22nd Mar 2005 07:02
Grainger Trust PLC22 March 2005 Not for release, distribution or publication in or into the United States of America, Canada, Japan or Australia. 22 March 2005 Grainger Trust plc Recommended cash offer for City North Group plc • The boards of Grainger and City North announce the terms of a recommendedcash offer, to be made by JPMorgan Cazenove on behalf of Grainger, for theentire issued and to be issued share capital of City North. • The Offer has been unanimously recommended by the Board of City North. • The Offer is 270 pence in cash for each City North Share, valuing theentire issued and to be issued ordinary share capital of City North atapproximately £58.5 million. • The Offer represents: • a premium of 6.5 per cent. to the closing middle market price of 253.5pence per City North Share on 21 March 2005, being the last business day priorto the announcement of the Offer; • a discount of 10.6 per cent. to the Net Asset Value per City North Shareof approximately 302 pence as at 31 December 2004; and • a premium of 2.3 per cent. to the Triple Net Asset Value per City NorthShare of approximately 264 pence as at 31 December 2004. • City North Shareholders may elect for a Partial Share Alternative of 180pence in cash and 0.2423 New Grainger Shares for each City North Share. Basedon the closing mid-market Grainger share price of 392 pence on 21 March 2005,being the latest practicable date prior to this announcement, the Partial ShareAlternative values each City North share at 275 pence. • Grainger's core business is in the tenanted residential market. Graingerregards the potential acquisition of City North as an important strategicopportunity to strengthen its presence in the market rented sector and inparticular in the Central London residential market. • In total, Grainger has received confirmation of support for the Offerfrom City North Shareholders in respect of their beneficial holdings amountingin aggregate to 7,421,519 City North Shares, representing approximately 35.34per cent. of City North's current issued share capital, comprising: • Certain directors of City North have irrevocably undertaken to accept theOffer in respect of their beneficial holdings amounting in aggregate to1,364,000 City North Shares, representing approximately 6.49 per cent. of CityNorth's current issued share capital. Of this aggregate holding, MichaelSherley-Dale, who holds 5.24 per cent., has stated his intention to elect to theextent possible under the Mix and Match Facility to take New Grainger Shares asconsideration in respect of a minimum of 50 per cent. of his holding. • Certain other Shareholders have irrevocably undertaken to accept theOffer in respect of their beneficial holdings amounting in aggregate to4,226,432 City North Shares, representing approximately 20.12 per cent. of CityNorth's current issued share capital. Of these, undertakings in respect of2,125,432 City North Shares, representing approximately 10.12 per cent. of CityNorth's current issued share capital, cease to be binding in the event that athird party announces a firm intention to make an offer for City North at ahigher price than that announced by Grainger, and undertakings in respect of2,101,000 City North Shares, representing approximately 10.00 per cent. of CityNorth's current issued share capital, cease to be binding in the event that athird party announces a firm intention to make an offer for City North at aprice which is 10 per cent. higher than that announced by Grainger. • Certain other Shareholders have confirmed in writing that it is theirintention to accept the Offer in respect of their beneficial holdings amountingin aggregate to 1,831,087 City North Shares, representing approximately 8.72 percent. of City North's current issued share capital. The above summary is to be read in conjunction with the full text of thisannouncement. Commenting on the Offer, Robert Dickinson, Chairman of Grainger, said: "The acquisition of City North will increase our market rented residentialportfolio to approximately £225m. This critical mass will enable us to takeadvantage of both operational synergies and wider funding opportunities. CityNorth's high quality portfolio, which includes approximately 350 units with anaverage value of approximately £247,000, is well located and has been wellmanaged. We believe the merging of our portfolios will be in the best interestsof both sets of shareholders." John Cobb, Chairman of City North, said: "The offer represents an excellent opportunity for our shareholders to receivefair value for their shares. The Board of City North believes there aresignificant advantages in City North becoming part of a larger entity in termsof critical mass and economies of scale." Enquiries GraingerRupert Dickinson 020 7795 4700Andrew Cunningham 0191 261 1819 JPMorgan Cazenove 020 7588 2828Richard CottonRoger Clarke Baron Phillips Associates 020 7920 3161Baron Phillips City North 020 7932 0403Michael Sherley-Dale KPMG Corporate Finance 020 7311 1000David SimpsonRichard BarlowRichard Brown JPMorgan Cazenove, which is regulated in the United Kingdom by the FinancialServices Authority, is acting for Grainger and for no one else in connectionwith the Offer and will not be responsible to anyone other than Grainger forproviding the protections afforded to clients of JPMorgan Cazenove or forproviding advice in relation to the Offer or any matter referred to