8th Mar 2005 07:03
Marlborough Stirling PLC08 March 2005 Not for release, publication or distribution in or into Australia, Canada orJapan For immediate release 8 March, 2005 Recommended acquisition of Marlborough Stirling plc by Vertex Data Science Limited (a wholly-owned subsidiary of United Utilities PLC) Summary • The Directors of Vertex Data Science Limited ("Vertex")and Marlborough Stirling plc ("Marlborough Stirling" or the "Company") arepleased to announce that they have reached agreement on the terms of arecommended proposal whereby Vertex will acquire the entire issued and to beissued share capital of Marlborough Stirling other than Marlborough StirlingShares already owned by the United Utilities Group (if any) (the "Proposal"). • The consideration payable under the Proposal will be 42 pence in cashfor each Marlborough Stirling Share, valuing the existing issued share capitalof Marlborough Stirling at approximately £95.3 million. • After accounting for Marlborough Stirling's net cash balance as at 31December, 2004 and exercisable options, the offer price translates into anenterprise value for Marlborough Stirling of approximately £72.2 million. • The Proposal represents: - a premium of approximately 46.1 per cent. to the Closing Price of 28.75pence for each Marlborough Stirling Share on 7 March, 2005 (the last BusinessDay prior to the date of this announcement); and - a discount of approximately 5.6 per cent. to the Closing Price of 44.5pence for each Marlborough Stirling Share on 29 November, 2004 (the lastBusiness Day prior to the announcement by Marlborough Stirling that it wascommencing a formal sale process for the Company). • The Marlborough Stirling Board unanimously recommends that MarlboroughStirling Shareholders vote in favour of the Scheme, as they have irrevocablyundertaken to do themselves in respect of their own beneficial holdings ofMarlborough Stirling Shares. • The Proposal will be effected by means of a scheme of arrangementunder section 425 of the Companies Act 1985, subject to Court and MarlboroughStirling Shareholder approval. • Marlborough Stirling Shareholders holding, in aggregate, approximately58.5 per cent. of the issued share capital of the Company have irrevocablyundertaken, or otherwise stated their intention, to vote in favour of theProposal. • The Scheme is expected to become effective in early May 2005. • Marlborough Stirling is a provider of outsourcing, transaction-basedservices and technology to the UK financial services sector. It has threedivisions, the largest of which is its life and pensions business, which in 2004generated turnover of £59.3 million. The division's business processoutsourcing clients include Sun Life Financial of Canada, Royal Liver and Bankof Scotland. • Marlborough Stirling's mortgage division is growing strongly and hasclients including Birmingham Midshires, Bradford and Bingley, CIBC, Egg andNorthern Rock. In addition, Marlborough Stirling's Exchange business is theleading supplier of portal services to independent financial intermediaries inthe UK, with over 20,000 subscribers. • For the year ended 31 December, 2004, the Marlborough Stirling Group'sturnover (including its share of turnover from joint ventures) was £98.8 millionon which it generated a loss before tax, amortisation of goodwill andexceptional items of £0.6 million. • Vertex has grown significantly in recent years and is now one of theleading business process outsourcers in the United Kingdom. Vertex has a broadclient base across the UK utility, local and central government and enterprisesectors, as well as the North American utility sector. Vertex is a wholly-ownedsubsidiary of United Utilities, a FTSE 100 company. • For the year ended 31 March, 2004, as shown in its statutory accounts,Vertex's turnover was £386.9 million on which it earned profit before tax,amortisation of goodwill and exceptional items of £24.6 million. • Vertex views Marlborough Stirling as an attractive platform throughwhich it can enter the business process outsourcing market within the financialservices sector, which Vertex considers has significant growth potential. Vertexbelieves that its core skills of transforming business processes and managingcustomers are directly relevant to this sector, and that this market exhibitsmany similar characteristics and growth opportunities to markets in which italready has a strong presence. • Vertex believes that Marlborough Stirling's progress in life andpensions outsourcing has been held back by a lack of scale, and this has led toMarlborough Stirling failing to secure a number of business opportunities. Aswell as providing additional expertise in business process outsourcing, Vertexbelieves that it can provide Marlborough Stirling with the stability andfinancial backing it requires to successfully secure large-scale outsourcingcontracts. • Based on Marlborough Stirling's complementary skills, strong clientbase and IT and software capabilities, Vertex believes that Marlborough Stirlingis an excellent fit with its own business. Vertex also believes that, throughthis acquisition, it will be able to secure significant synergies through theremoval of duplication in corporate overheads. • Commenting on the Proposal, Tom Drury, Managing Director of Vertex,said today: "The rationale for this acquisition is that it will provide Vertex with an entrypoint into the business process outsourcing segment of the financial servicesmarket, which we believe offers significant growth opportunities. This isconsistent with our approach to date of making bolt-on acquisitions, whereappropriate, to unlock significant growth potential in new markets. Once wehave achieved such footholds, we then look to grow by securing furthercontracts." • Commenting on the Proposal, Geoffrey Harrison-Dees, Chairman ofMarlborough Stirling, said today: "This offer is an attractive opportunity for our shareholders to receive cashfor their shares at a level which fairly reflects the value of MarlboroughStirling, from a company with the resources to enable it to reach its fullpotential as well as the ambition to play an important role in the financialservices market. The business can look forward to an exciting future as part ofa larger group well-positioned to take advantage of the excellent marketopportunities available." Vertex will be holding a conference call for analysts and investors at 9.15 a.m.today to discuss the Proposal. The dial in number is + 44 (0)20 7162 0181. A replay of the call will be available for the following seven days, by dialling+44 (0)20 7031 4064, access number: 650186. Enquiries Vertex Tel: +44 (0)161 493 2200 Tom Drury John Gittins Tim Birkett United Utilities Tel: +44 (0)1925 237 033 Simon Bielecki Evelyn Brodie Lehman Brothers Tel: +44 (0)20 7102 1000 (Financial adviser to United Utilities and Vertex) Henry Phillips Stephane-Rodolphe Lamirel Marlborough Stirling Tel: +44 (0)1242 54 7000 Mike O'Leary Bob Beveridge UBS Investment Bank Tel: +44 (0)20 7567 8000 (Financial adviser to Marlborough