2nd May 2006 07:00
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART INTO THEUNITED STATES, AUSTRALIA, CANADA OR JAPANFOR IMMEDIATE RELEASEINTERSERVE PLCRECOMMENDED CASH AND SHARE ACQUISITIONOFMACLELLAN GROUP PLC2 May 2006SummaryThe boards of Interserve and MacLellan are pleased to announce that agreementhas been reached between them on the terms of a recommended proposal wherebyInterserve will acquire, for cash (with a Loan Note Alternative) and shares,the entire issued and to be issued ordinary share capital of MacLellan andacquire, for cash, the entire issued convertible preference share capital ofMacLellan.The Acquisition values each MacLellan Share at approximately 116 pence and eachConvertible Preference Share at 40.6 pence. The Acquisition values the whole ofthe existing issued ordinary share capital of MacLellan at approximately ‚£116million and the whole of the existing issued convertible preference sharecapital at ‚£2.03 million.It is intended that the Acquisition will be effected by means of a scheme ofarrangement of MacLellan under section 425 of the Companies Act. However,Interserve reserves the right, in its sole discretion, to implement theAcquisition by making a takeover offer instead under section 428 of theCompanies Act.The board of Interserve believes that the Acquisition represents an attractiveopportunity and is consistent with Interserve's strategy to develop itsbusiness, particularly in the facilities management sector. The Acquisitionwill bring together MacLellan's broad private sector customer base withInterserve's complementary expertise and client exposure. The board ofInterserve believes that the Acquisition will expand Interserve's customerbase, enhance the range of services it offers and provide the EnlargedInterserve Group with a greater balance between private and public sectorcustomers and access to a number of new market sectors.The MacLellan Directors having been so advised by Investec consider that theterms of the Acquisition are fair and reasonable. Accordingly, the MacLellanDirectors intend to unanimously recommend that MacLellan Shareholders and, ifapplicable, the Convertible Preference Shareholder, vote in favour of theresolutions to be proposed at the Scheme Meeting(s) and the MacLellanExtraordinary General Meeting, as those directors who hold MacLellan Shareshave undertaken irrevocably to do in respect of their own beneficial holdingsof MacLellan Shares.The Acquisition - The terms of the Acquisition value each MacLellan Share at approximately 116 pence and each Convertible Preference Share at 40.6 pence. The terms of the Acquisition assume that the MacLellan final dividend of 1.25 pence per share proposed with respect to the issued ordinary share capital of MacLellan for the year ended 31 December 2005 (which was expected to be paid on 3 July 2006) shall not be paid unless the Acquisition is not completed. - The consideration for each MacLellan Share is 0.0943 New Interserve Shares valued at approximately 36 pence (based on the Closing Price of an Interserve Share immediately prior to this Announcement) and 80 pence in cash (or, at the option of individual MacLellan Shareholders, Loan Notes). MacLellan Shareholders shall not be entitled to Interserve's proposed final dividend of 10.1 pence per share for the year ended 31 December 2005. A Mix and Match Facility will also be available. - The value of the Acquisition of each MacLellan Share represents a premium of approximately 11 per cent. over the Closing Price of a MacLellan Share of 104.5 pence on 21 March 2006, being the last Business Day before the announcement that MacLellan had received an approach. - The value of the Acquisition of each MacLellan Share also represents a premium of approximately 36 per cent. over the average Closing Price of a MacLellan Share of 85.6 pence for the three months before 22 March 2006, being the Business Day of the announcement that MacLellan had received an approach. - Irrevocable undertakings to vote in favour of the Acquisition have been received from MacLellan Shareholders including all of the MacLellan Directors, in respect of 7,675,041 MacLellan Shares representing approximately 7.7 per cent. of MacLellan's existing ordinary issued share capital. Further information on these irrevocable undertakings can be found below under paragraph 19. Letters of intent indicating an intention to vote in favour of the Acquisition have also been received in respect of 12,267,632 MacLellan Shares representing approximately 12.3 per cent. of MacLellan's existing ordinary issued share capital. - Accordingly, irrevocable undertakings to vote in favour of the Acquisition and letters of intent indicating an intention to vote in favour of the Acquisition at the Scheme Meeting(s) and the MacLellan Extraordinary General Meeting have been received in respect of 19,942,673 MacLellan Shares representing approximately 20.0 per cent. of MacLellan's existing ordinary issued share capital. A letter of intent indicating an intention to vote in favour of the Acquisitionhas also been received from the Convertible Preference Shareholder.The conditions to and certain further terms of the Acquisition are set out inAppendix I to this announcement. The Acquisition is conditional on, amongstother things, the approval of Interserve Shareholders.Acquisition RationaleThe board of Interserve believes that MacLellan represents an attractiveopportunity, consistent with Interserve's strategy to develop its business,particularly in the facilities management sector. The board of Interserve isconfident that Interserve will be able to integrate MacLellan successfully,especially in the light of the compatibility of MacLellan's operations andcomplementary fit with Interserve's existing outsourcing businesses. The boardof Interserve believes that the Acquisition will provide Interserve with accessto a number of new market sectors, including retail, and strengthens itsservices in a number of areas including cleaning and security services.The board of Interserve believes that the Acquisition will assist with thedevelopment of Interserve's product offering, in particular enabling: - a material expansion of Interserve's outsourcing businesses, increasing the proportion of revenues from these activities from approximately 49 per cent. to approximately 58 per cent.; - a more even balance between the public and private sectors with non-public sector business increasing from approximately 30 per cent. to approximately 40 per cent. by revenue; - Interserve to leverage growth from an increasingly diverse customer base supported by a forward order book that is increased by approximately ‚£500 million to approximately ‚£5.3 billion. The board of Interserve believes that MacLellan has attractive growthprospects, good visibility of forward revenues, a high quality customer basethat includes leading companies such as Sainsbury's, Tesco, PruPim and Mapeleyand that following the Acquisition it will provide the Enlarged InterserveGroup with the potential to benefit from margin uplift by reducing overheadsand improving operational efficiency.The Acquisition is expected to be earnings enhancing for Interserve in 2007,being the first full year following completion of the Acquisition.1The board of Interserve believes that there is a strong strategic andoperational fit between MacLellan and its existing facilities service business.Interserve is being advised by JPMorgan Cazenove. MacLellan is being advised byInvestec.QuotationsCommenting on the Acquisition, Adrian Ringrose, Chief Executive of Interserve,said:"The Interserve board believes this acquisition represents an excitingopportunity in the development of Interserve as one of the UK's leadingInfrastructure and Facilities Management businesses. The acquisition ofMacLellan represents the next stage in Interserve's development and itsstrategy for growth. The excellent strategic fit between the two companies andthe services they provide to both public and private sectors will consolidateInterserve's position as one of the UK's leading support services companieswith a high quality customer base and secure long term order book."Commenting on the Acquisition, John Foley, Chief Executive of MacLellan, said:"We are happy to recommend that MacLellan Shareholders vote in favour of thisoffer since the Acquisition price represents a 36 per cent. premium over ourshare price in the three months before our announcement on 22 March that we hadreceived an approach and a 93 per cent. increase from the issue price of ourlast fundraising in October 2004. MacLellan Shareholders will receive asignificant proportion of their consideration in cash whilst the share elementprovides the potential to benefit from future growth of the combinedcompanies."This summary should be read in conjunction with the full text of thisannouncement which sets out further details of the Acquisition. The conditionsand certain further terms of the Acquisition are set out in Appendix I to thisannouncement and the final terms and conditions will be set out in the SchemeDocument expected to be issued in due course. The sources and bases ofinformation contained in this summary are set out in Appendix II to thisannouncement and the definitions of certain expressions used in this summaryare contained in Appendix III to this announcement.- ends -Enquiries:Interserve plc +44 (0)11 8932 0123Adrian Ringrose, Chief Executive, Tim Jones, Finance Director, Giles Scott,Head of Corporate CommunicationsJPMorgan Cazenove +44 (0)20 7588 2828Patrick Magee, Angus AllenThe Maitland Consultancy +44 (0)20 379 5151Neil Bennett (+44 (0)7900 000 777), Liz Morley (+44 (0)7798 683 108)MacLellan Group plc +44 (0)1905 744 400John Foley, Stephen ShipleyInvestec +44 (0)20 7597 5970David Currie, Rupert KreftingNotes to editors:ANALYSTS: A presentation to investors and analysts will take place at 10.00 am(BST) at JPMorgan Cazenove, 20 Moorgate, London EC2R 6DA. There will be a liveteleconference link to the investor and analyst meeting on 0845 146 2116 or +44(0)1452 584 160 . The presentation slides will also be available onInterserve's website, www.interserveplc.co.uk.This announcement does not constitute an offer to sell or 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.Note:1. A statement that the Acquisition will be earnings enhancing in 2007 does notconstitute a profit forecast and should not be interpreted to mean thatearnings for 2007 or any subsequent financial period would necessarily match orbe greater than those for any preceding financial period. Earnings meansearnings per share calculated by reference to Interserve's Group profit, net oftax and minorities but before amortisation of intangible assets.The release, publication or distribution of this announcement in certainjurisdictions may be restricted by law. The availability of the New InterserveShares and the Mix and Match Facility and the Loan Note Alternative under theterms of the Scheme (or, if the offer is implemented by way of a takeoveroffer, of that offer), if made, to persons not resident in the United Kingdommay be affected by the laws of the relevant jurisdictions in which they arelocated. Persons who are not resident in the United Kingdom or who are subjectto other jurisdictions should inform themselves of, and observe, any applicablerequirements. Further details in relation to Overseas Persons who are MacLellanShareholders will be contained in the Scheme Document.If the Acquisition is carried out by way of a takeover offer, it will not bemade, directly or indirectly, in, into or from, or by the use of mails or anymeans of instrumentality (including, without limitation, telephonically orelectronically) of interstate or foreign commerce of, or any facility of anational, state or other securities exchange of, nor will it be made in, intoor from, the US, Australia, Canada or Japan. Accordingly, copies of thisannouncement and all documents relating to the takeover offer will not be, andmust not be, directly or indirectly, mailed or otherwise forwarded, distributedor sent in, into or from, the US, Australia, Canada or Japan and such takeoveroffer will not be capable of acceptance by any such use, instrumentality orfacility within the US, Australia, Canada or Japan and persons receiving thisannouncement or any formal documentation (including custodians, nominees andtrustees) must not mail or otherwise forward, distribute or send it in, into orfrom, the US, Australia, Canada or Japan. Doing so may render invalid anypurported acceptance of the takeover offer. All MacLellan Shareholders or otherpersons (including nominees, trustees or custodians) who would or otherwiseintend to or may have a contractual or legal obligation to forward thisannouncement or any formal documentation relating to the takeover offer to anyjurisdiction outside the United Kingdom should refrain from doing so and seekappropriate professional advice before taking any such actions.Whether or not a MacLellan Shareholder's MacLellan Shares are voted at theScheme Meeting(s) or the MacLellan Extraordinary General Meeting, if the Schemebecomes Effective those MacLellan Shares will, subject to the Mix and MatchFacility and the Loan Note Alternative (and the terms and conditions set out inthis Announcement) receive 0.0943 Interserve Shares