herein or inthe Offer Document. KPMG Corporate Finance, a division of KPMG LLP which is authorised and regulatedby the Financial Services Authority, is acting for City North as financialadviser in relation to the Offer and is not acting for any other person inrelation to such Offer. KPMG Corporate Finance will not be responsible toanyone other than City North for providing the protections afforded to itsclients or for providing advice in relation to the contents of thisannouncement, or any matter referred to herein, or in the Offer Document. This announcement does not constitute, or form part of, any offer for, or anysolicitation of any offer for, securities. Any acceptance or other response tothe Offer should be made only on the basis of information referred to in theOffer Document and the Form of Acceptance which Grainger intends to despatchshortly to City North Shareholders and, for information only, to holders ofoptions under the City North Share Option Schemes. The availability of the Offer to persons not resident in the United Kingdom maybe affected by the law of the relevant jurisdiction. Such persons should informthemselves about and observe any applicable requirements. The Offer will not be made, directly or indirectly, in or into, or by use of themails, or by any means or instrumentality (including, but not limited to,facsimile transmission or other electronic transmission, telex or telephone) ofinterstate or foreign commerce, or any facilities of a national, state or othersecurities exchange, of the United States, nor will it be made, directly orindirectly, in or into Canada, Australia or Japan and will not be capable ofacceptance by any such use, means, instrumentality or facilities or from withinthe United States, Canada, Australia or Japan. Accordingly, copies of thisannouncement are not being, and must not be, mailed or otherwise distributed orsent in or into or from, the United States, Canada, Australia or Japan. This announcement is not an offer of securities for sale in the United Statesand the New Grainger Shares have not been, and will not be, registered under theUnited States Securities Act of 1933, as amended, or under the securities lawsof any jurisdiction of the United States; the relevant clearances have not beenobtained and will not be obtained from the securities commission of any provinceor territory of Canada; no prospectus in relation to the New Grainger Shares hasbeen, or will be, lodged with or registered by the Australian Securities &Investments Commission; nor have any steps been taken to enable the New GraingerShares to be offered in Japan in compliance with applicable securities laws ofJapan. Accordingly, the New Grainger Shares may not be offered, sold, resold ordelivered directly or indirectly in or into the United States, Canada, Australiaor Japan or any other country outside the UK where to do so would lead to abreach of any legal or regulatory requirement. This announcement contains a number of forward-looking statements relating toGrainger, City North and the Enlarged Group with respect to, among others, thefollowing: financial condition; results of operations; the business of theEnlarged Group; future benefits of the transaction; and management plans andobjectives. Grainger and City North consider any statements that are nothistorical facts as "forward-looking statements". They involve a number of risksand uncertainties that could cause actual results to differ materially fromthose suggested by the forward-looking statements. Important factors that couldcause actual results to differ materially from estimates or forecasts containedin the forward-looking statements include, among others, the followingpossibilities: future revenues are lower than expected; costs or difficultiesrelating to the integration of the businesses of Grainger and City North, or ofother future acquisitions, are greater than expected; expected cost savings fromthe transaction or from other future acquisitions are not fully realised orrealised within the expected time frame; competitive pressures in the industryincrease; general economic conditions or conditions affecting the relevantindustries, whether internationally or in the places Grainger and City North dobusiness, are less favourable than expected, and/or conditions in the securitiesmarket are less favourable than expected. The directors of Grainger accept responsibility for the information contained inthis announcement other than information relating to City North and thedirectors of City North, their immediate families, related trusts and personsconnected with them. To the best of the knowledge and belief of the directorsof Grainger (who have taken all reasonable care to ensure that such is thecase), the information contained in this announcement for which they acceptresponsibility is in accordance with the facts and does not omit anything likelyto affect the import of such information. The directors of City North accept responsibility for the information containedin this announcement relating to City North and the directors of City North,their immediate families, related trusts and persons connected with them. To thebest of the knowledge and belief of the directors of City North (who have takenall reasonable care to ensure that such is the case), the information containedin this announcement for which they accept responsibility is in accordance withthe facts and does not omit anything likely to affect the import of suchinformation. Not for release, distribution or publication in or into the United States of America, Canada, Japan or Australia. 