Stirling) Bill Hutchings Citigate Dewe Rogerson Tel: +44 (0)20 7638 9571 (PR adviser to Marlborough Stirling) Toby Mountford This summary should be read in conjunction with the full text of the attachedannouncement. The Proposal will be subject to the conditions set out inAppendix I to the full announcement and to the full terms and conditions whichwill be set out in the Scheme Document. Appendix II contains the sources and bases of information used in thisannouncement. Appendix III contains the definition of certain expressions used in thisannouncement. Lehman Brothers is acting for Vertex and United Utilities and no one else inconnection with the Proposal and will not be responsible to anyone other thanVertex and United Utilities for providing the protections afforded to clients ofLehman Brothers or for providing advice in connection with the Proposal. UBS Investment Bank is acting for Marlborough Stirling and no one else inconnection with the Proposal and will not be responsible to anyone other thanMarlborough Stirling for providing the protections afforded to clients of UBSInvestment Bank or for providing advice in connection with the Proposal. This announcement does not constitute an offer to sell or an invitation topurchase any securities or the solicitation of any vote for approval in anyjurisdiction, nor shall there be any sale, issue or transfer of the securitiesreferred to in this announcement in any jurisdiction in contravention ofapplicable law. The Scheme Document setting out the details of the Proposal, and the Forms ofProxy, will be posted to Marlborough Stirling Shareholders as soon as isreasonably practicable. In deciding whether or not to approve the Scheme,Marlborough Stirling Shareholders should rely only on the information contained,and procedures described, and the terms and conditions set out, in the SchemeDocument. MARLBOROUGH STIRLING SHAREHOLDERS ARE STRONGLY ADVISED TO READ THE SCHEMEDOCUMENT WHEN IT IS AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. This announcement has been prepared for the purpose of complying with the lawsof England and Wales and the City Code and the information disclosed may not bethe same as that which would have been disclosed if this announcement had beenprepared in accordance with the laws of a jurisdiction outside England or Wales. The availability of the Proposal to Marlborough Stirling Shareholders who arenot resident in the United Kingdom may be affected by the laws of the relevantjurisdictions. Marlborough Stirling Shareholders who are not so resident shouldinform themselves about, and observe, such applicable requirements.Furthermore, the release, publication or distribution of this announcement incertain jurisdictions may be restricted by law and therefore persons in any suchjurisdictions into which this announcement is released, published or distributedshould inform themselves about, and observe, such restrictions. Your attention is drawn to certain UK dealing disclosure requirements inrelation to the Proposal. These disclosure requirements are set out in Rule 8of the City Code. In particular, Rule 8.3 requires public disclosure ofdealings during the offer period by persons who own or control, or who would asa result of any transaction own or control, one per cent. or more of any classof relevant securities of Marlborough Stirling. Relevant securities includeMarlborough Stirling Shares, securities of Marlborough Stirling carryingconversion or subscription rights into Marlborough Stirling Shares, options inrespect of and derivatives referenced to Marlborough Stirling Shares. In thecase of the Proposal, this requirement will apply until the approval of therelevant resolutions at the Court Meeting and EGM. Disclosure should be made on an appropriate form by not later than 12 noon(London time) on the Business Day following the date of the relevant dealingtransaction. These disclosures should be sent to the Company AnnouncementsOffice of the London Stock Exchange (fax number: +44 (0)20 7638 1554).Disclosure Forms and further advice can be obtained from the Panel (tel.: + 44(0)20 7638 0129). Not for release, publication or distribution in or into Australia, Canada orJapan For immediate release 8 March, 2005 Recommended acquisition of Marlborough Stirling plc by Vertex Data Science Limited (a wholly-owned subsidiary of United Utilities PLC) 1. Introduction The Directors of Vertex and Marlborough Stirling are pleased to announce thatthey have reached agreement on the terms of a recommended proposal wherebyVertex will acquire for cash the entire issued and to be issued share capital ofMarlborough Stirling other than Marlborough Stirling Shares already held by theUnited Utilities Group (if any). The Marlborough Stirling Board unanimously recommends that Marlborough StirlingShareholders vote in favour of the Scheme. 2. Summary of the terms of the Proposal It is intended that the Proposal will be effected by way of a scheme ofarrangement of Marlborough Stirling under section 425 of the Companies Act. Thepurpose of the Scheme is to enable Vertex to acquire the entire issued and to beissued share capital of Marlborough Stirling. Under the terms of the Scheme,the Marlborough Stirling Shares (excluding any Marlborough Stirling Shares heldor beneficially owned by any member of the United Utilities Group) will becancelled and, upon the Scheme becoming effective, Marlborough StirlingShareholders will receive: for each Marlborough Stirling Share 42 pence in cash Upon the Scheme becoming effective, new ordinary shares of 1 pence each in thecapital of Marlborough Stirling will be issued to Vertex (or its nominee(s))whereupon Marlborough Stirling will become a wholly-owned subsidiary of Vertex. The Proposal values the entire issued share capital of Marlborough Stirling atapproximately £95.3 million. The Proposal represents: - a premium of approximately 46.1 per cent. to the Closing Price of28.75 pence for each Marlborough Stirling Share on 7 March, 2005 (the lastBusiness Day prior to the date of this announcement); and - a discount of approximately 5.6 per cent. to the Closing Price of 44.5pence for each Marlborough Stirling Share on 29 November, 2004 (the lastBusiness Day prior to the announcement by Marlborough Stirling that it wascommencing a formal sale process for the Company). Appropriate proposals will be made to participants in the Marlborough StirlingShare Schemes to take account of the effects of the Proposal on their rights andentitlements. These proposals are referred to in paragraph 13 below. To become effective, the Scheme requires, amongst other things, approval by thenecessary majorities at the Court Meeting of the Marlborough StirlingShareholders present and voting, either in person or by proxy; the passing ofthe special resolution set out in the notice of EGM; satisfaction or waiver ofthe other conditions set out in Appendix I of this announcement; and thesanction of the Court at the Court Hearing. The Court Meeting and the EGM andthe nature of the approvals required to be given at them are described in moredetail in paragraph 11 below. Marlborough Stirling Shareholders are entitled toattend the Court Hearing in person or to be represented at their own expense bycounsel to support or oppose the sanctioning of the Scheme. 