valued at approximately 36pence (based on the Closing Price of an Interserve Share immediately prior tothis announcement) and 80 pence in cash. MacLellan and Interserve urgeMacLellan Shareholders to read the Scheme Document when it becomes availablebecause it will contain important information relating to the Acquisition.The availability of Business Asset Taper Relief and Non-Business Asset TaperRelief on a subsequent disposal of New Interserve Shares will depend on thecircumstances of each shareholder. Generally, however, it is easier to satisfythe conditions to obtain Business Asset Taper Relief for companies that arequoted on AIM as opposed to those with a full listing on the London StockExchange. Accordingly, individuals may find they obtain lower rates of taperrelief on holdings of New Interserve Shares than they presently do for existingholdings of MacLellan Shares.This announcement is not an offer of securities for sale in the US and the NewInterserve Shares have not been, and will not be, registered under the USSecurities Act or under the securities laws of any state, district or otherjurisdiction of the US, Australia, Canada or Japan and no regulatory clearancein respect of the New Interserve Shares has been, or will be, applied for inany jurisdiction other than the UK. Accordingly, unless an exemption under theUS Securities Act or other relevant securities laws is applicable, the NewInterserve Shares are not being, and may not be, offered, sold, resold,delivered or distributed, directly or indirectly, in or into the US, Australia,Canada or Japan or to, or for the account or benefit of, any US person or anyperson resident in Australia, Canada or Japan.JPMorgan Cazenove, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting exclusively for Interserve and noone else in connection with the Acquisition and will not be responsible toanyone other than Interserve for providing the protections afforded to clientsof JPMorgan Cazenove or for providing advice in relation to the Acquisition,the contents of this announcement, or any matter referred to herein.Investec, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for MacLellan and no oneelse in connection with the Acquisition and will not be responsible to anyoneother than MacLellan for providing the protections afforded to clients ofInvestec or for providing advice in relation to the Acquisition and thecontents of this Announcement or any matter referred to herein.Dealing Disclosure RequirementsUnder the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the"Code"), if any person is, or becomes, "interested" (directly or indirectly) in1% or more of any class of "relevant securities" of Interserve or of MacLellan,all "dealings" in any "relevant securities" of that company (including by meansof an option in respect of, or a derivative referenced to, any such "relevantsecurities") must be publicly disclosed by no later than 3.30 pm (London time)on the London business day following the date of the relevant transaction. Thisrequirement will continue until the date on which the offer becomes, or isdeclared, unconditional as to acceptances, lapses or is otherwise withdrawn oron which the "offer period" otherwise ends. If two or more persons act togetherpursuant to an agreement or understanding, whether formal or informal, toacquire an "interest" in "relevant securities" of Interserve or of MacLellan,they will be deemed to be a single person for the purpose of Rule 8.3.Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Interserve or of MacLellanby Interserve or of MacLellan, or byany of their respective "associates", must be disclosed by no later than 12.00noon (London time) on the London business day following the date of therelevant transaction.A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securitiesin issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk."Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities.Terms in quotation marks are defined in the Code, which can also be found onthe Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel.Forward Looking StatementsThis announcement contains statements about Interserve and MacLellan that areor may be forward looking statements. All statements other than statements ofhistorical facts included in this announcement may be forward lookingstatements. Without limitation, any statements preceded or followed by or thatinclude the words "targets", "plans" "believes", "considers", "expects","aims"," intends", "will", "may", "anticipates", "estimates", "projects" or,words or terms of similar substance or the negative thereof, are forwardlooking statements. Forward looking statements include statements relating tothe following: (i) future capital expenditures, expenses, revenues, earnings,synergies, economic performance, indebtedness, financial condition, dividendpolicy, losses and future prospects; (ii) business and management strategiesand the expansion and growth of Interserve's or MacLellan's operations andpotential synergies resulting from the Acquisition; and (iii) the effects ofgovernment regulation on Interserve's or MacLellan's business.Such forward looking statements involve risks and uncertainties that couldsignificantly affect expected results and are based on certain key assumptions.Many factors could cause actual results to differ materially from thoseprojected or implied in any forward looking statements. Due to suchuncertainties and risks, readers are cautioned not to place undue reliance onsuch forward looking statements, which speak only as of the date hereof.Interserve and MacLellan disclaim any obligation to update any forward lookingor other statements contained herein, except as required by applicable law.2 May 2006Interserve plcRecommended Cash and Share Acquisition of MacLellan Group plc1. Introduction The boards of Interserve and MacLellan are pleased to announce that agreementhas been reached between them on the terms of a recommended proposal wherebyInterserve will acquire, for cash (with a Loan Note Alternative) and shares,the entire issued and to be issued ordinary share capital of MacLellan and, forcash, the entire issued convertible preference share capital of MacLellan bymeans of a scheme of arrangement under section 425 of the Companies Act. Theboard of MacLellan intends to unanimously recommend the Acquisition and intendsto unanimously recommend that MacLellan Shareholders (and, if applicable, theConvertible Preference Shareholder) vote in favour of the Acquisition at theScheme Meeting(s) and the MacLellan Extraordinary General Meeting.The terms of the Acquisition value each MacLellan Share at approximately 116pence and each Convertible Preference Share at 40.6 pence. The Acquisitionvalues the whole of the existing issued ordinary share capital of MacLellan atapproximately ‚£116 million and the whole of the existing issued convertiblepreference share capital at ‚£2.03 million. The terms of the Acquisition assumethat the proposed MacLellan final dividend of 1.25 pence per share for the yearended 31 December 2005 (which was expected to be paid on 3 July 2006) shall notbe paid unless the Acquisition is not completed.Irrevocable undertakings to vote in favour of the Acquisition have beenreceived from MacLellan Shareholders, including all of the MacLellan Directors,in respect of 7,675,041 MacLellan Shares representing approximately 7.7 percent. of MacLellan's existing issued ordinary share capital. Furtherinformation on these irrevocable undertakings can be found below underparagraph 19.Letters of intent indicating an intention to vote in favour of the Acquisitionat the Scheme Meeting(s) and the MacLellan Extraordinary General Meeting havebeen received in respect of 12,267,632 MacLellan Shares representingapproximately 12.3 per cent. of MacLellan's existing ordinary issued sharecapital.Accordingly, irrevocable undertakings to vote in favour of the Acquisition andletters of intent indicating an intention to vote in favour of the Acquisitionat the Scheme Meeting(s) and the MacLellan Extraordinary General Meeting havebeen received in respect of 19,942,673 MacLellan Shares representingapproximately 20.0 per cent. of MacLellan's existing ordinary issued sharecapital.A letter of intent indicating an intention to vote in favour of the Acquisitionhas also been received from the Convertible Preference Shareholder.Interserve reserves the right, in its sole discretion, to implement theAcquisition by making a takeover offer for the entire issued and to be issuedshare capital of MacLellan.Due to its size, the Acquisition requires the approval of InterserveShareholders at the Interserve Extraordinary General Meeting. The board ofInterserve intends to unanimously recommend that Interserve Shareholders votein favour of the Acquisition.Appendix III contains definitions of certain terms used in this announcement.2. Terms of the AcquisitionUnder the terms of the Scheme, MacLellan Shareholders will be entitled toreceive:for every 1 MacLellan Share 0.0943 New Interserve Shares and 80 pence in cashand so in proportion for any other number of MacLellan Shares held. Based onthe Closing Price of an Interserve Share immediately prior to thisannouncement, this entitlement represents approximately 36 pence in NewInterserve Shares plus 80 pence in cash. MacLellan Shareholders will beentitled to receive Loan Notes instead of cash for some or all of the cashconsideration to which they will be entitled under the Acquisition, subject tothe conditions set out in paragraph 9 below.Under the terms of the Scheme, the Convertible Preference Shareholder will beentitled to receive for every 1 Convertible Preference Share 40.6 pence in cashreflecting the value of the conversion rights attributable to the ConvertiblePreference Shares to convert into Ordinary Share on the basis of 35 OrdinaryShares for every 100 Convertible Preference Shares. If the ConvertiblePreference Shareholder elects to convert his shares into Ordinary Shares priorto the Scheme Voting Record Time then the Convertible Preference Shares willbecome MacLellan Shares with the entitlements set out above.The board of MacLellan has undertaken to seek the approval of the MacLellanShareholders at the MacLellan annual general meeting on 3 May 2006 to adjournthe resolution to approve the payment of the final dividend of 1.25 pence pershare that had been proposed for the year ended 31 December 2005, which wasexpected to be paid on 3 July 2006. No further dividend will be paid ordeclared and the MacLellan Directors will not reconvene a meeting to considerthe adjourned dividend resolution unless the Acquisition does not complete. Inthe event that any dividend is declared or paid by MacLellan after the date ofthis announcement and Interserve proceeds with the Acquisition, the cashelement of the consideration payable by Interserve under the Acquisition shallbe reduced by an equal amount.Neither the MacLellan Shareholders (nor the Convertible Preference Shareholderin the event that it elects to convert its Convertible Preference Shares intoMacLellan Shares prior to the Scheme Voting Record Time) shall be entitled toInterserve's proposed final dividend of 10.1 pence per share for the year ended31 December 2005.A Mix and Match Facility will be available to MacLellan Shareholders pursuantto which MacLellan Shareholders may, subject to availability, elect to vary theproportions in which they receive New Interserve Shares and cash (with a LoanNote Alternative) in respect of their holdings of MacLellan Shares. Furtherdetails of the Mix and Match Facility are set out in paragraph 8 below.Assuming that a maximum number of 9.5 million New Interserve Shares will beissued pursuant to the Acquisition, MacLellan Shareholders will hold InterserveShares representing approximately 8 per cent. of the Enlarged Interserve Group.In addition, MacLellan Shareholders will have received cash consideration, inaggregate, of approximately ‚£80 million.Based on the Closing Price of 382 pence per Interserve Share on 28 April 2006,being the last Business Day before this announcement, the Acquisition valueseach MacLellan Share at approximately 116 pence and the existing issuedordinary share capital of MacLellan at approximately ‚£116 million.The value of the Acquisition of the MacLellan Shares represents a premium ofapproximately 11 per cent. over the Closing Price of a MacLellan Share of 104.5pence on 21 March 2006, the last Business Day before the announcement thatMacLellan had received an approach. The value of the Acquisition of theMacLellan Shares also represents a premium of approximately 36 per cent. overthe average Closing Price of a MacLellan Share of 85.6 pence for the threemonths before the announcement that MacLellan had received an approach.As fractions of New Interserve Shares will not be allotted or issued to personspursuant to the Scheme, fractional entitlements to New Interserve Shares willbe aggregated and sold in the market and the net proceeds of sale will bedistributed pro rata to persons entitled thereto. However, individualfractional entitlements to amounts of less than ‚£3 will not be paid to personswho would otherwise be entitled thereto under the Scheme but will be retainedfor the benefit of the Enlarged Interserve Group.It is currently expected that the following will happen