22 March 2005 Grainger plc Recommended cash offer for City North Group Plc 1. Introduction The boards of Grainger and City North announce the terms of a recommended cashoffer, to be made by JPMorgan Cazenove on behalf of Grainger, for the entireissued and to be issued share capital of City North. 2. The Offer The Offer is 270 pence in cash for each City North Share, valuing the entireissued and to be issued ordinary share capital of City North at approximately£58.5 million. The Offer represents: • a premium of 6.5 per cent. to the closing middle market price of253.5 pence per City North Share on 21 March 2005, being the last business dayprior to the announcement of the Offer; • a discount of 10.6 per cent. to the Net Asset Value per City NorthShare of approximately 302 pence as at 31 December 2004; and • a premium of 2.3 per cent. to the Triple Net Asset Value per CityNorth Share of approximately 264 pence as at 31 December 2004. The City North Shares will be acquired pursuant to the Offer fully paid and freefrom all liens, charges, equitable interests, encumbrances and rights ofpre-emption and any other interests of any nature whatsoever and together withall rights now or hereafter attaching thereto including voting rights and theright to receive all dividends or other distributions declared, made or paidafter the date of the Offer, other than the City North second interim dividendannounced today and referred to below, which will be paid on 26 April 2005 toCity North Shareholders on the register on 1 April 2005. The Offer will initially remain open for acceptance until 3.00 pm (London time)on the date which is 21 days following the date on which the Offer Document isposted, but may be extended in accordance with the Code. The conditions to and certain further terms of the Offer are set out in AppendixI to this Announcement. Further details of the terms of the Offer will becontained in the Offer Document and the Form of Acceptance. 3. Terms of the Partial Share Alternative Each City North Shareholder (other than certain overseas shareholders) may electto receive New Grainger Shares in lieu of part of the cash consideration towhich he would otherwise be entitled under the Offer. Under the Partial Share Alternative a City North Shareholder may elect toreceive 180 pence in cash plus 0.2423 New Grainger Shares for each City NorthShare. The Partial Share Alternative will be available in respect of up to amaximum of 5,088,583 New Grainger Shares. Fractions of New Grainger Shares will not be allotted or issued to AcceptingCity North Shareholders. Fractional entitlements to New Grainger Shares will berounded down and paid in cash. The Partial Share Alternative is conditional upon the Offer becoming or beingdeclared unconditional in all respects. Full acceptance of the Offer assuming the maximum take-up of the Partial ShareAlternative, and assuming exercise of all the options under the City North ShareOption Schemes where the exercise price is less than 270 pence, would result inthe issue of 5,088,583 New Grainger Shares (representing approximately 3.9 percent. of the enlarged issued share capital of Grainger). 4. Terms of the Mix and Match Facility City North Shareholders (other than certain overseas shareholders) whoparticipate in the Partial Share Alternative may elect under the terms of theMix and Match Facility to vary the proportion of New Grainger Shares theyreceive in lieu of cash consideration above or below the New Grainger Sharesreceivable under the Partial Share Alternative. The total number of New Grainger Shares to be issued to City North Shareholderspursuant to the Partial Share Alternative will not exceed 5,088,583.Accordingly, satisfaction of elections made for additional New Grainger Sharespursuant to the Mix and Match Facility will depend on the extent to which otherCity North shareholders have elected to receive New Grainger Shares under eitherthe Partial Share Alternative or the Mix and Match Facility. To the extent that elections to receive more than the New Grainger Sharesavailable under the Partial Share Alternative are received, any City NorthShareholders who elect for the Partial Share Alternative or fewer New GraingerShares than are receivable under the Partial Share Alternative will have theirelections satisfied in full, but City North Shareholders who elect foradditional New Grainger Shares will be scaled down pro rata. Fractions of NewGrainger Shares will be rounded down and paid in cash. As a result, City North Shareholders who make an election to receive more thanthe New Grainger Shares available under the Partial Share Alternative will notnecessarily know the exact number of New Grainger Shares or the amount of cashthey will receive until settlement of the consideration under the Offer. Elections under the Mix and Match Facility will not affect the entitlements ofthose City North Shareholders who have elected for the Partial Share Alternativebut who have not made elections under the Mix and Match Facility. The Mix and Match Facility will remain open until the first closing date of theOffer. If the Offer is not then unconditional as to acceptances, Grainger mayextend the Mix and Match Facility to a later date. If the Mix and MatchFacility has been closed, Grainger reserves the right to reintroduce a mix andmatch facility, subject to the rules of the Code. The Mix and Match Facility isconditional on the Offer becoming or being declared wholly unconditional. Further details of the terms of the Mix and Match Facility will be contained inthe Offer Document and Form of Acceptance. 