3. Recommendation The Directors of Marlborough Stirling, who have been so advised by UBSInvestment Bank, financial advisers to Marlborough Stirling, consider the termsof the Proposal to be fair and reasonable. In providing advice to the Directorsof Marlborough Stirling, UBS Investment Bank has taken into account thecommercial assessments of the Directors of Marlborough Stirling. Accordingly, the Directors of Marlborough Stirling believe that the terms of theProposal are in the best interests of Marlborough Stirling Shareholders as awhole and unanimously recommend Marlborough Stirling Shareholders to vote infavour of the resolutions to be proposed at the Court Meeting and the EGM asthey have irrevocably undertaken to do themselves in respect of their ownbeneficial holdings of Marlborough Stirling Shares (see paragraph 6 below). 4. Background to and reasons for the recommendation of the Proposal The last year has been one of significant change for Marlborough Stirling bothinternally, as the Company successfully re-organised and re-focused its businessunits, and externally, as Marlborough Stirling reacted to a major shift in thelife and pensions market. Following the appointment of Mike O'Leary as Chief Executive in March 2004, theCompany undertook a detailed strategic review of each of its business units, theresults of which were announced in September 2004. The review confirmed thatthere remains a substantial market opportunity for Marlborough Stirling withinits existing markets. In particular, the life and pensions outsourcing market islarge and expanding rapidly, both in the UK and overseas. However, althoughMarlborough Stirling has a comprehensive re-engineering proposition based uponintellectual property in change management and its software platform, its scaleand financial resources have held it back significantly in winning new business. Over the last few months, Marlborough Stirling has worked hard to implement aplanned transition to a more predictable revenue model for the life and pensionsdivision, focused on outsourcing. The Company has made good progress indeveloping comprehensive partnership relationships to bid for large contractsand has also taken steps to reduce costs further, including planning to utiliseoffshore resources where appropriate. Notwithstanding these positive steps, it became increasingly clear during thelatter part of 2004 that the transition programme underway was likely to takelonger than expected, as reflected in Marlborough Stirling's financial results.Although Marlborough Stirling's pipeline remains good, it remains difficult topredict with confidence the outcome and timing of securing the significantprospects on which the Company is currently working. Accurate forecasting ofMarlborough Stirling's financial results therefore remains challenging which, inturn, impacts negatively on the Company's credibility when bidding for newbusiness, given Marlborough Stirling's overall size relative to the value ofthese potential contracts. Given this degree of short term uncertainty, the Marlborough Stirling Boardconcluded that shareholder value was likely to be maximised by pursuing jointventures or sale processes for some or all of the constituent parts of theMarlborough Stirling Group. Since announcement of this decision on 30 November,2004, the Company has, with the assistance of UBS, conducted a competitive saleprocess with an extensive number of potential purchasers, which led to theProposal from Vertex. The Marlborough Stirling Board believes that the Proposal offers MarlboroughStirling Shareholders certainty of value at an offer price which balances fairlythe significant strategic value that the Marlborough Stirling Group will bringto Vertex's business, with the risk profile of completing the transition to amore predictable business model on a stand-alone basis. The cash consideration under the terms of the Proposal represents a premium ofapproximately 46.1 per cent. over the Closing Price of 28.75 pence for eachMarlborough Stirling Share on 7 March, 2005, the Business Day prior to theannouncement of the Proposal. The Marlborough Stirling Board believes that the long term future of MarlboroughStirling, its employees and customers will be best served as part of a largergroup and that the Proposal will allow Marlborough Stirling to benefit fromVertex's outsourcing expertise, financial strength and other support, and willoffer an exciting future for Marlborough Stirling's employees. The MarlboroughStirling Board believes that Vertex's ownership will enhance MarlboroughStirling's ability to achieve its objectives to transform the UK's financialservices market. The Board remains convinced of Marlborough Stirling's potentialin this rapidly developing market. In light of the factors set out above, the Marlborough Stirling Directorsrecommend unanimously that Marlborough Stirling Shareholders vote in favour ofthe Proposal, as they have irrevocably undertaken to do in respect of theirentire beneficial holdings of Marlborough Stirling Shares. 5. Background to and reasons for the Proposal Vertex is a leading business process outsourcer that has grown strongly inrecent years, increasing sales by approximately 63.4 per cent and operatingprofits by approximately 95.2 per cent since 2001. The majority of this growthhas been organic, with significant contracts secured with utility and publicsector clients. The Proposal is consistent with Vertex's approach to date of making bolt-onacquisitions, where appropriate, to unlock significant growth potential in newmarkets. For example, in recent years First Revenue Assurance and 7C wereacquired to provide Vertex with an entry point into the utility outsourcingmarket in the United States and an offshoring capability in India. Vertex views the financial services sector as being an attractive target marketwith significant growth potential. It believes that its core skills oftransforming business processes and managing customer bases are directlyrelevant to this market. Furthermore it views the financial services sector asexhibiting many similar characteristics and growth opportunities to sectors thatit already has a strong presence in. Currently Vertex does not have a significant presence in this market. Thereforein order to achieve market entry Vertex needs to either develop or acquire abusiness on which it can build market share. Vertex views Marlborough Stirlingas an attractive platform through which it can then grow through the securing ofnew contract opportunities. The characteristics of the two businesses, the synergies to be gained from amerger and their complementary visions make Marlborough Stirling and Vertex anexcellent fit. Vertex believes that the combination of its scale and expertisetogether