in the order set outbelow immediately prior to the Scheme becoming Effective: - the Scheme Shares other than the Convertible Preference Shares will be subdivided and converted into two further new classes of shares in the capital of MacLellan; and - further Scheme Shares will be issued as Ordinary Shares to participants in the MacLellan Share Option Schemes who have exercised their options and awards under such schemes (see paragraph 14), and upon the Scheme becoming Effective: - the Scheme Shares other than certain Scheme Shares to the extent transferred under the Loan Note Alternative described in paragraph 9 below will be cancelled and in their place new ordinary shares of 5 pence each in the capital of MacLellan will be issued to Interserve (or its nominee(s)), whereupon MacLellan will become a wholly owned subsidiary of Interserve; and - the cash and/or New Interserve Shares and/or Loan Notes due to each MacLellan Shareholder pursuant to the Scheme will be paid or issued to such MacLellan Shareholder within 14 days of the Effective Date. The Scheme will be subject to the conditions and certain further terms set outin this paragraph, paragraphs 8 and 9 below and in Appendix I to thisannouncement and the full terms and conditions to be contained in the SchemeDocument and the related Form of Election.3. Background to and reasons for the Acquisition The board of Interserve believes that MacLellan represents an attractiveopportunity, consistent with Interserve's strategy to grow its business,particularly in the facilities management sector. The board of Interserve isconfident that Interserve will be able to integrate MacLellan successfully,especially in the light of the compatibility of MacLellan's operations andcomplementary fit with Interserve's existing outsourcing businesses.The board of Interserve believes that the Acquisition will assist with thedevelopment of Interserve's product offering, in particular enabling: - a material expansion of Interserve's outsourcing businesses, increasing the proportion of revenues from these activities from approximately 49 per cent.to approximately 58 per cent.; - a more even balance between the public and private sectors with non-public sector business increasing from approximately 30 per cent. to approximately 40 per cent. by revenue; - Interserve to leverage growth from an increasingly diverse customer base supported by a forward order book that is increased by approximately ‚£500 million to approximately ‚£5.3 billion. The Acquisition is expected to be earnings enhancing for Interserve in 2007,being the first full year following completion of the Acquisition.(1)The board of Interserve believes that MacLellan has attractive growthprospects, good visibility of forward revenues, a high quality customer basethat includes leading companies such as Sainsbury's, Tesco, PruPim and Mapeleyand that following the Acquisition it will provide the Enlarged InterserveGroup with potential to benefit from margin uplift by reducing overheads andimproving operational efficiency.The board of Interserve believes that there is a strong strategic andoperational fit between MacLellan and its existing facilities service business.The board of Interserve considers that the Acquisition will create value forInterserve Shareholders through the combination of two companies with a strongstrategic fit and complementary skills and market strengths, particularly infacilities management. The Enlarged Interserve Group will have a greater scaleand a broader range of skills and capabilities, strengthening its integratedservices offering across the UK facilities management market.Over recent years, Interserve's strategy has been focused on the development ofthe Interserve Group into one of Britain's leading facilities managementservices providers, a position which the Interserve board considers offers theInterserve Group attractive growth opportunities and good visibility ofearnings. Revenue (net of works bills) from its facilities management businesshas grown organically from ‚£278 million in 2002 to ‚£383 million in 2005,particularly through major contract wins in the defence, education and healthsectors such as the Army Training Estate, South East Regional Prime, Telford &Wrekin schools and Newcastle Hospitals.Growth in public sector outsourcing is expected to continue and the board ofInterserve considers that the Interserve Group is well placed to take advantageof this, as exemplified by the Interserve Group's recent success in securing aseven year contract to provide facilities management services to the LondonBorough of Croydon, with an anticipated contract value of ‚£60 million andrecent selection as Preferred Bidder for the ‚£100 million MoD Cyprus primeContract. This will be supplemented by the approximately ‚£100 million of publicsector order book of MacLellan.The board of Interserve believes that the breadth and depth of MacLellan'spenetration into the private sector through its long term customerrelationships and its ability to fulfil complex customer demands will enhancethe continuing development and success of the Enlarged Interserve Group bybuilding upon the approximately ‚£800 million Interserve private sector orderbook.Interserve's Industrial Services and Project Services divisions will continueto offer the Enlarged Interserve Group complementary opportunities in otherareas of the building and maintenance markets. Equipment Services is expectedto continue to contribute significant levels of earnings and to develop theEnlarged Interserve Group's international expansion.4. Integration plan for the combination of Interserve and MacLellan It is intended that MacLellan will be fully integrated into Interserve'smanagement and control systems. However, due to the complementary nature of thebusinesses, the board of Interserve anticipates that MacLellan will operatewithin the Enlarged Group alongside existing Interserve businesses with closeliaison with respect to cross selling and other revenue enhancingopportunities. Separate market-facing identity and branding will be retainedwhere this is held to have a recognisable value in its particular market.Interserve intends to carry out an operational review in the period followingthe Acquisition in order to identify opportunities for functional alignment andoverhead costs savings.Management and employeesIf the Acquisition becomes Effective, MacLellan's current Chief Executive, JohnFoley, and Finance Director, Stephen Shipley, will step down from themanagement of MacLellan but will assist the Enlarged Interserve Group with theintegration of the combined businesses for a period of three months followingthe Effective Date. The Chief Executive and Finance Director will becompensated under the terms of their existing contractual entitlements.The board of Interserve recognises the importance of the skills and experienceof the existing employees of MacLellan and believes that opportunities for themwill be enhanced in the event that the Acquisition becomes Effective.On the Acquisition becoming Effective, the accrued employment rights, includingpension rights, of all management and employees of the MacLellan Group will befully safeguarded. As part of these arrangements, an obligation to makepayments to senior management under the terms of a bonus scheme will betriggered. The aggregate amount of the payments under such bonus scheme willnot exceed ‚£1.5 million.5. Financial effects on Interserve The Acquisition is expected to be earnings enhancing for Interserve in 2007being the first full year following completion of the Acquisition.1The Acquisition is also expected to make a positive contribution to theEnlarged Interserve Group's cash flow, providing opportunities for investmentin growth in the businesses.6. Information on InterserveInterserve is a FTSE 250 support services group with turnover of more than ‚£1.22 billion and employing approximately 12,000 employees worldwide. Interservecreates, operates and maintains amenities and infrastructure for both thepublic and private sectors, including hospitals, schools, utilities andcommercial and industrial production facilities.7. Information on MacLellanMacLellan is a provider of integrated facilities and support services in the UKwith turnover of more than ‚£230 million and over 13,500 employees. MacLellanoffers customers integrated facilities services, technical services, health andsafety services, security services, office support services, cleaning servicesand catering services.MacLellan's strategy is to maximise its position in the market for outsourcedbusiness services. MacLellan seeks to establish long term managed servicescontracts with its customers and the broadening of its business base throughcontrolled diversification within its chosen market sectors.8. Mix and Match FacilityMacLellan Shareholders (other than certain Overseas Persons) will be entitledto elect, subject to availability, to vary the proportions in which theyreceive New Interserve Shares and cash and/or Loan Notes in respect of theirholdings of MacLellan Shares. However, the total number of New InterserveShares to be issued and the maximum aggregate amount of cash and/or Loan Notesto be paid under the Scheme will not be varied as a result of elections underthe Mix and Match Facility. Accordingly, satisfaction of elections made byMacLellan Shareholders under the Mix and Match Facility will depend on theextent to which other MacLellan Shareholders make offsetting elections.Satisfaction of elections under the Mix and Match Facility will be effected onthe basis of 382 pence in cash (being the Closing Price of an Interserve Shareon 28 April 2006, the last Business Day before this announcement) for each NewInterserve Share (and vice versa). To the extent that elections cannot besatisfied in full, they will be scaled down on a pro rata basis. As a result,MacLellan Shareholders who make an election under the Mix and Match Facilitywill not necessarily know the exact number of New Interserve Shares or theamount of cash (and/or Loan Notes) they will receive until settlement of theconsideration due to them in respect of the Acquisition.Elections under the Mix and Match Facility will not affect the entitlements ofthose MacLellan Shareholders who do not make any such elections.The Mix and Match Facility and the Loan Note Alternative are conditional uponthe Acquisition becoming Effective. Further details on the Mix and MatchFacility and the Loan Note Alternative will be included in the Scheme Documentand the related Form of Elections.9. Loan Note AlternativeThe MacLellan Shareholders, who are Scheme Shareholders, (other than certainOverseas Persons) will be entitled to elect to receive Loan Notes to be issuedby Interserve instead of some or all of the cash consideration to which theywould otherwise be entitled under the Scheme. The Loan Note Alternative isbeing made available on the basis of ‚£1 nominal value of Loan Notes for every ‚£1 of cash consideration and it will be available to those MacLellanShareholders who have elected, subject to availability, to vary the proportionsin which they receive new Interserve Shares and cash in respect of theirholdings of MacLellan Shares under the Mix and Match Facility.The Loan Notes, which will be governed by English law, will be unsecured andwill be issued, credited as fully paid, in amounts an integral multiples of ‚£1nominal value. All fractional entitlements to the Loan Notes will bedisregarded and not issued. No application will be made for the Loan Notes tobe issued or dealt in on any stock exchange and they will not be transferable.The Loan Notes will bear interest at 0.75 per cent. below sterling LIBOR for aperiod equal, or as nearly as possible equal, to the relevant interest period.Interest will be payable by half-yearly instalments in arrear (less any tax) on30 June and 31 December in each year. The first payment of interest will bemade on 31 December 2006. On that date, interest will be paid in respect of theperiod from (and including) the date of issue of the relevant Loan Notes to(but excluding) that date. The Loan Notes will be redeemable in whole or inpart for cash at the option of the noteholders on 30 June 2007 and subsequentlysemi-annually on 30 June and 31 December in each year. In certain circumstancesInterserve will have the right to redeem all of the Loan Notes. If notpreviously redeemed, the final redemption date will be the fifth anniversary ofthe date on which the Loan Notes are issued.No Loan Notes will be issued unless, on or before the Effective Date, validelections have been received in respect of at least ‚£2 million in nominal valueof Loan Notes. If insufficient elections are received, MacLellan Shareholderselecting for the Loan Note Alternative will instead receive cash in accordancewith the terms of the Scheme. If at any time after 30 June 2007 the outstandingnominal amount of Loan Notes equals or is less than ‚£200,000 then Interservewill be entitled to redeem all of the then outstanding Loan Notes.The Loan Note Alternative is conditional upon the Scheme becoming effective inaccordance with its terms. The Loan Notes are not being offered in the UnitedStates, Canada, Australia, Japan or any other jurisdiction where the sale,issue or transfer of the Loan Notes would be a contravention