5. Conclusion and Recommendation Conclusion The Board of City North, which has been so advised by KPMG Corporate Finance,considers the terms of the Offer to be fair and reasonable so far as the CityNorth Shareholders are concerned. In providing its advice, KPMG CorporateFinance has taken into account the commercial assessments of the Board of CityNorth. Recommendation The directors of City North unanimously recommend City North Shareholders toaccept the Offer, as they will do in respect of their own respective beneficialholdings comprising, in aggregate, 1,460,447 City North Shares, representingapproximately 6.95 per cent. of the current issued share capital of City North. 6. Undertakings to accept the Offer Certain directors of City North have entered into agreements with Graingerpursuant to which they have irrevocably undertaken to accept the Offer inrespect of their own beneficial holdings amounting in aggregate to 1,364,000City North Shares, representing approximately 6.49 per cent. of the currentissued share capital of City North. The terms of these irrevocable undertakingsrequire acceptance of the Offer even in the event of a higher competing offerbeing made for City North by a third party, unless the Offer is withdrawn orlapses. Of this aggregate holding, Michael Sherley-Dale, who holds 5.24 percent., has stated his intention to elect to the extent possible under the Mixand Match Facility to take New Grainger Shares as consideration in respect of aminimum of 50 per cent. of his holding. Certain other Shareholders have irrevocably undertaken to accept the Offer inrespect of their beneficial holdings amounting in aggregate to 4,226,432 CityNorth Shares, representing approximately 20.12 per cent. of City North's currentissued share capital. Of these, undertakings in respect of 2,125,432 City NorthShares, representing approximately 10.12 per cent. of City North's currentissued share capital, cease to be binding in the event that a third partyannounces a firm intention to make an offer for City North at a higher pricethan that announced by Grainger, and undertakings in respect of 2,101,000 CityNorth Shares, representing approximately 10.00 per cent. of City North's currentissued share capital, cease to be binding in the event that a third partyannounces a firm intention to make an offer for City North at a price which is10 per cent. higher than that announced by Grainger. Certain other Shareholders have confirmed in writing that is their intention toaccept the Offer in respect of their beneficial holdings amounting in aggregateto 1,831,087 City North Shares, representing approximately 8.72 per cent. ofCity North's current issued share capital. 7. Background to, reasons for and benefits of the Offer The Directors of Grainger anticipate that the supply of regulated tenancies willdecline over forthcoming years. Grainger is therefore expanding other areas ofits business to take advantage of the skills and understanding of theresidential marketplace within the organisation. One of these areas is market rented tenancies. Grainger intends to extend itsactivities as a manager of and co-investor in property funds. Its extensivenetwork of in-house managers, combined with external agents, carry out both theday-to-day and asset management of the existing 12,000 unit residentialportfolio. Grainger regards City North as a well run company with a proven track record inbuying and managing market rented residential property. City North is a goodstrategic fit with Grainger's existing £136m rented portfolio. This is anexcellent opportunity to merge both the market rented portfolios of Grainger andCity North and also the property management operations of both groups. Graingerhas recently moved its main South Eastern management office to Putney and itsBoard believes that the inclusion of City North's Clerkenwell office in thenetwork will provide better geographical coverage for the approximately 4,000properties managed in London and the South East. City North's principal business is a residential market rented portfoliotogether with a number of commercial investment and development properties.Grainger is increasingly becoming involved in mixed use development and believesthat City North's management team will augment its existing capabilities inmixed use development and management. City North has existing plans for joint venture development or sale of its twomain development sites. The greater scale of the Enlarged Group's operationswill enable a longer term view of these plans to be taken. 