with Marlborough Stirling's knowledge and experience of the financialservices sector will provide that market with an attractive outsourcingproposition. Vertex also believes that it will benefit from MarlboroughStirling's IT software and systems development, particularly when looking tosecure large scale business process outsourcing contracts. Vertex and Marlborough Stirling have complementary business models with similarcultures that focus on building long-term customer relationships and improvingcustomer service levels. In addition Marlborough Stirling's North American business is a good fit withVertex's own business in North America and Vertex's offshore presence in Indiaand complementary transformational skills will further enhance the MarlboroughStirling offering. Whilst Marlborough Stirling's mortgage and Exchange businesses continue todevelop well, its life and pensions business has been affected by a reduction indemand for stand-alone software and consultancy services. Its outsourcingoperations within this business have performed satisfactorily but missed out ona number of large contract opportunities due to Marlborough Stirling's lack ofscale. Vertex believes that there are significant opportunities to grow MarlboroughStirling's life and pensions outsourcing business from its current base. Vertexbelieves that this business will benefit significantly from Vertex's reputation,financial scale and operational expertise. The United Utilities Group'sfinancial strength and stability will also improve Marlborough Stirling'sability to secure larger, higher value contracts that are more long-term innature. 6. Undertakings to vote in favour of the Proposal Irrevocable undertakings or statements of intent to vote in favour of theProposal have been received by Vertex in respect of 132,719,079 MarlboroughStirling Shares representing, in aggregate, approximately 58.5 per cent. of theexisting issued share capital of Marlborough Stirling. Details of theseirrevocable undertakings and statements of intent are as follows: (a) institutional investors have provided voting undertakings in respectof, in aggregate, 70,082,677 Marlborough Stirling Shares, representingapproximately 30.9 per cent. of the existing issued share capital of MarlboroughStirling. Voting undertakings from certain institutional investors in respect of39,280,569 Marlborough Stirling shares will cease to be binding if an offer ismade for Marlborough Stirling that exceeds the value of the Proposal by morethan 10 per cent. The remaining voting undertakings from institutionalinvestors in respect of 30,802,108 Marlborough Stirling Shares will cease to bebinding if an offer is made for Marlborough Stirling that exceeds the value ofthe Proposal by more than 5 per cent.; (b) a former director has provided a voting undertaking in respect of, inaggregate, 15,755,722 Marlborough Stirling Shares, representing approximately6.9 per cent. of the existing issued share capital of Marlborough Stirling. Thevoting undertaking from the former director of Marlborough Stirling in respectof such shareholding will remain binding if an offer is made for MarlboroughStirling that exceeds the value of the Proposal; (c) all of the Directors of Marlborough Stirling who hold beneficialinterests in Marlborough Stirling Shares have provided voting undertakings inrespect of all of their Marlborough Stirling Shares. The total number ofMarlborough Stirling Shares to which these voting undertakings relate is21,740,425 Marlborough Stirling Shares, representing approximately 9.6 per cent.of the existing issued share capital of Marlborough Stirling. The votingundertakings from the Directors of Marlborough Stirling in respect of suchshareholdings will remain binding on them only in their capacity as MarlboroughStirling Shareholders if an offer is made for Marlborough Stirling that exceedsthe value of the Proposal; and (d) in addition, certain institutional investors have given non-bindingstatements of intention to vote in favour of the Proposal in respect of, inaggregate, 25,140,255 Marlborough Stirling Shares, representing approximately11.1 per cent. of the existing issued share capital of Marlborough Stirling. All of the irrevocable undertakings referred to in (a) to (c) above also containundertakings to accept Vertex's Proposal if Vertex elects, for any reason, toimplement the Proposal by way of a takeover offer (within the meaning of section428 of the Companies Act) rather than by way of the Scheme. In addition to the circumstances described in paragraphs (a) to (c) above, thevoting undertakings will also cease to be binding if the Scheme lapses (except,in the case of all but one of the voting undertakings, if the Scheme lapses incircumstances where Vertex elects, for any reason, to implement the Proposal byway of a takeover offer pursuant to section 428 of the Companies Act instead ofthe Scheme). 7. Implementation Deed and Inducement Fee Vertex and Marlborough Stirling have entered into the Implementation Deed, whichgoverns their relationship during the period until the Scheme becomes effectiveor the Proposal lapses. Among other things, the parties have agreed toco-operate with regard to the process of implementing the Scheme and the Companyhas entered into certain undertakings concerning its conduct of business duringthat period. The Implementation Deed also contains an exclusivity arrangement with Vertex,binding on Marlborough Stirling and the Marlborough Stirling Group. Marlborough Stirling has agreed with Vertex that it will, in certaincircumstances, pay to Vertex an inducement fee of £950,000 (including VAT, ifany, save to the extent such VAT is recoverable by Marlborough Stirling, inwhich event the inducement fee will be exclusive of VAT) if, before the expiryof the period commencing on the date of this announcement and ending on the dateupon which the Proposal either lapses or is not approved by Marlborough StirlingShareholders at the Court Meeting and the EGM: (a) the Marlborough Stirling Board (or any committee thereof) at anytime withdraws or adversely modifies or qualifies its unanimous recommendationof the Proposal or determines not to implement the Proposal by refusing to putforward the Scheme; or (b) a third party announces that it is considering making an offer forMarlborough Stirling, and: (i) that offer (whether implemented by way of takeover offer or schemeof arrangement under section 425 of the Companies Act, whether announced by thethird party or any person acting in concert with it, and whether or notrecommended by the Marlborough Stirling Board) completes, or becomes effectiveor becomes or is declared unconditional in all respects; or (ii) that offer is referred to the competition authorities, lapses or iswithdrawn, and the relevant third party makes another offer for MarlboroughStirling which completes or becomes effective or becomes or is declaredunconditional in all respects. The Implementation Deed will terminate (without prejudice to any obligation onMarlborough Stirling to pay