of applicable law.In the case of the Loan Note Alternative, if the Scheme becomes Effective, theTransfer Shares will be cancelled or, if appropriate, transferred to Interserveand/or its nominee(s) fully paid and free from all liens, charges, equitableinterests, encumbrances, rights of pre-emption and other rights or interests ofany nature whatsoever and together with all rights then and thereafterattaching thereto, including voting rights and the right to receive and retainin full all dividends and other distributions (if any) declared on or after thedate of this announcement.10. FinancingInterserve has arranged new debt financing facilities to finance theAcquisition and the working capital needs of the Enlarged Interserve Group.11. Implementation Deed and Inducement Fee ArrangementsInterserve and MacLellan have entered into the Implementation Deed whichgoverns their relationship during the period until the Acquisition becomesEffective or lapses. Amongst other things, the parties have agreed toco-operate with regard to the process of implementing the Acquisition. TheImplementation Deed will terminate (without prejudice to any obligation onMacLellan to pay the break fee (see below)) in certain circumstances, includingif the Acquisition lapses or if the Scheme or the Acquisition is not approvedat the Scheme Meeting(s) or the Interserve Extraordinary General Meeting or theMacLellan Extraordinary General Meeting (as appropriate).The Implementation Deed also provides for MacLellan to pay Interserve a breakfee (inclusive of value added tax) of an amount equal to 1 per cent. of thevalue of MacLellan calculated by reference to the terms of the Acquisition asat the date of this announcement in certain circumstances including if (i) athird party announces that it is considering making a Competing Proposal beforethe Acquisition lapses or is withdrawn and thereafter such or any otherCompeting Proposal completes or becomes effective or is declared unconditionalin all respects; or (ii) if the MacLellan Board at any time withdraws oradversely modifies or qualifies its unanimous recommendation of the Acquisitionor determines not to implement the Acquisition and the Scheme does notsubsequently become Effective in accordance with its terms; or (iii) theAcquisition is not approved at the Scheme Meeting(s) or the MacLellanExtraordinary General Meeting.12. The New Interserve SharesThe New Interserve Shares to be issued pursuant to the Acquisition will beordinary shares of 10 pence each in the capital of Interserve. The NewInterserve Shares will be issued credited as fully paid and will rank paripassu in all respects with the existing Interserve Shares except that they willnot be entitled to Interserve's proposed final dividend of 10.1 pence per sharefor the year ended 31 December 2005. The New Interserve Shares will be issuedin registered form and will be capable of being held in both certificated anduncertificated form.13. Dividend PolicyFollowing the Acquisition becoming Effective, Interserve intends to maintainits existing dividend policy of delivering real increases in the annual payoutwhilst seeking to strengthen both cash and earnings cover.14. MacLellan Share Option SchemesThe Acquisition will, as described in paragraph 2 above, extend to allMacLellan Shares issued or unconditionally allotted upon the exercise ofoptions under the MacLellan Share Option Schemes before the Scheme becomesEffective. An offer will be made in due course to participants in the MacLellanShare Option Schemes to include a cash cancellation offer comprising 116 penceless the relevant exercise price for every option share. Implementation of theScheme will require amendment of MacLellan's articles of association asdescribed in paragraph 18 of this announcement.15. PensionsInterserve has a net pensions deficit assessed at ‚£132.6m under IAS 19 as at 31December 2005. Interserve is currently in discussions with the trustee to thepension scheme to determine the triennial valuation as at the same date. Basedon the outcome of this valuation, the level of cash contributions made into thescheme will be reassessed and are likely to increase. The board of Interserveanticipates that this process will be concluded in time for the announcement ofinterim results in September 2006.The provision of retirement benefits within MacLellan is substantially throughdefined contribution arrangements. MacLellan had a net scheme liability on itsdefined benefit scheme of ‚£25,000 as measured under FRS17 as at 31 December2005.16. Disclosure of interests in MacLellanSave for the arrangements with MacLellan Shareholders and the ConvertiblePreference Shareholder in relation to the irrevocable undertakings and letterof intent summarised in paragraph 19 below, neither Interserve, nor any memberof the Interserve board nor their close relatives and related trusts, nor, sofar as the board of Interserve is aware, any party acting in concert withInterserve, owns or controls or is interested in any MacLellan Shares orConvertible Preference Shares or any securities convertible or exchangeableinto MacLellan Shares or Convertible Preference Shares or options to purchase(including traded options) in respect of, or derivatives referenced to anyMacLellan Shares or Convertible Preference Shares ("MacLellan Securities"), orhas any arrangements in relation to any MacLellan Securities, or has enteredinto any derivative referenced to MacLellan Shares or Convertible PreferenceShares which remains outstanding. For this purpose, "arrangements" include anindemnity or option arrangement or an agreement or understanding, whetherformal or informal, of whatever nature relating to MacLellan Shares orConvertible Preference Shares which is or may be an inducement to one or morepersons to deal or refrain from dealing in MacLellan Securities.It has not been possible, by the date of the announcement, to ascertain theinterests in MacLellan Shares (if any) of all of Interserve's concert parties.Further enquiries will be completed prior to publication of the SchemeDocument. If such enquiries reveal any such interests, they will be included inthe Scheme Document or announced earlier if required by the Panel.17. Settlement, listing and dealing of New Interserve SharesApplication will be made to the London Stock Exchange for the New InterserveShares to be admitted to trading on its market for listed securities and to theUK Listing Authority for the New Interserve Shares to be admitted to theOfficial List. It is expected that listing will become effective and thatdealings for normal settlement in the New Interserve Shares will commence onthe date on which the Scheme becomes Effective.Certificates for New Interserve Shares to be issued to MacLellan Shareholderswill be despatched no later than 14 days after the date on which the Schemebecomes Effective. No certificates for New Interserve Shares will be issued inrespect of the entitlements of those MacLellan Shareholders who hold theirshares in CREST, settlement for which will be made through the applicable CRESTprocedures.Further details on listing, dealing and settlement will be included in theScheme Document.18. Implementation of the Scheme and cancellation of listingIt is currently intended that the Acquisition will be effected by means of ascheme of arrangement between MacLellan and Scheme Shareholders under section425 of the Companies Act. The procedure involves an application by MacLellan tothe Court to sanction the Scheme and confirm the cancellation of all theexisting Scheme Shares (other than any MacLellan Shares and ConvertiblePreference Shares already beneficially held by the Interserve Group (if any))and other than the Transfer Shares to the extent (if at all) transferred toInterserve rather than cancelled pursuant to the Scheme. In consideration forthe cancellation of their MacLellan Shares, MacLellan Shareholders, who areScheme Shareholders, will receive cash and New Interserve Shares as outlined inparagraph 2 above and the Convertible Preference Shareholder will receive cashas outlined in paragraph 2 above. Following the Scheme becoming Effective,MacLellan will become a wholly-owned subsidiary of Interserve.The Scheme will be subject, among other things, to the Conditions set out inAppendix I to this announcement, including approval by MacLellan Shareholdersby the passing of a resolution at a meeting of the MacLellan Shareholdersconvened by the order of the Court pursuant to section 425 of the Companies Actto consider and, if thought fit, approve the Scheme with or without anymodification thereof (and any adjournment thereof). This resolution must beapproved by a majority in number of the holders of MacLellan Shares (other thanmembers of the Interserve Group, if relevant) present and voting, either inperson or by proxy, at the Scheme Meeting(s) representing not less thanthree-fourths in value of the MacLellan Shares held by such holders. The Schememust also be sanctioned by the Court and the associated Capital Reduction mustbe confirmed by the Court, in each case at the relevant Court Hearings.Pursuant to the articles of association of MacLellan, the Scheme will also besubject to approval by the holder(s) of the Convertible Preference Shares, andsuch approval will be sought by asking the holder(s) of the ConvertiblePreference Shares either to pass an extraordinary resolution approving theScheme at a meeting of the holders of the Convertible Preference Shares or togive written consent to the Scheme (in the latter scenario, the consent inwriting of holder(s) of not less than three-quarters of the issued ConvertiblePreference Shares would be required). If so directed by the Court, the consentof the holders of the Convertible Preference Shares to the Scheme may also berequired at a court-convened meeting of the holder(s) of the ConvertiblePreference Shares.In addition, the implementation of the Scheme will require separate approval bythe passing of a special resolution at the MacLellan Extraordinary GeneralMeeting, amongst other things, to: - approve the Scheme and to authorise the MacLellan Directors to take such action as they consider necessary or appropriate to effect the Scheme; - reclassify and subsequently cancel any existing MacLellan Shares (other than the Transfer Shares to the extent (if at all) to be transferred to Interserve rather than cancelled and MacLellan Shares already held by Interserve (if any)) and other than the Transfer Shares (if any) and approve the issue of new shares of 5 pence each in MacLellan to Interserve (and/or its nominee(s)) in accordance with the Scheme; and - amend the MacLellan articles of association to ensure that the MacLellan Shares issued under the MacLellan Share Option Schemes will be subject to the Scheme or, if issued following the Scheme Record Time, will be automatically transferred to Interserve on the same terms as under the Scheme. The MacLellan Extraordinary General Meeting will be held directly after theScheme Meeting(s)If the Scheme becomes Effective, it will be binding on all Scheme Shareholdersirrespective of whether or not they attend or vote in favour of the Scheme atthe Scheme Meeting(s) or in favour of the special resolution to be proposed atthe MacLellan Extraordinary General Meeting. Prior to the Scheme becomingEffective, Interserve intends to apply to delist the MacLellan Shares from theAIM and to cancel trading on the London Stock Exchange's market for AIM listedsecurities. This will take effect on the Effective Date.The anticipated timetable for implementing the Scheme will be set out in theScheme Document.19. Irrevocable undertakingsMacLellan Directors who also hold Scheme Shares have irrevocably undertaken tovote such Scheme Shares (in aggregate, 926,307 MacLellan Shares, representingapproximately 0.93 per cent. of the existing issued ordinary share capital ofMacLellan) in favour of the Acquisition and the Scheme at the Scheme Meeting(s)and the MacLellan Extraordinary General Meeting. Such MacLellan Directors havealso undertaken that, if following this announcement, Interserve decides toimplement the Acquisition by means of a takeover offer instead of by way of theScheme, that such MacLellan Directors shall accept such takeover offer inrespect of their Scheme Shares.Irrevocable undertakings to vote in favour of the Scheme at the Scheme Meeting(s) and the MacLellan Extraordinary General Meeting have also been receivedfrom AXA Framlington Investment Management Limited in respect of 6,748,734MacLellan Shares.Accordingly, Interserve has received irrevocable undertakings on the terms setout above in respect of, in aggregate, 7,675,041 MacLellan Shares, representingapproximately 7.7 per cent. of MacLellan's existing ordinary issued sharecapital.Letters of intent indicating an intention to vote in favour of the Scheme andthe Acquisition at the Scheme Meeting(s) have been received from Morley FundManagement Limited in respect of approximately 8,169,299 MacLellan Shares andCanada Life Limited in respect of approximately 4,098,333 MacLellan Sharestogether representing approximately 12.3 per cent. of MacLellan's existingordinary issued share capital.Accordingly, irrevocable undertakings to vote in favour of the Acquisition andletters of intent indicating an intention to vote in favour of the Acquisitionat the