8. Information relating to the Grainger Group Grainger is the UK's largest quoted residential property investor owning over12,000 units. This core business is supplemented by the development and tradingdivision, which is active in the delivery of residential and mixed usedevelopments. In addition to its traditional long-term businesses Grainger isalso expanding its portfolio of equity release products and exploringopportunities in mainland Europe. Grainger specialises in those areas of the tenanted residential market thatoffer reversionary or development potential, regulated tenancies and homereversions in particular. It also has expertise in residential property andasset management, including purchase, refurbishment and sale both for its ownportfolio and for other landlords, such as the Schroders ResPUT, in whichGrainger holds approximately 9.5 per cent. of the units. Consequently Grainger's business generates income from two main sources: tradingprofits from the sale of residential units and development assets and rentalincome from its managed portfolio. Grainger also receives property and assetmanagement fees from its work for other landlords. In the year ended 30 September 2004, Grainger reported profit before tax andexceptional items of £59.6 million and at that date had a property portfoliowith a market value of £1.4 billion. 9. Information relating to City North City North is primarily a residential property company, specialising in CentralLondon development and letting. The business originated from a combination ofprivate and Business Expansion Scheme investments, which grew significantly fromthe late 1980s. The Group was floated on the London Stock Exchange in May 1998,at which stage it raised approximately £11 million from institutional investorsand had around £36 million of shareholders' funds. As at 31 December 2004, City North's net assets were approximately £65 million,with gross assets of around £112 million. The bulk of the assets are one, twoand three bedroom flats, which generate approximately 80 per cent. of currentincome. The business remains a residential specialist with over 70 per cent. ofassets being Central London apartments within a four-mile radius of OxfordCircus. There has been some diversification by the addition of a number ofcommercial and office schemes, but these remain a secondary priority for CityNorth. Turnover for the year ended on 31 December 2004 was over £5.8 million,which mostly derived from middle price range rentals, where many flats areshared by single professional tenants. City North released its preliminary results for the year ended 31 December 2004today. John Cobb, City North's Chairman, said the following: "City North has completed its sixth full year since flotation, with its bestever performance in margins and new highs in turnover and operating profits inthat period. Asset value per share has resumed an upward path and shareholders'funds have increased by 10 per cent." 10. Financial effects of the acceptance of the Offer Details of the financial effects of acceptance of the Offer are set out inAppendix II of this announcement. 11. City North Share Option Schemes The Offer will extend to any City North Shares unconditionally issued orallotted while the Offer remains open for acceptance (or by such earlier date asGrainger may, subject to the Code or with the consent of the Panel, determine)including any such shares allotted or issued pursuant to the exercise of CityNorth Options. Grainger will make appropriate proposals to participants in theCity North Share Option Schemes in due course which would take effect after theOffer has become or has been declared wholly unconditional, to the extent thattheir options have not been exercised. 12. Financing of the Offer The Offer will be financed by existing facilities of Grainger. There are noconditions required to be satisfied prior to the drawdown of these funds. Pro forma net debt of the Enlarged Group on completion of the acquisition isexpected to be a maximum of approximately £805 million, assuming no take-up ofthe Partial Share Alternative. 13. Management and employees The Board of Grainger has given assurances to the City North directors that,following the Offer becoming or being declared unconditional in all respects,the existing employment rights (including pension rights) of all employees ofCity North will be safeguarded. 14. Listing of New Grainger Shares Application will be made to the UK Listing Authority for the New Grainger Sharesto be admitted to the Official List and to the London Stock Exchange for the NewGrainger Shares be admitted to trading on the London Stock Exchange's market forlisted securities. It is expected that admission of the New Grainger Shares tothe Official List will become effective, and that dealings for normal settlementin the New Grainger Shares will commence on the London Stock Exchange, as soonas reasonably practicable after the date on which the Offer becomes or isdeclared unconditional in all respects (subject only to the condition relatingto admission contained in paragraph (b) of Part 1 of Appendix I to thisAnnouncement). 15. Delisting and compulsory acquisition If the Offer becomes or is declared unconditional in all respects, Graingerintends to procure the making of an application by City North to delist the CityNorth Shares from the Official List and to cancel trading on the London StockExchange's market for listed securities. It is anticipated that cancellation oflisting and trading will take effect no earlier than 20 business days after theOffer becomes or is declared unconditional in all respects. Delisting wouldsignificantly reduce the liquidity and marketability of any City North Sharesnot assented to the Offer. If Grainger receives acceptances under the Offer in respect of, and/or otherwiseacquires, 90 per cent. or more of the City North Shares to which the Offerrelates, Grainger intends to exercise its rights pursuant to the provisions ofsections 428 to 430F (inclusive) of the Companies Act 1985 (as amended) toacquire compulsorily the remaining City North Shares. 