the inducement fee) in certain circumstances,including if the Proposal lapses or if the Scheme is not approved at the CourtMeeting or the EGM. 8. Information on the Marlborough Stirling Group Marlborough Stirling is a provider of outsourcing, transaction-based servicesand technology to the UK life, pensions and mortgages markets. It delivers abroad range of solutions to mortgage lenders and life and pensions providers forthe cost-effective distribution, processing and administration of financialproducts. Its Exchange subsidiary is the leading supplier of portal services toindependent financial intermediaries in the UK. Marlborough Stirling's clientsinclude most of the UK's leading life assurance companies, as well as severalmajor overseas providers. Marlborough Stirling today announced its preliminary results for the year to 31December, 2004. For this period, Group turnover (including MarlboroughStirling's share of turnover from joint ventures) was £98.8 million (2003:£114.6 million). Adjusted pre-tax losses (before charges for goodwillamortisation, employee share options, operating exceptionals, income frominterests in joint ventures and profit on disposals) and reported pre-tax lossesfor the year amounted to £0.6 million and £11.0 million respectively (2003:profits of £10.6 million and restated profits of £0.9 million respectively). 9. Information on Vertex and its financing of the Proposal Vertex was incorporated in 1996 following the merger of the front andback-offices of North West Water Plc and Norweb Plc. Since its creation it hasgrown from being a mainly in-house service provider to United Utilities to oneof the leading business process outsourcing companies in the UK. Vertex works closely with clients in the UK utility, public and enterprisesectors, as well as the North American utility sector. Its stated mission is todeliver operational and customer service excellence. Vertex remains awholly-owned subsidiary of United Utilities, a FTSE 100 company. Vertex is a growth business with good visibility of income streams based on adiversified portfolio of long-term contracts, which are usually of between threeand seven years' length, across a number of sectors. Vertex's head office is in Manchester with approximately 7,000 full-time andtemporary employees based in over 30 UK locations covering the North West,Midlands, South East England, Wales and Scotland; and approximately 2,000employees in its international operations in the USA, Canada and India. For the year ended 31 March, 2004, Vertex's turnover was £386.9 million on whichit earned profit before tax, amortisation of goodwill and exceptional items of£24.6 million. As at 31 March, 2004, Vertex had net assets of £210.8 million. It is intended that the funding for the Proposal will be met from theoperational cash flows of United Utilities' non-regulated businesses, the cashflows generated from the redeployment of capital within these activities andexisting bank facilities available to the United Utilities Group. 10. Information on United Utilities The principal activities of the United Utilities Group are managing andoperating the regulated electricity distribution, water and wastewater assets inNorth West England, a region with a population of approximately 7 million. As well as operating utility assets in the North West of England, the UnitedUtilities Group also owns two support services businesses, United UtilitiesContract Solutions Limited and Vertex. These businesses seek to exploit theUnited Utilities Group's core skills of infrastructure management and businessprocess outsourcing without either significant further investment ordiversification risk. United Utilities also owns Your Communications, a medium-sized alternativetelecommunications provider. Your Communications offers voice, mobile and dataservices to the public sector and small to medium-sized business customerspredominantly in the Midlands and north of England. United Utilities is a member of the FTSE 100 and employs over 16,000 people.For the year ended 31 March, 2004, United Utilities' turnover was £2,115.5million on which it earned profit before tax, amortisation of goodwill andexceptional items of £349.0 million. As at 31 March, 2004, United Utilities hadnet assets of £3,083.3 million. 11. Implementation of the Scheme and cancellation of listing It is intended that the Proposal will be effected by means of a scheme ofarrangement between Marlborough Stirling and its shareholders under section 425of the Companies Act. The procedure involves an application by MarlboroughStirling to Court to sanction the Scheme and confirm the cancellation of all ofthe existing Marlborough Stirling Shares. In consideration for the cancellationof their Marlborough Stirling Shares, Marlborough Stirling Shareholders willreceive cash as outlined in paragraph 2 above. Following implementation of theScheme, Marlborough Stirling will become a wholly-owned subsidiary of Vertex. The Scheme will be subject to the conditions in Appendix I to this announcementincluding approval by Marlborough Stirling Shareholders by the passing ofresolution(s) at the Court Meeting(s). These resolutions must be approved by amajority in number of the holders of Marlborough Stirling Shares present andvoting, either in person or by proxy, at the Court Meeting(s), representing notless than three-fourths in value of the Marlborough Stirling Shares held by suchholders. The Scheme must also be sanctioned by the Court. In addition, the implementation of the Scheme will require separate approval bythe passing of a special resolution at the EGM to: (a) approve the Scheme and to authorise the MarlboroughStirling Directors to take such action as they consider necessary or appropriateto effect the Scheme; (b) cancel the existing Marlborough Stirling Shares, increasethe authorised share capital of Marlborough Stirling and to approve the issue ofnew shares of 1 pence each in Marlborough Stirling to Vertex (and/or its nominee(s)) in accordance with the Scheme; and (c) amend the Marlborough Stirling Articles to ensure thatany Marlborough Stirling Shares issued under the Marlborough Stirling ShareSchemes will be subject to the Scheme or, if issued following the date on whichthe Scheme becomes effective, transferred to Vertex on the same terms as underthe Scheme. The EGM will be held directly after the Court Meeting(s). The Scheme will be subject to the conditions set out in Appendix I and furtherterms to be set out in the Scheme Document. The Scheme will become effectiveupon the delivery to the Registrar of Companies of a copy of the Order of theCourt sanctioning the Scheme and confirming the related reduction of capital,and the registration of such Order. If the Scheme becomes effective, it will be binding on all Marlborough StirlingShareholders irrespective of whether or not they attend or vote in favour of theScheme at the Court Meeting(s) or in favour of the special resolution to beproposed at the EGM. It is intended that, following the Scheme becoming effective, and subject to theapplicable requirements of the London Stock Exchange, Vertex will procure thatMarlborough Stirling will apply to the London Stock Exchange for the MarlboroughStirling Shares to cease trading, and to the UKLA to remove the MarlboroughStirling Shares from the Official List. 12. Management and employees The Vertex Board has confirmed to the Marlborough Stirling Board that, on theScheme becoming effective, the existing contractual employment rights, includingaccrued pension rights, of all management and employees of the MarlboroughStirling Group will be fully safeguarded. Upon the Scheme becoming effective, the non-executive Marlborough StirlingDirectors will resign from the Marlborough Stirling Board. 