Scheme Meeting(s) and the MacLellan Extraordinary General Meeting havebeen received in respect of 19,942,673 MacLellan Shares representingapproximately 20.0 per cent. of MacLellan's existing ordinary issued sharecapital.In addition, a letter of intent indicating an intention to vote in favour ofthe Scheme and the Acquisition at the Scheme Meeting(s) has been received fromthe Convertible Preference Shareholder in respect of the Convertible PreferenceShares.The irrevocable undertaking received from AXA Framlington Investment ManagementLimited will lapse if a third party announces its firm intention to make acompeting offer and the value of that competing offer is deemed to be more than121 pence for every MacLellan Share.20. The recommendationThe MacLellan Directors, who have been so advised by Investec, consider theterms of the Acquisition to be fair and reasonable. In providing its advice tothe MacLellan Directors, Investec has taken into account the commercialassessments of the MacLellan Directors.Accordingly, the MacLellan Directors intend to unanimously recommend that theMacLellan Shareholders and, if applicable, the Convertible PreferenceShareholder, vote in favour of the resolutions to be proposed at the SchemeMeeting(s) and the MacLellan Extraordinary General Meeting, as they haveirrevocably undertaken to do in respect of their own respective beneficialholdings, amounting, in aggregate, to 926,307 MacLellan Shares, representingapproximately 0.93 per cent. of MacLellan's existing issued ordinary sharecapital.21. Interserve Shareholder ApprovalThe Acquisition constitutes a Class 1 transaction (as defined in the ListingRules of the UKLA) for Interserve. Accordingly, Interserve will be required toseek the approval of its shareholders for the Acquisition at the InterserveExtraordinary General Meeting. Interserve will prepare and send to itsshareholders, as soon as is reasonably practicable, an explanatory circularsummarising the background to and reasons for the Acquisition (which willinclude a notice convening the Interserve Extraordinary General Meeting). TheAcquisition will be conditional on, amongst other things, the requisiteresolution being passed by the Interserve Shareholders at the InterserveExtraordinary General Meeting.22. Overseas ShareholdersThe availability of New Interserve Shares and the Loan Note Alternative underthe terms of the Acquisition to persons not resident in the United Kingdom maybe affected by the laws of the relevant jurisdiction. Such persons shouldinform themselves about and observe any applicable requirements. Furtherdetails in relation to Overseas Persons who are MacLellan Shareholders will becontained in the Scheme Document. The Loan Notes are not being offered in theUnited States, Canada, Australia or Japan or any other jurisdiction where thesale, issue or transfer of the Loan Notes shall be a contravention ofapplicable law.23. GeneralThe formal documentation setting out the details of the Acquisition, includingthe Scheme Document setting out the procedures to be followed to approve theScheme, with the forms of proxy for use in connection with the Scheme Meeting(s) and the MacLellan Extraordinary General Meeting and the forms of electionunder which MacLellan Shareholders can elect for varying proportions of cashand New Interserve Shares under the Mix and Match Facility and can opt for theLoan Note Alternative will be posted to MacLellan Shareholders and theConvertible Preference Shareholder and, for information only, to participantsin the MacLellan Share Option Schemes (in each case other than to persons withaddresses in Restricted Territories) as soon as is reasonably practicable and,in any event within 28 days of the date of this announcement (or such laterdate as Interserve and MacLellan may, with the consent of the Panel, agree).The Scheme Document will include full details of the Scheme, together withnotices of the Scheme Meeting(s) and the MacLellan Extraordinary GeneralMeeting and the expected timetable, and will specify the necessary action to betaken by the Scheme Shareholders.The sources and bases of information set out in this announcement are containedin Appendix II. The definitions of certain expressions used in thisannouncement are contained in Appendix III.In accordance with Rule 2.10 of the City Code, as at 28 April 2006 (being thelast Business Day before this announcement), 99,803,624 MacLellan Shares werein issue. The International Securities Identification Number for MacLellanShares is GB0004783519. In addition, as at 28 April 2006 (being the lastBusiness Day before this announcement), 114,231,032 Interserve Shares were inissue. The International Securities Identification Number for Interserve Sharesis GB0001528156.- ends -Enquiries:Interserve plc +44 (0)11 8932 0123Adrian Ringrose, Chief Executive, Tim Jones, Finance Director, Giles Scott,Head of Corporate CommunicationsJPMorgan Cazenove +44 (0)20 7588 2828Patrick Magee, Angus AllenThe Maitland Consultancy +44 (0)20 379 5151Neil Bennett (+44 (0)7900 000 777), Liz Morley (+44 (0)7798 683 108)MacLellan Group plc +44 (0)1905 744 400John Foley, Stephen ShipleyInvestec +44 (0)20 7597 5970David Currie, Rupert KreftingNotes to editors:ANALYSTS: A presentation to investors and analysts will take place at 10.00 am(BST) at JPMorgan Cazenove, 20 Moorgate, London EC2R 6DA. There will be a liveteleconference link to the investor and analyst meeting on 0845 146 2116 or +44(0)1452 584 160 . The presentation slides will also be available onInterserve's website, www.interserveplc.co.uk.This announcement does not constitute an offer to sell or 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.Note:1 A statement that the Acquisition will be earnings enhancing in 2007 does notconstitute a profit forecast and should not be interpreted to mean thatearnings for 2007 or any subsequent financial period would necessarily match orbe greater than those for any preceding financial period. Earnings meansearnings per share calculated by reference to Interserve's Group profit, net oftax and minorities but before amortisation of intangible assets.This announcement does not constitute an offer to sell or 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 release, publication or distribution of this announcement in certainjurisdictions may be restricted by law. The availability of the New InterserveShares and the Mix and Match Facility and the Loan Note Alternative under theterms of the Scheme (or, if the offer is implemented by way of a takeoveroffer, of that offer), if made, to persons not resident in the United Kingdommay be affected by the laws of the relevant jurisdictions in which they arelocated. Persons who are not resident in the United Kingdom or who are subjectto other jurisdictions should inform themselves of, and observe, any applicablerequirements. Further details in relation to Overseas Persons who are MacLellanShareholders will be contained in the Scheme Document.If the Acquisition is carried out by way of a takeover offer, it will not bemade, directly or indirectly, in, into or from, or by the use of mails or anymeans of instrumentality (including, without limitation, telephonically orelectronically) of interstate or foreign commerce of, or any facility of anational, state or other securities exchange of, nor will it be made in, intoor from, the US, Australia, Canada or Japan. Accordingly, copies of thisannouncement and all documents relating to the takeover offer will not be, andmust not be, directly or indirectly, mailed or otherwise forwarded, distributedor sent in, into or from, the US, Australia, Canada or Japan and such takeoveroffer will not be capable of acceptance by any such use, instrumentality orfacility within the US, Australia, Canada or Japan and persons receiving thisannouncement or any formal documentation (including custodians, nominees andtrustees) must not mail or otherwise forward, distribute or send it in, into orfrom, the US, Australia, Canada or Japan. Doing so may render invalid anypurported acceptance of the takeover offer. All MacLellan Shareholders or otherpersons (including nominees, trustees or custodians) who would or otherwiseintend to or may have a contractual or legal obligation to forward thisannouncement or any formal documentation relating to the Acquisition to anyjurisdiction outside the United Kingdom should refrain from doing so and seekappropriate professional advice before taking any such actions.Whether or not a MacLellan Shareholder's MacLellan Shares are voted at theScheme Meeting(s), or the MacLellan Extraordinary General Meeting, if theScheme becomes Effective those MacLellan Shares will, subject to the Mix andMatch Facility, the Loan Note Alternative (and the terms and conditions set outin this announcement) receive 0.0943 Interserve Shares valued at approximately36 pence (based on the Closing Price of an Interserve Share immediately priorto this announcement and 80 pence in cash.) MacLellan and Interserve urgeMacLellan Shareholders to read the Scheme Document when it becomes availablebecause it will contain important information relating to the Acquisition.The availability of Business Asset Taper Relief and Non-Business Asset TaperRelief on a subsequent disposal of New Interserve Shares will depend on thecircumstances of each shareholder. Generally however, it is easier to satisfythe conditions to obtain Business Asset Taper Relief for companies that arequoted on AIM as opposed to those with a full listing on the London StockExchange. Accordingly, individuals may find they obtain lower rates of taperrelief on holdings of New Interserve Shares than they presently do for existingholdings of MacLellan Shares.This announcement is not an offer of securities for sale in the US and the NewInterserve Shares have not been, and will not be, registered under the USSecurities Act or under the securities laws of any state, district or otherjurisdiction of the US, Australia, Canada or Japan and no regulatory clearancein respect of the New Interserve Shares has been, or will be, applied for inany jurisdiction other than the UK. Accordingly, unless an exemption under theUS Securities Act or other relevant securities laws is applicable, the NewInterserve Shares are not being, and may not be, offered, sold, resold,delivered or distributed, directly or indirectly, in or into the US, Australia,Canada or Japan or to, or for the account or benefit of, any US person or anyperson resident in Australia, Canada or Japan.JPMorgan Cazenove, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting exclusively for Interserve and noone else in connection with the Acquisition and will not be responsible toanyone other than Interserve for providing the protections afforded to clientsof JPMorgan Cazenove or for providing advice in relation to the Acquisition,the contents of this announcement, or any matter referred to herein.Investec, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for MacLellan and no oneelse in connection with the Acquisition and will not be responsible to anyoneother than MacLellan for providing the protections afforded to clients ofInvestec or for providing advice in relation to the Acquisition, the contentsof this Announcement or any matter referred to herein.Dealing Disclosure RequirementsUnder the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the"Code"), if any person is, or becomes, "interested" (directly or indirectly) in1% or more of any class of "relevant securities" of Interserve or of MacLellan,all "dealings" in any "relevant securities" of that company (including by meansof an option in respect of, or a derivative referenced to, any such "relevantsecurities") must be publicly disclosed by no later than 3.30 pm (London time)on the London business day following the date of the relevant transaction. Thisrequirement will continue until the date on which the offer becomes, or isdeclared, unconditional as to acceptances, lapses or is otherwise withdrawn oron which the "offer period" otherwise ends. If two or more persons act togetherpursuant to an agreement or understanding, whether formal or informal, toacquire an "interest" in "relevant securities" of Interserve or of MacLellan,they will be deemed to be a single person for the purpose of Rule 8.3.Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Interserve or of MacLellanby Interserve or of MacLellan, or byany of their respective "associates", must be disclosed by no later than 12.00noon (London time) on the London business day following the date of therelevant transaction.A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securitiesin issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk."Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities.Terms in quotation marks are defined in the Code, which can also be found onthe Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel.Forward Looking StatementsThis announcement contains statements about Interserve and MacLellan that areor may be forward looking statements. All statements other than statements ofhistorical facts included in this announcement may be forward lookingstatements. Without limitation, any statements preceded or followed by or thatinclude the words "targets", "plans" "believes", "considers", "expects","aims"," intends", "will", "may", "anticipates", "estimates", "projects" or,words or terms of similar substance or the negative thereof, are forwardlooking statements. Forward looking statements include statements relating tothe following: (i) future capital expenditures, expenses, revenues, earnings,synergies, economic performance, indebtedness, financial condition, dividendpolicy, losses and future prospects; (ii) business and management strategiesand the expansion and growth of Interserve's or MacLellan's operations andpotential synergies resulting from the Acquisition; and (iii) the effects ofgovernment regulation on Interserve's or MacLellan's business.Such forward looking statements involve risks and uncertainties that couldsignificantly affect expected results and are based on certain key assumptions.Many factors could cause actual results to differ materially from thoseprojected or implied in any forward looking statements. Due to suchuncertainties and risks, readers are cautioned not to place undue reliance onsuch forward looking statements, which speak only as of the date hereof.Interserve and MacLellan disclaim any obligation to update any forward lookingor other statements contained herein, except as required by applicable law.APPENDIX ICONDITIONS AND CERTAIN FURTHER TERMS OF THE ACQUISITIONThe Acquisition will be conditional upon the Scheme becoming unconditional andeffective by a date falling 120 days after the date on which the SchemeDocument is posted or such later date as Interserve and MacLellan may agree and(if required) the Court may allow.Part A: Conditions of the AcquisitionThe Acquisition will be subject to the following conditions:a. its approval by a majority in number representing not less than three-fourths in value of the holders of MacLellan Shares who are on the register of members of MacLellan at the Scheme Voting Record Time, present and voting, whether in person or by proxy, at the Scheme Meeting(s) (or any adjournment thereof); b. the approval of the Scheme by the holder(s) of the Convertible Preference Shares pursuant to the articles of association of MacLellan by means of an extraordinary resolution passed at a meeting of the holder(s) of the Convertible Preference Shares (or any adjournment thereof) or a written resolution signed by the holders of not less than three-quarters of the issued Convertible Preference Shares and, if required by the Court, the approval of the Scheme by the holder(s) of the Convertible Preference Shares at a court-convened meeting of the holder(s) of the Convertible Preference Shares (or any adjournment thereof); c. the special resolution required to approve and implement the Scheme being passed at the MacLellan Extraordinary General Meeting (or any adjournment thereof); d. the sanction (with or without modification (but subject to such modification being acceptable to Interserve and MacLellan)) of the Scheme and the confirmation of the Capital Reduction by the Court, an office copy of the Court Order and of the Minute being delivered for registration to the Registrar of Companies and registration of the Court Order confirming the Capital Reduction and of the Minute with the Registrar of Companies; e. the Admission of the New Interserve Shares becoming Effective or if Interserve and MacLellan so determine and (subject to the consent of the Panel) the UKLA agreeing to admit such shares to the Official List and the London Stock Exchange agreeing to admit such shares to trading subject only to (i) the allotment of such shares and/or (ii) the Scheme becoming Effective; f. the passing at the Interserve Extraordinary General Meeting (or at any adjournment of such a meeting) of such resolution or resolutions as may be necessary or desirable to approve, effect and implement the Acquisition and the acquisition of MacLellan Shares pursuant to the Acquisition or otherwise (as such resolutions may be set out in the Interserve Shareholder Circular, including a resolution or resolutions to increase the share capital of Interserve and authorise the creation and allotment of New Interserve Shares), the making of any offer, proposal or other arrangement to holders of options under the MacLellan Share Option Schemes and any necessary increases of the authorised share capital of Interserve and allotment and issue of Interserve Shares; g. save as fairly disclosed in writing by MacLellan to Interserve, there being no provision of any agreement, arrangement, licence, permit or other instrument to which any member of the wider MacLellan Group is a party or by or to which any such member or any of its assets may be bound, entitled or subject, which in consequence of the Acquisition or the proposed acquisition of any shares or other securities in MacLellan by the Interserve Group or because of a change in the control or management of MacLellan or otherwise, could or might reasonably be expected to result (in each case to an extent which would be material in the context of the wider MacLellan Group as a whole) in: (i) any moneys borrowed by or any other indebtedness (actual or contingent) of, or grant available to any such member, being or becoming repayable or capable of being declared repayable immediately or earlier than their or its stated maturity date or repayment date or the ability of any such member to borrow moneys or incur any indebtedness being withdrawn or inhibited or being capable of becoming or being withdrawn or inhibited;(ii) any such agreement, arrangement, licence, permit or instrument or the rights, liabilities, obligations or interests of any such member thereunder being terminated or modified or affected or any obligation or liability arising or any action being taken thereunder;(iii) any assets or interests of any such member being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged otherwise than in the ordinary course of business;(iv) the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any such member;(v) the rights, liabilities, obligations or interests of any such member in, or the business of any such member with, any person, firm or body (or any arrangement or arrangements relating to any such interest or business) being terminated, adversely modified or affected;(vi) the value of any such member or its financial or trading position or prospects being prejudiced or adversely affected;(vii) any such member ceasing to be able to carry on business under any name under which it presently does so; or(viii) the creation of any liability, actual or contingent, by any such member,and no event having occurred which, under any provision of any agreement,arrangement, licence, permit or other instrument to which any member of thewider MacLellan Group is a party or by or to which any such member or any ofits assets may be bound, entitled or subject, which would result or wouldreasonably be expected to result in any of the events or circumstances as arereferred to in sub-paragraphs (i) to (viii) of this condition (g) (in each caseto an extent which would be material in the context of the wider MacLellanGroup as a whole);h. no government or governmental, quasi-governmental, supranational, statutory, regulatory, environmental body, court or trade association in any jurisdiction or any other person or body in any jurisdiction (each a Third Party) having decided to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference, or enacted, made or proposed any statute, regulation, decision or order, or having taken any other steps which would or might reasonably be expected to: (i) require, prevent or delay the divestiture, or alter the terms envisaged for any proposed divestiture by any member of the wider Interserve Group or any member of the wider MacLellan Group of all or any portion of their respective businesses, assets or property or impose any material limitation on the ability of any of them to conduct their respective businesses (or any of them) or to own any of their respective assets or properties or any material part thereof, where this would have a material effect in the context of the wider MacLellan Group as a whole;(ii) require, prevent or materially delay the divestiture by any member of the wider Interserve Group of any shares or other securities in MacLellan; (iii) impose any limitation on, or result in a material delay in, the ability of any member of the wider Interserve Group directly or indirectly to acquire or to hold or to exercise effectively any rights of ownership in respect of shares or loans or securities convertible into shares or any other securities (or the equivalent) in any member of the wider MacLellan Group or the wider Interserve Group or to exercise management control over any such member;(iv) otherwise adversely affect the business, assets, profits or prospects of any member of the wider Interserve Group or of any member of the wider MacLellan Group to an extent which would be material in the context of the wider MacLellan Group as a whole;(v) make the Acquisition or its implementation or the acquisition or proposed acquisition by Interserve or any member of the wider Interserve Group of any shares or other securities in, or control of MacLellan void, illegal, and/or unenforceable under the laws of any jurisdiction, or otherwise, directly or indirectly, restrain, restrict, prohibit, delay or otherwise materially interfere with the same, or impose additional conditions or obligations with respect thereto, or otherwise challenge or materially interfere therewith;(vi) require any member of the wider Interserve Group or the wider MacLellan Group to offer to acquire any shares or other securities (or the equivalent) or interest in any member of the wider MacLellan Group or the wider Interserve Group owned by any Third Party;(vii) impose any material limitation on the ability of any member of the wider MacLellan Group to co-ordinate its business, or any part of it, with the businesses of any other members; or(viii) result in any member of the wider MacLellan Group ceasing to be able to carry on business under any name under which it presently does so,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 Acquisition or proposed acquisition of anyMacLellan Shares having expired, lapsed or been terminated;i. all necessary filings or applications having been made in connection with the Acquisition and all statutory or regulatory obligations in any jurisdiction having been complied with in connection with the Acquisition or the acquisition by any member of the wider Interserve Group of any shares or other securities in, or control of, MacLellan and all authorisations, orders, recognitions, grants, consents, licences, confirmations, clearances, permissions and approvals (collectively Consents) reasonably necessary or for or in respect of the Acquisition or the proposed acquisition of any shares or other securities in, or control of, MacLellan by any member of the wider Interserve Group having been obtained in terms and in a form reasonably satisfactory to Interserve from all appropriate Third Parties or persons with whom any member of the wider MacLellan Group has entered into contractual arrangements and all such Consents together with all material Consents necessary to carry on the business of any member of the wider MacLellan Group remaining in full force and effect and all filings necessary for such purpose have been made and there being no notice or intimation of any intention to revoke or not to renew any of the same at the time at which the Acquisition becomes Effective and all necessary statutory or regulatory obligations in any jurisdiction having been complied with in all material respects; j. except as disclosed in the MacLellan Annual Report and Accounts or as otherwise publicly announced by MacLellan (by the delivery of an announcement to a Regulatory Information Service as specified by the Listing Rules) prior to 28 April 2006, no member of the wider MacLellan Group having, since 31 December 2005: (i) save as between MacLellan and wholly-owned subsidiaries of MacLellan or for MacLellan Shares issued pursuant to the exercise of options granted under the MacLellan Share Option Schemes, issued, authorised or proposed the issue of additional shares of any class;(ii) save as between MacLellan and wholly-owned subsidiaries of MacLellan or for the grant of options under the MacLellan Share Option Schemes, issued or agreed to issue, authorised or proposed the issue of securities convertible into shares of any class or rights, warrants or options to subscribe for, or acquire, any such shares or convertible securities;(iii) other than to another member of the MacLellan Group, recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus in respect of shares, dividend or other distribution whether payable in cash or otherwise, save for the declaration and payment of the proposed MacLellan final dividend of 1.25 pence per share for the year ended 31 December 2005 which was expected to be paid on 3 July 2006 provided that in the event that any dividend is declared or paid by MacLellan after the date of this announcement and Interserve proceeds with the Acquisition the cash element of the consideration payable by Interserve shall be reduced by an equivalent amount;(iv) save for intra-MacLellan Group transactions, merged or demerged with any body corporate or acquired or disposed