regulations, may be transferred by means ofform" CREST. "United Kingdom" the United Kingdom of Great Britain and Northern Ireland.or "UK" "United States" the United States of America, its territories and possession,or "US" any state of the United States of America and the District of Columbia and any other areas subject to its jurisdiction. "Xpert" Xpert Group Limited, a private limited company incorporated and registered in England and Wales under the Act with registered number 4590730. "Xpert Group" Xpert, its subsidiaries and its subsidiaries undertakings (within the meaning of the Act) at the date of the Circular. References to page numbers, paragraphs and Parts are references to such pagenumbers, paragraphs and Parts of the Circular, unless the context requires orindicates otherwise. GLOSSARY OF TERMS "access control" Door or building access control system "biometric A form of access controlsecurity accesscontrol" "call recording" Voice call recording "content delivery Technology that delivers and/or manages content, i.e.,networks" presentations, video etc. over a network "converged IP A common IP network used for different services such asnetwork" voice, data and building applications "converged Integration of messaging types, voice, mail etc.messaging" "converged voice Integration of voice and data solutions e.g. IP telephonysolutions" "common IP Common internet protocol platformplatform" "data Connectivity of data systemsconnectivity" "DSL" Digital subscriber line, technology used to deliver broadband services "end to end Something that takes into account all aspects ofcommunications" communication requirements from one end of a network to another "high end Powerful processing capability, typically found in highlyprocessing" specified computers etc "intelligent Intelligent routing of email by sender, receiver, location,e-mail routing" time of day etc "Intelligent A networking platform used as part of a telecommunicationsNetwork/ing" network to provide functionality for inbound telecommunications services such as 08XX number ranges "intelligent voice Intelligent routing of voice calls, depending on congestion,routing" location, originating number etc. "internet Connections to the internetconnectivity" "Internet Protocol Technology using the TCP/IP protocol stock i.e. internet, IP/technology" or Telephony etc."IP" "ISDN" Integrated services digital network - a form of dial up connection but digital "ISP network" Internet service provider network "local area A network connecting a number of localised users and devicesnetworks" or together, e.g. within a building"LAN" "Smart Redstone's brand name for a solution that integrates servicesBuildings" such as data, telephony, access control and CCTV into an IP network "storage area A virtual network of servers used to store and distributenetworks" information "switching Used in local and wide area networks to provide connectivitytechnology" and manage bandwidth "systems A Redstone classification of products and services thatcommunications include voice, data and building communicationssolutions" "voice The switching of voice from one place to anotherswitching" "Wide Area A network that links sites togetherNetworks" "wireless and GSM A radio based network solution, using short range wireless orsolutions" mobile phone technology "XML A software language used in systems, generally databases toapplications" manipulate and present data This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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