Acquisition

RNS ANNOUNCEMENT

23 March 2012

OPSEC SECURITY GROUP PLC

Proposed acquisition of Delta Labelling, Placing and Notice of General Meeting

OpSec Security Group plc ("OpSec" and, together with its subsidiaries, the "Group"), the supplier of anti-counterfeiting technologies and services, is pleased to announce:

·; its proposed acquisition of Delta Labelling Limited and Delta Labelling (HK) Limited (together "Delta");

·; a proposed placing of 17,337,476 new ordinary shares of 5 pence each in OpSec ("Ordinary Shares") at 45 pence per share with existing shareholders to raise approximately £7.8 million before expenses (the "Placing"); and

·; a proposed subscription by Delta's current shareholders (the "Sellers") for) 2,666,666 new Ordinary Shares at 75 pence per share to raise approximately £2.0 million in cash (the "Vendor Subscription").

Highlights

·; Proposed acquisition of Delta for a total consideration of £12.5 million plus Delta's excess cash at completion of the Acquisition ("Completion"), of which £9.5 million payable in cash at Completion with deferred cash consideration of £3.0 million being payable (subject to the achievement of certain performance targets and milestones) in four instalments including a final instalment of £2.6 million payable once the sales of specified Delta products and of OpSec products to named Delta customers during the two year period ending 31 March 2014 have been agreed.

·; Proposed placing of 17,337,476 new Ordinary Shares ("Placing Shares") at 45 pence per share with existing shareholders to raise approximately £7.8 million before expenses.

·; Proposed subscription immediately after Completion by the Sellers for 2,666,666 new Ordinary Shares ("Vendor Subscription Shares") at 75 pence per share to raise approximately £2.0 million in cash.

·; Following their issue, the Placing Shares and the Vendor Subscription Shares will comprise approximately 17.3% and 2.7% respectively of OpSec's enlarged share capital.

·; The proceeds of the Placing and the Vendor Subscription shall fund the initial cash consideration payable for Delta.

·; Circular to shareholders to be sent shortly providing further details and convening a general meeting to approve the issue of the Placing Shares and the Vendor Subscription Shares, to be held at 9.00 a.m. on 11 April 2011 at Dickinson Dees LLP, Gate House, 1 Farringdon Street, London EC4M 7LG.

·; Irrevocable undertakings to vote in favour of the special resolution to be proposed at the general meeting have been received from OpSec's executive directors and certain other shareholders holding shares carrying approximately 84.4% of the votes capable of being cast at the general meeting.

David Mahony, Chairman of OpSec, commented:

"We are pleased to announce the proposed acquisition of Delta, which will complement OpSec's existing brand protection business in the fashion and apparel sector, and which we expect to be earnings enhancing within the first year of its acquisition. We are also pleased to be able to fund the acquisition through a placing with existing shareholders and welcome the Delta's shareholders' decision to invest in OpSec."

For further information, please contact:

OpSec Security Group plc

Mark Turnage, Chief Executive/ Mike Angus, Finance Director +1 720 394 2803

Shore Capital & Corporate Limited

Stephane Auton /Patrick Castle 020 7408 4090

Further information

1. Acquisition of Delta

1.1. Information about Delta

Delta is a supplier of leather, printed, woven, PVC and metal labels to the fashion industry and operates from facilities in Tamworth (England) and Hong Kong. Delta's major customers include an international sportswear manufacturer and a high street fashion chain. Delta consists of two separate companies each owned by the Sellers - Delta Labelling Limited (an English company) and Delta Labelling (HK) Limited in Hong Kong. Delta's aggregated unaudited operating profit for the year ended 31 December 2011 was approximately £2.2 million. The aggregated unaudited net assets of Delta as at 31 December 2011 were approximately £1.8 million.

1.2. Reasons for the Acquisition

Delta has a consistent record of profitability and cash generation and OpSec's directors (the "Directors") believe that Delta will complement OpSec's existing brand protection business in the fashion and apparel sector. The proposed acquisition of Delta (the "Acquisition") will also provide OpSec with a distribution facility in Hong Kong and an opportunity to increase its presence in Asian markets.

The Directors believe that the Acquisition will provide the Group with significant cross-selling opportunities, a new range of products to sell into the Group's customer base for brand protection products, and the opportunity to sell the Group's products to Delta's customers. The Directors believe that the Acquisition will be earnings enhancing within the first year of its completion.

1.3. Terms of the Acquisition

OpSec has conditionally agreed to acquire the entire issued share capital of Delta for a total consideration of £12.5 million plus an amount equal to the Excess Cash as defined below, structured as follows:

·; initial cash consideration of £9.5 million; and

·; deferred cash consideration of £3.0 million payable in four instalments including a final instalment of £2.6 million payable once the sales of specified Delta products and sales of OpSec products to named Delta customers during the two year period ending 31 March 2014 have been agreed. Payment of this deferred cash consideration is subject to the achievement of certain milestones and sales during the two year period to 31 March 2014. The acquisition agreement provides a mechanism reducing the cost of the deferred consideration to OpSec if these targets and milestones are not achieved.

A cash payment equal to the amount by which Delta's net cash at Completion exceeds its working capital requirements ("Excess Cash") will be payable upon agreement of completion accounts to be prepared pursuant to the acquisition agreement.

Of the initial £9.5 million cash payable at Completion, £1.0 million is to be held until 31 March 2013 in a joint solicitors' escrow account by way of security for any claims under the acquisition agreement, and a further £2.0 million is to be used by the Sellers to subscribe immediately after Completion for the Vendor Subscription Shares at 75 pence per share.

Jim Bowman and Steve Hayes, Delta's principal shareholders, have agreed to stay with the Group following Completion and have entered into new service agreements with OpSec Security Limited for a minimum fixed term to 31 March 2014.