13. Marlborough Stirling Share Schemes If the Scheme becomes effective, options granted under the Marlborough StirlingShare Schemes will become exercisable (if not already exercisable) in accordancewith the rules of the relevant Marlborough Stirling Share Scheme. If notexercised within the specified period in the relevant Marlborough Stirling ShareScheme, the options will lapse. Any shares in Marlborough Stirling issued afterthe Effective Date upon exercise of the options will be transferred to Vertex(or its nominee(s)) on the same terms as the Scheme. A letter will be sent toparticipants in the Marlborough Stirling Share Schemes shortly after posting ofthe Scheme Document, to inform them of the effect of the Proposal on theirrights under the Marlborough Stirling Share Schemes and to set out appropriateproposals to be made to the holders of options. 14. Disclosure of interests in Marlborough Stirling Save for the irrevocable undertakings summarised in paragraph 6, neither Vertexnor, so far as the Directors of Vertex are aware, any person acting in concertwith it owns or controls any Marlborough Stirling Shares or any securitiesconvertible or exchangeable into Marlborough Stirling Shares or any rights tosubscribe for or purchase, or options (including traded options) in respect of,or derivatives referenced to, any such shares ("Relevant Marlborough StirlingSecurities") nor does any such person have any arrangement in relation toRelevant Marlborough Stirling Securities. For these purposes, "arrangement"includes any indemnity or option arrangement, any agreement or understanding,formal or informal, of whatever nature, relating to Relevant MarlboroughStirling Securities which may be an inducement to deal or refrain from dealingin such securities. 15. Taxation Information on the tax consequences of the Scheme for Marlborough StirlingShareholders will be set out in the Scheme Document. 16. General The formal documentation setting out the details of the Proposal, including theScheme Document setting out the procedures to be followed to approve the Scheme,and the Forms of Proxy, will be posted to Marlborough Stirling Shareholders assoon as is reasonably practicable. The sources and bases for certain information contained in this announcement andthe definitions of certain expressions used in this announcement are set out inAppendices II and III. EnquiriesVertex Tel: +44 (0)161 493 2200 Tom Drury John Gittins Tim Birkett United Utilities Tel: +44 (0)1925 237 033 Simon Bielecki Evelyn Brodie Lehman Brothers Tel: +44 (0)20 7102 1000 (Financial adviser to United Utilities and Vertex) Henry Phillips Stephane-Rodolphe Lamirel Marlborough Stirling Tel: +44 (0)1242 54 7000 Mike O'Leary Bob Beveridge UBS Investment Bank Tel: +44 (0)20 7567 8000 (Financial adviser to Marlborough Stirling) Bill Hutchings Citigate Dewe Rogerson Tel: +44 (0)20 7638 9571 (PR adviser to Marlborough Stirling) Toby Mountford Vertex will be holding a conference call for analysts and investors at 9.15 a.m.today to discuss the recommended proposal to acquire Marlborough Stirling. Thedial in number is + 44 (0)20 7162 0181. A replay of the call will be available for the following 7 days, by dialling +44(0)20 7031 4064, access number: 650186. Lehman Brothers is acting for Vertex and United Utilities and no one else inconnection with the Proposal and will not be responsible to anyone other thanVertex and United Utilities for providing the protections afforded to clients ofLehman Brothers or for providing advice in connection with the Proposal. UBS Investment Bank is acting for Marlborough Stirling and no one else inconnection with the Proposal and will not be responsible to anyone other thanMarlborough Stirling for providing the protections afforded to clients of UBSInvestment Bank or for providing advice in connection with the Proposal. This announcement does not constitute an offer to sell or an invitation topurchase any securities or the solicitation of any vote for approval in anyjurisdiction, nor shall there be any sale, issue or transfer of the securitiesreferred to in this announcement in any jurisdiction in contravention ofapplicable law. The Scheme Document setting out the details of the Proposal, and the Forms ofProxy, will be posted to Marlborough Stirling Shareholders as soon as reasonablypracticable. In deciding whether or not to approve the Scheme, MarlboroughStirling Shareholders should rely only on the information contained, andprocedures described, and the terms and conditions set out, in the SchemeDocument. MARLBOROUGH STIRLING SHAREHOLDERS ARE STRONGLY ADVISED TO READ THE SCHEMEDOCUMENT WHEN IT IS AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. This announcement has been prepared for the purpose of complying with the lawsof England and Wales and the City Code and the information disclosed may not bethe same as that which would have been disclosed if this announcement had beenprepared in accordance with the laws of a jurisdiction outside England or Wales. The availability of the Proposal to Marlborough Stirling Shareholders who arenot resident in the United Kingdom may be affected by the laws of the relevantjurisdictions. Marlborough Stirling Shareholders who are not so resident shouldinform themselves about, and observe, such applicable requirements.Furthermore, the release, publication or distribution of this announcement incertain jurisdictions may be restricted by law and therefore persons in any suchjurisdictions into which this announcement is released, published or distributedshould inform themselves about, and observe, such restrictions. Your attention is drawn to certain UK dealing disclosure requirements inrelation to the Proposal. These disclosure requirements are set out in Rule 8of the City Code. In particular, Rule 8.3 requires public disclosure ofdealings during the offer period by persons who own or control, or who would asa result of any transaction own or control, one per cent. or more of any classof relevant securities of Marlborough Stirling. Relevant securities includeMarlborough Stirling Shares, securities of Marlborough Stirling carryingconversion or subscription rights into Marlborough Stirling Shares, options inrespect of and derivatives referenced to Marlborough Stirling Shares. In thecase of the Proposal, this requirement will apply until the approval of therelevant resolutions at the Court Meeting and EGM. Disclosure should be made on an appropriate form by not later than 12 noon(London time) on the Business Day following the date of the relevant dealingtransaction. These disclosures should be sent to the Company AnnouncementsOffice of the London Stock Exchange (fax number: +44 (0)20 7638 1554).Disclosure Forms and further advice can be obtained from the Panel (tel.: + 44(0)20 7638 0129). APPENDIX I Conditions to the Scheme The Proposal will be conditional upon the Scheme becoming unconditional andbecoming effective by no later than 31 July, 2005 or such later date (if any) asVertex and Marlborough Stirling may agree and the Court may allow. 