of or transferred, mortgaged or charged or created any security interest over any assets or any right, title or interest in any asset (including shares and trade investments) or authorised or proposed or announced any intention to propose any merger, demerger, acquisition or disposal, transfer, mortgage, charge or security interest, in each case, other than in the ordinary course of business;(v) save for intra-MacLellan Group transactions, made or authorised or proposed or announced an intention to propose any change in its loan capital;(vi) issued, authorised or proposed the issue of any debentures or (save for intra-MacLellan Group transactions), save in the ordinary course of business, incurred or increased any indebtedness or become subject to any contingent liability;(vii) purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or reduced or, save in respect to the matters mentioned in sub-paragraph (i) above, made any other change to any part of its share capital;(viii) implemented, or authorised, proposed or announced its intention to implement, any reconstruction, amalgamation, scheme, commitment or other transaction or arrangement otherwise than in the ordinary course of business or entered into or changed the terms of any contract with any director or senior executive to the extent not fairly disclosed in writing to the Interserve Group prior to 28 April 2006;(ix) entered into or varied or authorised, proposed or announced its intention to enter into or vary any contract, transaction or commitment (whether in respect of capital expenditure or otherwise) which is of a long term, onerous or unusual nature or magnitude or which is or would be reasonably likely to be materially restrictive on the businesses of any member of the Enlarged Interserve Group or which involves or could involve an obligation of such a nature or magnitude or which is other than in the ordinary course of business and in each such case is material in the context of the wider MacLellan Group;(x) (other than in respect of a member which is dormant and was solvent at the relevant time) taken any corporate action or had any legal proceedings started or threatened against it (and which in each such case is or are still extant) for its winding-up, dissolution or reorganisation or for the appointment of a receiver, administrative receiver, administrator, trustee or similar officer of all or any of its assets or revenues or any analogous proceedings in any jurisdiction or had any such person appointed;(xi) entered into any contract, transaction or arrangement which would be restrictive on the business of any member of the wider MacLellan Group or the Enlarged Interserve Group, to an extent which is material in the context of the wider MacLellan Group other than to a nature and extent which is normal in the context of the business concerned;(xii) waived or compromised any claim which is material in the context of the wider MacLellan Group otherwise than in the ordinary course of business; or(xiii) entered into any contract, commitment, arrangement or agreement otherwise than in the ordinary course of business which is material in the context of the wider MacLellan Group or passed any resolution or made any offer (which remains open for acceptance) with respect to or announced any intention to, or to propose to, effect any of the transactions, matters or events referred to in this condition (j), k. since 31 December 2005 and save as disclosed in the MacLellan Annual Report and Accounts or as otherwise publicly announced by MacLellan (by the delivery of an announcement to a Regulatory Information Service as specified in the Listing Rules) prior to 28 April 2006: (i) no material adverse change or deterioration having occurred in the business, assets, financial or trading position or profits or prospects of any member of the wider MacLellan Group taken as a whole which is materially adverse in the context of the wider MacLellan Group;(ii) no litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the wider MacLellan Group is or may become a party (whether as a plaintiff, defendant or otherwise) and no investigation by any Third Party against or in respect of any member of the wider MacLellan Group having been instituted announced or threatened by or against or remaining outstanding in respect of any member of the wider MacLellan Group which in any such case would be reasonably expected to have a material adverse effect on the wider MacLellan Group as a whole;(iii) no contingent or other liability having arisen which would be likely to materially adversely affect the wider MacLellan Group; and(iv) no steps having been taken which are likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the wider MacLellan Group which is necessary for the proper carrying on of its business where the effect would be materially adverse to the wider MacLellan Group;(l) save as disclosed in the MacLellan Annual Report and Accounts or as otherwise publicly announced by MacLellan (by the delivery of an announcement to a Regulatory Information Service as specified in the Listing Rules) prior to 28 April 2006 or as otherwise fairly disclosed in writing to Interserve by MacLellan prior to 28 April 2006, Interserve not having discovered: (i) that any financial, business or other information concerning the wider MacLellan Group as contained in the information publicly disclosed at any time by or on behalf of any member of the wider MacLellan Group prior to 28 April 2006 is materially misleading, contains a material misrepresentation of fact or omits to state a fact necessary to make that information not materially misleading; or(ii) that any member of the wider MacLellan Group partnership, company or other entity in which any member of the wider MacLellan Group has a significant economic interest and which is not a subsidiary undertaking of MacLellan is subject to any liability (contingent or otherwise) which is material in the context of the wider MacLellan Group; or(iii) any information which affects the import of any information disclosed at any time by or on behalf of any member of the wider MacLellan Group to an extent which is material in the context of the wider MacLellan Group; andm. Interserve not having discovered that: (i) any past or present member of the wider MacLellan Group has failed to comply with any and/or all applicable legislation or regulation, of any jurisdiction with regard to the disposal, spillage, release, discharge, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health or animal health or otherwise relating to environment matters, or that there has otherwise been any such disposal, spillage, release, discharge, leak or emission (whether or not the same constituted a non-compliance by any person with any such legislation or regulations, and wherever the same may have taken place) any of which disposal, spillage, release, discharge, leak or emission would be likely to give rise to any liability (actual or contingent) on the part of any member of the wider MacLellan Group to an extent which is material in the context of the wider MacLellan Group as a whole; or(ii) there is, or is likely to be, for that or any other reason whatsoever, any liability (actual or contingent) of any past or present member of the wider MacLellan Group to make good, repair, reinstate or clean up any property or any controlled waters now or previously owned, occupied, operated or made use of or controlled by any such past or present member of the wider MacLellan Group, under any environment legislation, regulation, notice, circular or order of any government, governmental, quasi-governmental, state or local government, supranational, statutory or other regulatory body, agency, court, association or any other person or body in any jurisdiction where the cost is material in the context of the wider MacLellan Group as a whole.For the purposes of these conditions the "wider MacLellan Group" meansMacLellan and its subsidiary undertakings, associated undertakings and anyother undertaking in which MacLellan and/or such undertakings (aggregatingtheir interests) have a significant interest and the "wider Interserve Group"means Interserve and its subsidiary undertakings, associated undertakings andany other undertaking in which Interserve and/or such undertakings (aggregatingtheir interests) have a significant interest and for these purposes "subsidiaryundertaking", "associated undertaking" and "undertaking" have the meaningsgiven by the Companies Act, other than paragraph 21(1)(b) of Schedule 4A to theCompanies Act which shall be excluded for this purpose, and "significantinterest" means a direct or indirect interest in twenty per cent. or more ofthe equity share capital (as defined in the Companies Act).Interserve reserves the right to waive, in whole or in part, all or any of theabove conditions, except conditions (a) to (f) inclusive.If Interserve is required by the Panel to make an offer for MacLellan Sharesunder the provisions of Rule 9 of the City Code, Interserve may make suchalterations to any of the above conditions as are necessary to comply with theprovisions of that Rule.Interserve reserves the right to elect to implement the Acquisition by way of atakeover offer under section 428 of the Companies Act. In such event, theAcquisition will be implemented on the same terms (subject to appropriateamendments including (without limitation) an acceptance condition set at 90 percent. of the shares to which the Acquisition relates), so far as applicable, asthose which would apply to the implementation of the Acquisition by means ofthe Scheme.The Acquisition will not proceed if, after the date of this announcement andbefore the MacLellan Extraordinary General Meeting, the Acquisition is referredto the Competition Commission.This Acquisition will be governed by English law and be subject to thejurisdiction of the English courts, to the conditions and further terms set outin this announcement and in the Scheme Document and the related Form ofElection.Part B: Certain further terms of the AcquisitionFractions of New Interserve Shares will not be allotted or issued to personsaccepting the Scheme. Fractional entitlements to New Interserve Shares will beaggregated and sold in the market and the net proceeds of sale will bedistributed pro rata to persons entitled thereto. However, individualentitlements to amounts of less than ‚£3 will not be paid to persons otherwiseentitled thereto under the terms of the Scheme but will be retained for thebenefit of the Enlarged Interserve Group.If the Acquisition is carried out by way of a takeover offer, it will not bemade, directly or indirectly, in, into or from, or by the use of mails or anymeans or instrumentality (including, without limitation telephonically orelectronically) of interstate or foreign commerce of, or of any facility of anational, state or other securities exchange of, nor will it be made in, intoor from the US, Australia, Canada or Japan and such takeover offer will not becapable of acceptance by any such use, means, instrumentality or facility orfrom within the United States, Canada, Japan or Australia or into any otherjurisdiction if to do so would constitute a violation of the relevant laws ofsuch jurisdiction.The New Interserve Shares to be issued pursuant to the Scheme have not been andwill not be registered under the US Securities Act nor under any of therelevant securities laws of Canada, Japan or Australia. Accordingly, the NewInterserve Shares may not be offered, sold or delivered, directly orindirectly, in the United States, Canada, Japan or Australia nor to any UnitedStates person, except pursuant to exemptions from applicable requirements ofany such jurisdiction.The New Interserve Shares will be issued credited as fully paid and will rankpari passu in all respects with the existing Interserve Shares. Applicationswill be made to the UK Listing Authority for the New Interserve Shares to beadmitted to the Official List and to the London Stock Exchange for the NewInterserve Shares to be admitted to trading. The MacLellan Shareholders willnot be entitled to Interserve's proposed final dividend of 10.1 pence per sharefor the year ended 31 December 2005.MacLellan Shares and (where relevant) Convertible Preference Shares to theextent transferred to Interserve will be acquired by Interserve fully paid andfree from all liens, equitable interests, charges, encumbrances and other thirdparty rights of any nature whatsoever and together with all rights attaching tothem including the rights to receive and return all dividends and distributions(if any) declared, made or payable after the date of this announcement.In the event that any dividend is declared or paid by MacLellan after the dateof this announcement and Interserve proceeds with the Acquisition, the cashelement of the consideration payable by Interserve under the Acquisition shallbe reduced by an equal amount.APPENDIX IISOURCES AND BASES OF INFORMATIONSave as otherwise set out in this announcement, the following constitute thebases and sources of certain information referred to in this announcement:1. The financial information relating to Interserve has been extracted from itsaudited annual accounts for the relevant periods and the interim financialstatements for the relevant