16. Inducement fee It has been agreed between Grainger and City North that City North will payGrainger a fee of £585,000 (inclusive of VAT) if the board of City Northwithdraws its recommendation of the Offer or if, prior to the withdrawal orlapse of the Offer, a higher competing offer for City North is announced andsuch offer subsequently becomes or is declared unconditional in all respects. 17. Securities in issue As at 7.00 a.m. on 22 March 2005 Grainger had 124,106,385 ordinary shares of 5pin issue (ISIN number GB00B04V1276) and City North had 21,001,170 ordinaryshares of 50p in issue (ISIN number GB0002827672) and options outstanding over660,670 City North Shares. 18. General Neither Grainger, nor any of its directors, nor, so far as Grainger is aware,any person deemed to be acting in concert with it, owns or controls any CityNorth Shares or has any option to acquire any City North Shares, or has enteredinto any derivative referenced to securities of City North which remainsoutstanding. The Offer will be on the terms and subject to the conditions set out herein andin Appendix I and to be set out in the Offer Document and Form of Acceptance.It is intended that the Offer Document (including a letter of recommendationfrom the Chairman of City North) and Forms of Acceptance will be despatchedshortly to City North Shareholders. Appendix III contains the sources and bases for certain information set out inthis announcement. Appendix IV contains the definitions used in this announcement. JPMorgan Cazenove, which is regulated in the United Kingdom by the FinancialServices Authority, is acting for Grainger and for no one else in connectionwith the Offer and will not be responsible to anyone other than Grainger forproviding the protections afforded to clients of JPMorgan Cazenove or forproviding advice in relation to the Offer or any matter referred to herein or inthe Offer Document. KPMG Corporate Finance, a division of KPMG LLP which is authorised and regulatedby the Financial Services Authority, is acting for City North as financialadviser in relation to the Offer and is not acting for any other person inrelation to such Offer. KPMG Corporate Finance will not be responsible toanyone other than City North for providing the protections afforded to itsclients or for providing advice in relation to the contents of thisannouncement, or any matter referred to herein, or in the Offer Document. The availability of the Offer 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. This announcement does not constitute, or form any part of, any offer for, orsolicitation of any offer for securities. Any acceptance or other response tothe Offer should be made only on the basis of the information contained in theOffer Document and the Form of Acceptance. The Offer will not be made, directly or indirectly, in or into, or by use of themails or any means of instrumentality (including without limitation facsimiletransmission, telex and telephone) of interstate or foreign commerce of, or anyfacilities of a national securities exchange of the United States, nor will itbe made in or into Canada, Australia or Japan. Accordingly, copies of thisannouncement are not being, and must not be, mailed or otherwise distributed orsent in or into or from the United States, Canada, Australia or Japan andpersons receiving this announcement (including custodians, nominees andtrustees) must not distribute or send it in, into or from the United States,Canada, Australia or Japan. The New Grainger Shares have not been, and will not be, registered under theUnited States Securities Act of 1933, as amended, or under the securities lawsof any jurisdiction of the United States; the relevant clearances have not beenobtained and will not be obtained from the securities commission of any provinceor territory of Canada; no prospectus in relation to the New Grainger Shares hasbeen, or will be, lodged with or registered by the Australian Securities &Investments Commission; nor have any steps been taken to enable the New GraingerShares to be offered in Japan in compliance with applicable securities laws ofJapan. Accordingly, the New Grainger Shares may not be offered, sold, resold ordelivered directly or indirectly in or into the United States, Canada, Australiaor Japan or any other country outside the UK where to do so would lead to abreach of any legal or regulatory requirement. This announcement contains a number of forward-looking statements relating toGrainger, City North and the Enlarged Group with respect to, among others, thefollowing: financial condition; results of operations; the business of theEnlarged Group; future benefits of the acquisition; and management plans andobjectives. Grainger and City North consider any statements that are nothistorical facts as 'forward-looking statements'. They involve a number of risksand uncertainties that could cause actual results to differ materially fromthose suggested by the forward-looking statements. Important factors that couldcause actual results to differ materially from estimates or forecasts containedin the forward-looking statements include, among others, the followingpossibilities: future revenues are lower than expected; costs or difficultiesrelating to the integration of the businesses of Grainger and City