Completion of the Acquisition is conditional, inter alia, upon:

·; the passing of the resolution (the "Resolution") to be proposed at the Company's general meeting to be held on 11 April 2012 (the "General Meeting") as a special resolution of OpSec ;

·; completion of the Placing; and

·; admission to trading on AIM ("Admission") of the Vendor Subscription Shares.

The acquisition agreement contains warranties and indemnities typical for a transaction of this type, and contains restrictive covenants on the Sellers which apply for three years from Completion.

2. Placing

The Company is seeking to raise approximately £7.8 million before expenses by the allotment and issue of 17,337,476 new Ordinary Shares pursuant to the Placing. OpSec proposes to use the proceeds of the Placing to assist in funding the initial cash consideration payable under the acquisition agreement.

The Directors remain committed to growing the Group's business through ongoing reinvestment in the Group's facilities and, potentially, through add-on acquisitions. In order to be able to pursue such growth opportunities, the Directors consider it to be in the Company's best interests to strengthen its balance sheet through the issue of additional equity. The Placing will enable OpSec to achieve this objective.

The proposed placees and their proposed subscriptions are as follows:

1 Includes both Ordinary Shares and Preferred Shares: Orca currently holds 20,000,000 Preferred Shares

The Placing is conditional, inter alia, upon:

·; the Resolution being duly passed as a special resolution of OpSec at the General Meeting;

·; the subscription agreement relating to the Placing becoming unconditional in all respects save for the condition relating to Admission of the Placing shares; and

·; Admission taking place by no later than 8.00 a.m. on 30 April 2012 (or such later date as OpSec and each placee may agree).

The obligations of the placees under the Subscription Agreement are conditional on satisfaction of a number of conditions including the passing of the Resolution. In addition, the subscription agreement contains customary rights of termination which could enable the Placees to cancel their obligations to subscribe in the Placing if, inter alia, any of the following circumstances arise prior to the date on which the Resolution is passed:

·; the placee becoming aware of any material breach of the warranties contained in the subscription agreement;

·; any material adverse change arising which could, in the placees' reasonable opinion, be expected to have a material adverse effect on the business, condition, operations, performance or properties of the Group; or

·; certain specified force majeure circumstances occur which the placees (acting reasonably) consider to be likely to have a material adverse effect on the financial or trading position or the business prospects of the Group as a whole or to have a materially prejudicial effect on the Placing or to render the Placing impracticable or inadvisable or to cause a significant deterioration in the price or value of any of OpSec's issued shares.

3. Related Party

Orca Holdings Limited currently holds 23,272,765 Ordinary Shares and 20,000,000 preferred shares in OpSec representing approximately 54.1% of the existing equity share capital of OpSec (the "Existing Shares"). Further, Herald Investment Trust plc holds 18,679,366 Ordinary Shares representing 23.4% of the Existing Shares. Accordingly, both Orca and Herald are related parties for the purposes of Rule 13 of the AIM Rules. David Mahony, Mark Turnage and Michael Angus (the "Independent Directors"), having consulted with Shore Capital & Corporate Limited, the Company's nominated adviser, consider the terms of the Placing to be fair and reasonable insofar as shareholders are concerned.

4. General Meeting

A circular will be posted shortly to shareholders convening the General Meeting which is to be held at the offices of Dickinson Dees LLP at Gate House, 1 Farringdon Street, London EC4M 7LG at 9.00 a.m. on 11 April 2012. At the General Meeting the Resolution will be proposed (as a special resolution) to authorise the Directors to issue:

·; the Placing Shares for cash on a non pre-emptive basis to the Placees as described in this document;

·; the Vendor Subscription Shares for cash on a non pre-emptive basis to the Sellers as described in this document; and

·; equity securities for cash (until the Company's next annual general meeting) on a non pre-emptive basis in connection with any rights issue.

In order for the Placing and the issue of the Vendor Subscription Shares to take place, the Resolution must be passed. If the Resolution is not passed it will not be possible for the Placing to take place or for the Acquisition to be completed.

5. Irrevocable Undertakings

OpSec has received irrevocable undertakings to vote in favour of the Resolution:

·; from Orca Holdings Limited in respect of its holdings of 23,272,765 Ordinary Shares and 20,000,000 Preferred Shares representing, in aggregate, approximately 54.1% of the Existing Shares;

·; from Herald Investment Trust plc in respect of its holding of 18,679,366 Ordinary Shares representing, in aggregate, approximately 23.4% of the Existing Shares;

·; from Mark Turnage and Michael Angus in respect of an aggregate of 3,064,528 Ordinary Shares, representing approximately 3.8% of the Existing Shares; and

·; from The OpSec Security Group Employee Trustee Company Limited in respect of 2,496,429 Ordinary Shares, representing approximately 3.1% of the Existing Shares.

When aggregated, irrevocable undertakings have therefore been received to vote in favour of Resolution in respect of 47,513,088 Ordinary Shares and 20,000,000 Preferred Shares representing, in aggregate, approximately 84.4%% of the Existing Shares.

6. Recommendation

The Directors believe that the Acquisition and the Vendor Subscription are in the best interests of the Company and the shareholders as a whole. However, since Hazem Ben-Gacem, Anand Radhakrishnan and Glenn Luk represent the interests of Orca Holdings Limited on OpSec's board of directors, and since Richard Fuller is an adviser to Investcorp Technology Partners, none of them has taken part in any decision by the Directors in respect of the Placing. The Independent Directors consider the Placing and the Vendor Subscription to be in the best interests of the Company and shareholders as a whole and unanimously recommend that shareholders vote in favour of the Resolution to be proposed at the General Meeting.

A copy of this announcement and the circular will be available at OpSec's website at www.opsecsecurity.com