periods as published by Interserve, all of whichare prepared in accordance with UK GAAP or IFRS.2. The financial information relating to MacLellan has been extracted orprovided (without material adjustment) from its audited annual report andaccounts for the relevant periods and the interim financial statements for therelevant periods as published by MacLellan, all of which are prepared inaccordance with UK GAAP.3. The value placed on the entire issued ordinary share capital of MacLellan bythe Acquisition is based on 99,803,624 MacLellan Shares in issue on 28 April2006, being the last Business Day before this announcement.4. All prices quoted for MacLellan Shares and Interserve Shares are ClosingPrices.5. The proportion of the Enlarged Interserve Group represented by MacLellanShareholders that will hold Interserve Shares is based on 114,231,032Interserve Shares in issue on 28 April 2006, being the last Business Day beforethis Announcement.APPENDIX IIIDEFINITIONS USED IN THIS ANNOUNCEMENTThe following definitions apply throughout this announcement unless the contextotherwise requires:"Acquisition" means the proposed acquisition of the entire issued and to be issued share capital of MacLellan by Interserve, and references to the acquisition by way of the Scheme shall include, if applicable, the Acquisition by way of a takeover offer under section 428 of the Companies Act; "Admission" means the admission of New Interserve Shares to the Official List in accordance with the Listing Rules and the admission of such shares to trading on the London Stock Exchange's market for listed securities in accordance with the Admission and Disclosure Standards of the London Stock Exchange; "AIM" means the alternative investment market of the London Stock Exchange; "Australia" means the Commonwealth of Australia and its states, territories or possessions and all areas subject to its jurisdiction or any sub-division thereof; "Business Day" means a day (excluding Saturdays, Sundays or public holidays) on which banks generally are open in the City of London for the transaction of normal banking business; "Canada" means Canada, its provinces and possessions, territories and all areas subject to its jurisdiction or any political sub-division thereof; "Capital Reduction" means the proposed reduction of share capital of MacLellan pursuant to the Scheme; "City Code" means the City Code on Takeovers and Mergers (as issued from time to time by or on behalf of the Panel); "Closing Price" means the closing middle market quotation of a MacLellan Share or an Interserve Share (as the context requires) as derived from the Daily Official List; "Companies Act" means the Companies Act 1985 (as amended); "Competing Proposal" means a proposed offer, merger, acquisition, scheme of arrangement, recapitalisation or other business combination relating to any direct or indirect acquisition of 50 per cent. or more of MacLellan Shares or all or any material part of the business or assets of the MacLellan Group proposed by any third party which is not an associate (as defined in the City Code) of Interserve; "Conditions" means the conditions to the Acquisition and the Scheme set out in Appendix I of this announcement; "Convertible Preference means the Convertible Preference Shares of 10 Shares" pence each in the capital of MacLellan; "Convertible Preference means the holder of Convertible Preference Shares;Shareholder" "Court Hearings" means the two separate hearings by the Court of the petition to sanction the Scheme and to confirm the cancellation and extinguishment of the Scheme Shares provided for by the Scheme under section 137 of the Companies Act; "Court" means the High Court of Justice in England and Wales; "CREST" means the computerised settlement system to facilitate the transfer of title to shares in uncertificated form operated by CrestCo Limited; "Daily Official List" means the daily official list of the London Stock Exchange; "Effective" means in the context of the Acquisition: i. if the Acquisition is implemented by way of the Scheme, the Scheme having become effective pursuant to its terms; or ii. if the Acquisition is implemented by way of a takeover offer, the takeover offer having been declared or become unconditional in all respects in accordance with the requirements of the City Code; "Effective Date" means the date on which the Acquisition becomes Effective; "Enlarged Interserve means the Interserve Group (including the Group" MacLellan Group) following the Effective Date; "First Court Order" means the first order of the Court sanctioning the Scheme under section 425 of the Companies Act and confirming the reduction of share capital under section 137 of the Companies Act provided by the Scheme; "Forms of Election" means the forms of election relating to the Acquisition which will accompany the Scheme Document; "FSMA" means the Financial Services and Markets Act 2000; "Implementation Deed" means the implementation deed dated 1 May2006 between Interserve and MacLellan in relation to the Acquisition; "Interserve" means Interserve plc, registered in England and Wales (no. 0088456); "Interserve Extraordinary means the extraordinary general meeting of General Meeting" Interserve to be convened to consider, and if thought fit, approve the Acquisition; "Interserve Group" means Interserve and its subsidiaries and, where the context permits, each of them; "Interserve Shareholder means the circular to be sent to Interserve Circular" Shareholders outlining the Acquisition and containing the notice convening the Interserve Extraordinary General Meeting; "Interserve Shareholders" means the holders of Interserve Shares; "Interserve Shares" means the ordinary shares of 10 pence each in the capital of Interserve; "Investec" means Investec Bank (UK) Limited; "Japan" means Japan, its cities, prefectures, territories and possessions; "JPMorgan Cazenove" means JPMorgan Cazenove Limited; "Listing Rules" means the listing rules and regulations of the UK Listing Authority as amended from time to time, and contained in the UK Listing Authority's publication of the same name; "LIBOR" means the rate of interest determined by Interserve on the basis of the average (rounded down where necessary to the nearest whole multiple of one-sixteenth of 1.0 per cent.) of the respective rates per annum at which any two London clearing banks selected by Interserve are prepared to offer six month Sterling deposits of ‚£2 million to leading banks in the London inter-bank market at or about 11.00am (London time) on the first Business Day of the relevant interest period and a certificate in writing, under the hand of a duly authorised official of Interserve, shall be conclusive evidence of that rate; "Loan Note Alternative" means the alternative whereby Scheme Shareholders (other than certain Overseas Persons and the Convertible Preference Shareholder) may elect to receive Loan Notes instead of some or all of the cash consideration to which they would otherwise be entitled under the proposal Acquisition; "Loan Notes" means the floating rate unsecured loan notes of Interserve issued pursuant to the Loan Note Alternative; "London Stock Exchange" means London Stock Exchange plc or its successor; "MacLellan" means MacLellan Group plc, registered in England and Wales (no. 2279581); "MacLellan Annual Report means the audited annual consolidated financial and Accounts" statements of the MacLellan Group for the financial years ended 31 December 2004 and 31 December 2005; "MacLellan Directors" means the directors of MacLellan; "MacLellan Extraordinary means the extraordinary general meeting of General Meeting" MacLellan to consider and, if thought fit, to approve the Acquisition; "MacLellan Group" means MacLellan and its subsidiaries and, where the context permits, each of them; "MacLellan Share Option means the unapproved Share Option Scheme 1998, theSchemes" Jordec Plc Share Option Plan 2000, the MacLellan Share Save Scheme 2001 and the Jordec Group plc Executive Share Option Scheme and MacLellan Share Option Scheme means any one of them; "MacLellan Shareholders" means the holders of MacLellan Shares or a person entitled to any such MacLellan Shares by transmission; "MacLellan Shares" means: (i) prior to the Reorganisation Record Time, Ordinary Shares; and (ii) after the Reorganisation Record Time, the shares in the capital of MacLellan into which the issued Ordinary Shares are converted; "Minute" means the minute (approved by the Court) showing with respect to MacLellan's share capital, as altered by the Second Court Order confirming the Capital Reduction, the information required by section 138 of the Companies Act; "Mix and Match Facility" means the mix and match facility under which MacLellan Shareholders may, subject to availability, elect to vary the proportion of New Interserve Shares and cash they will receive under the Scheme; "New Interserve Shares" means the Interserve Shares proposed to be issued and credited as fully paid pursuant to the Scheme; "Official List" means the official list maintained by the UK Listing Authority; "Ordinary Shares" means the ordinary shares of 5 pence each in the capital of MacLellan; "Overseas Persons" means Scheme Shareholders who are resident in, ordinarily resident in, or citizens of, jurisdictions outside the United Kingdom; "Panel" means the Panel on Takeovers and Mergers; "Registrar of Companies" means the Registrar of Companies in England and Wales, within the meaning of the Companies Act; "Regulatory Information means a regulatory information service as defined Service" in Appendix I to the Listing Rules; "Reorganisation Record means the time on which the first Court Order Time" under section 425 of the Companies Act sanctioning the Scheme is delivered to the Registrar of Companies for Registration; "Restricted Territories" means Australia, Canada or Japan or any other jurisdiction where either sending the Scheme Document would violate the law of that jurisdiction; "Scheme" means the proposed scheme of arrangement under section 425 of the Companies Act between MacLellan and the MacLellan Shareholders and the Convertible Preference Shareholder to implement the Acquisition; "Scheme Document" means the circular to MacLellan Shareholders and (if applicable) the Convertible Preference Shareholder proposing the Scheme to be posted by MacLellan as soon as is reasonably practicable after the date of this announcement; "Scheme Meetings)" means the meeting(s) of MacLellan Shareholders and (if applicable) the Convertible Preference Shareholder to be convened by order of the Court under section 425 of the Companies Act to consider and, if thought fit, approve the Scheme; "Scheme Record Time" means 6.00 p.m. on the Business Day before the Scheme becomes Effective; "Scheme Shareholders" means holders of Scheme Shares; "Scheme Shares" means: i. the MacLellan Shares and the Convertible Preference Shares in issue at the date of the Scheme Document; ii. any MacLellan Shares or Convertible Preference Shares issued after the date of the Scheme Document and before the Scheme Voting Record Time; and iii. any MacLellan Shares or Convertible Preference Shares issued at or after the Reorganisation Record Time and before 6.00 p.m. on the day before the date on which the Second Court Order is made in respect of which the original or any subsequent holders thereof are, or shall have agreed in writing to be, bound by the Scheme, in each case other than MacLellan Shares or Convertible Preference Shares beneficially owned by the Interserve Group; "Scheme Voting Record means 6.00 p.m. on the day which is two days Time" before the Scheme Meeting(s) or, if the Scheme Meeting(s) is/are adjourned, 6.00 p.m. on the second day before the date of such adjourned meeting(s); "Second Court Order" means the second order of the Court sanctioning the Scheme under section 425 of the Companies Act and confirming the reduction of share capital under section 137 of the Companies Act provided by the Scheme; "Transfer Shares" means Scheme Shares (if any) in respect of which valid elections for the Loan Note Alternative are made in accordance with its terms; "UK Listing Authority" or means the Financial Services Authority acting in "UKLA" its capacity as the competent authority for the purposes of Part VI of FSMA; "United Kingdom" or "UK" means the United Kingdom of Great Britain and Northern Ireland; "US Securities Act" means the United States Securities Act of 1933 and the rules thereunder; and "US" or "United States" means the United States of America, its territories and possessions, any State of the United States of America and the District of Columbia and all other areas subject to its jurisdiction. All references to legislation in this announcement are to English legislationunless the contrary is indicated.Any reference to any provision of any legislation shall include any amendment,modification, re-enactment or extension thereof. For the purposes of thisannouncement, subsidiary has the meaning under the Companies Act. References to‚£, pence and p are to the lawful currency of the United Kingdom. Wordsimporting the singular shall include the plural and vice versa, and wordsimporting the masculine gender shall include the feminine or neutral gender.ENDINTERSERVE PLCRelated Shares:
Interserve