1. The Scheme will be subject to the following conditions: (a) the approval by a majority in number representing not less thanthree-fourths in value of the holders of Marlborough Stirling Shares present andvoting, whether in person or by proxy, at the Court Meeting; (b) the special resolution required to approve and implement the Schemebeing passed at the EGM; and (c) the sanction (with or without modification (but subject to suchmodification being acceptable to Vertex and Marlborough Stirling)) of the Schemeand the confirmation of the reduction of capital by the Court, an office copy ofthe Order being delivered for registration to the Registrar of Companies andregistration of the Order confirming the reduction of capital involved in theScheme with the Registrar of Companies; 2. Marlborough Stirling and Vertex have agreed that, subject to theprovisions of paragraph 3 below, the Proposal is also conditional upon, andaccordingly the necessary action to make the Scheme effective will only be takenon, the satisfaction or waiver as referred to below of the following conditionsprior to the Scheme being sanctioned by the Court: (a) it being established in terms reasonably satisfactory to Vertex thatthe Office of Fair Trading in the United Kingdom does not intend to refer theproposed acquisition of Marlborough Stirling by Vertex or any matter arisingtherefrom to the Competition Commission for investigation and the deadline forappealing such a decision to the Competition Appeals Tribunal having expired orlapsed (as appropriate); (b) the Financial Services Authority giving notice in writing undersection 184(1) of FSMA, in terms reasonably satisfactory to Vertex, of itsapproval in respect of any acquisition of control over (as defined in section179 of FSMA) any member of the Marlborough Stirling Group which is a UKauthorised person (as defined in section 178(4) of FSMA) which would result fromthe Scheme becoming effective, or being treated as having given its approval byvirtue of section 184(2) of FSMA; (c) no government, governmental, quasi-governmental, supranational,statutory or regulatory body, trade agency, association, institution orprofessional body having responsibility for the regulation or supervision ofbanking, consumer credit or financial services having: (i) withdrawn or refused to renew, or threatened to withdraw or torefuse to renew, any licence or permission; or (ii) instituted, implemented, taken or omitted, or threatened to take orto omit, any other action; the effect of which would be materially and adversely to affect the businesses,assets, prospects or profits of the wider Marlborough Stirling Group, and uponno such licences or permissions terminating or otherwise becoming invalid as aresult of the Proposal or its implementation the effect of which would bematerially and adversely to affect the businesses, assets, prospects or profitsof the wider Marlborough Stirling Group; (d) no order or judgment of any court or governmental, statutory orregulatory body having been issued or made prior to the Effective Dateoccurring, and no legal or regulatory requirements remaining to be satisfied,other than the obtaining of any non-mandatory or post-Effective Date mergercontrol consent, which has the effect of making unlawful or otherwiseprohibiting the purchase of Marlborough Stirling by Vertex; (e) save as Disclosed, there being no provision of any agreement,arrangement, licence, permit or other instrument to which any member of thewider Marlborough Stirling Group is a party or by or to which any such member orany of its assets may be bound, entitled or subject, which in consequence of theProposal would or might reasonably be expected to result in: (i) any material moneys borrowed by or any other materialindebtedness (actual or contingent) of any such member, being or becomingrepayable or capable of being declared repayable immediately or earlier thantheir or its stated maturity date or repayment date or the ability of any suchmember to borrow moneys or incur any indebtedness being withdrawn or materiallyinhibited or being capable of becoming or being withdrawn or materiallyinhibited; (ii) any such agreement, arrangement, licence, permit or instrument whichis material or the rights, liabilities, obligations or interests of any suchmember thereunder being terminated or adversely modified or affected or anymaterial obligation or liability arising or any action being taken thereunder; (iii) any material assets or interests of any such member being orfalling to be disposed of or charged or any right arising under which any suchasset or interest could be required to be disposed of or charged; (iv) the creation or enforcement of any mortgage, charge or other securityinterest over the whole or any material part of the business, property or assetsof any such member; (v) the material rights, liabilities, obligations or interests ofany such member in, or the business of any such member with, any person, firm orbody (or any arrangement or arrangements relating to any such interest orbusiness) being terminated, adversely modified or affected; (vi) the value of any such member or its financial or trading position orprospects being prejudiced or adversely affected to a material extent; (vii) any such member ceasing to be able to carry on business under anyname under which it presently does so; or (viii) the creation of any material liability, actual or contingent,by any such member, and no event having occurred which, under any provision of any materialagreement, arrangement, licence, permit or other instrument to which any memberof the wider Marlborough Stirling Group is a party or by or to which any suchmember or any of its material assets may be bound, entitled or subject, would bereasonably likely to result in any of the events or circumstances as arereferred to in sub-paragraphs (i) to (viii) of this paragraph (e); (f) no government or governmental, quasi-governmental, supranational,statutory, regulatory, environmental or investigative body, court, trade agency,association, institution or any other body or person whatsoever in anyjurisdiction (each a "Third Party") having decided to take, institute, implementor threaten any action, proceeding, suit, investigation, enquiry or reference,or enacted, made or proposed any statute, regulation, decision or order, orhaving taken any other steps which would or might reasonably be expected to: (i) require, prevent or delay the divestiture, or materiallyalter the terms envisaged for any proposed divestiture by any member of thewider Vertex Group or any member of the wider Marlborough Stirling Group of allor a substantial part of their respective businesses, assets or property orimpose any limitation on the ability of any of them to conduct their respectivebusinesses (or any of them) or to own their respective assets or properties orany material part thereof; (ii) require, prevent or materially delay the divestiture by any memberof the wider Vertex Group of any shares or other securities in MarlboroughStirling; (iii) impose any limitation on, or result in a material delay in,the ability of any member of the wider Vertex Group, directly or indirectly, toacquire or to hold or to exercise effectively any rights of ownership in respectof shares or loans or securities convertible into shares or any other securities(or the equivalent) in any member of the wider Marlborough Stirling Group or thewider Vertex Group or to exercise management control over any such member; (iv) otherwise adversely affect the business, assets, profits or prospectsof any member of the wider Marlborough Stirling Group to a material extent; (v) make the Proposal or its implementation or the acquisition orproposed acquisition by Vertex or any member of the wider Vertex Group of anyshares or other securities in, or control of Marlborough Stirling void, illegal,and/or unenforceable under the laws of any jurisdiction, or otherwise, directlyor indirectly, restrain, restrict, prohibit, delay or otherwise materiallyinterfere with the same, or impose additional conditions or obligations withrespect thereto, or otherwise challenge or materially interfere therewith; (vi) require any member of the wider Vertex Group or the wider MarlboroughStirling Group to offer to acquire any shares or other securities (or theequivalent) or interest in any member of the wider Marlborough Stirling Group(other than as a result of or in connection with the Proposal) or (as a resultof or in connection with the Proposal) the wider Vertex Group owned by any thirdparty; (vi) impose any material limitation on the ability of any member ofthe wider Marlborough Stirling Group to co-ordinate its business, or any part ofit, with the businesses of any other members; or (vii) result in any member of the wider Marlborough Stirling Groupceasing to be able to carry on business under any name under which it presentlydoes so the effect of which is materially detrimental to such member, and all applicable waiting and other time periods during which any such ThirdParty could institute, implement or threaten any action, proceeding, suit,investigation, enquiry or reference or any other step under the laws of anyjurisdiction in respect of the Proposal or the acquisition or proposedacquisition of any Marlborough Stirling Shares having expired, lapsed or beenterminated; (g) all necessary filings or applications having been made in connectionwith the Proposal and all statutory or regulatory obligations in anyjurisdiction having been complied with in connection with the Proposal or theacquisition by any member of the wider Vertex Group of any shares or othersecurities in, or control of, any member of the wider Marlborough Stirling Groupand all authorisations, orders, recognitions, grants, consents, licences,confirmations, clearances, permissions and approvals deemed necessary orappropriate by Vertex or any member of the wider Vertex Group (in each case,acting reasonably) but including (without limitation to the foregoing) from theIsle of Man Government Insurance and Pensions Authority for or in respect of theProposal or the proposed acquisition of any shares or other securities in, orcontrol of, any member of the wider Marlborough Stirling Group by any member ofthe wider Vertex Group having been obtained in terms and in a form reasonablysatisfactory to Vertex from all appropriate Third Parties or persons with whomany member of the wider Marlborough Stirling Group has entered into contractualarrangements and all such authorisations, orders, recognitions, grants,consents, licences, confirmations, clearances, permissions and approvalstogether with all material authorisations orders, recognitions, grants,licences, confirmations, clearances, permissions and approvals reasonablynecessary or appropriate to carry on the business of any member of the widerMarlborough Stirling Group remaining in full force and effect and there being nonotice or intimation of any intention to revoke or not to renew any of the sameat the time at which the Scheme becomes otherwise effective and all necessarystatutory or regulatory obligations in any jurisdiction having been compliedwith; (h) save as Disclosed, no member of the wider Marlborough Stirling Grouphaving, since 31 December, 2004: (i) save as between Marlborough Stirling and wholly-ownedsubsidiaries of Marlborough Stirling or for Marlborough Stirling Shares issuedpursuant to the exercise of options granted under the Marlborough Stirling ShareSchemes, issued, authorised or resolved (by way of board or shareholderresolution) to issue any additional shares of any class; (ii) save as between Marlborough Stirling and wholly-ownedsubsidiaries of Marlborough Stirling or for the grant of options under theMarlborough Stirling Share Schemes, issued or agreed to issue or authorised orresolved (by way of board or shareholder resolution) the issue of securitiesconvertible into shares of any class or rights, warrants or options to subscribefor, or acquire, any such shares or convertible securities; (iii) other than to another member of the Marlborough StirlingGroup, recommended, declared, paid or made or resolved (by way of board orshareholder resolution) to recommend, declare, pay or make any bonus, dividendor other distribution whether payable in cash or otherwise; (iv) save for intra-Marlborough Stirling Group transactions, mergedor demerged with any body corporate or acquired or disposed of or transferred,mortgaged or charged or created any security interest over any material assetsor any right, title or interest in any material asset (including shares, tradeinvestments and intellectual property) or authorised or resolved (by way ofboard or shareholder resolution) or announced any intention to propose any suchmerger, demerger, acquisition or disposal, transfer, mortgage, charge orsecurity interest, in each case, other than in the ordinary course of business; (v) save for intra-Marlborough Stirling Group transactions, madeor authorised or resolved (by way of board or shareholder resolution) orannounced an intention to propose any material change in its loan capital; (vi) issued, authorised or resolved (by way of board or shareholderresolution) the issue of any debentures or (save for intra-Marlborough StirlingRelated Shares:
United Utilities