North, or ofother future acquisitions, are greater than expected; expected cost savings fromthe acquisition or from other future acquisitions are not fully realised orrealised within the expected time frame; competitive pressures in the industryincrease; general economic conditions or conditions affecting the relevantindustries, whether internationally or in the places Grainger and City North dobusiness, are less favourable than expected, and/or conditions in the securitiesmarket are less favourable than expected. The directors of Grainger accept responsibility for the information contained inthis announcement other than information relating to City North and thedirectors of City North, their immediate families, related trusts and personsconnected with them. To the best of the knowledge and belief of the directorsof Grainger (who have taken all reasonable care to ensure that such is thecase), the information contained in this announcement for which they acceptresponsibility is in accordance with the facts and does not omit anything likelyto affect the import of such information. The directors of City North accept responsibility for the information containedin this announcement relating to City North and the directors of City North,their immediate families, related trusts and persons connected with them. To thebest of the knowledge and belief of the directors of City North (who have takenall reasonable care to ensure that such is the case), the information containedin this announcement for which they accept responsibility is in accordance withthe facts and does not omit anything likely to affect the import of suchinformation. APPENDIX I CONDITIONS TO AND CERTAIN FURTHER TERMS OF THE OFFER PART 1 CONDITIONS OF THE OFFER The Offer will be subject to the following conditions: (a) valid acceptances being received (and not, where permitted,withdrawn) by 3.00 p.m. (London time) on the first closing date of the Offer (orsuch later time(s) and/or date(s) as Grainger may, subject to the rules of theCode or with the consent of the Panel, decide) in respect of not less than 90per cent. (or such lesser percentage as Grainger may decide) in nominal value ofthe City North Shares to which the Offer relates, provided that this conditionwill not be satisfied unless Grainger (together with its wholly ownedsubsidiaries) shall have acquired or agreed to acquire (pursuant to the Offer orotherwise) City North Shares carrying in aggregate more than 50 per cent. of thevoting rights then exercisable at a general meeting of City North (including forthis purpose, to the extent (if any) required by the Panel, any voting rightsattaching to any City North Shares that are unconditionally allotted or issuedbefore the Offer becomes or is declared unconditional as to acceptances whetherpursuant to the exercise of any outstanding subscription or conversion rights orotherwise). For the purposes of this condition: (i) City North Shares which have been unconditionally allottedshall be deemed to carry the voting rights they will carry upon issue; and (ii) the expression "City North Shares to which the Offerrelates" shall be construed in accordance with sections 428 to 430F of theCompanies Act 1985; (b) the UK Listing Authority agreeing to admit the New GraingerShares to the Official List and such admission becoming effective in accordancewith paragraph 7.1 of the Listing Rules and the London Stock Exchange agreeingto admit the New Grainger Shares to trading and the admission becoming effectivein accordance with the Admission and Disclosure Standards of the London StockExchange or (if Grainger so determines and subject to the consent of the Panel)the UK Listing Authority and the London Stock Exchange agreeing to admit suchshares to listing and trading respectively; (c) it being established to the satisfaction of Grainger that: (i) neither the proposed acquisition of City North by any member of theWider Grainger Group nor any matters or arrangements arising therefrom orrelated thereto will be referred to the Competition Commission in the UnitedKingdom; (ii) it is not and will not be necessary, in order to avoid any suchreference to the Competition Commission, for any member of the Wider GraingerGroup or member of the Wider City North Group to give undertakings to the Officeof Fair Trading except where any such undertakings are on terms which Graingerin its entire discretion considers satisfactory; and (iii) there has been no statement or intervention by the Office ofFair Trading or the Secretary of State for Trade and Industry indicating that itis necessary or desirable for any aspect of the proposed acquisition of CityNorth or any matters or arrangements arising therefrom or related thereto to bealtered, amended or modified except on terms which Grainger in its entirediscretion considers satisfactory. (d) no government or governmental, quasi-governmental, supranational,statutory, regulatory or investigative body, trade agency, court, professionalassociation or any other body or person in any jurisdiction (each a "ThirdParty") having (prior to the date on which the Offer would otherwise becomeunconditional) decided to take, institute or threaten any action, proceeding,suit, investigation, enquiry or reference, or having required any action to betaken or otherwise having done anything or having enacted, made or proposed anystatute, regulation, decision or order and there not continuing to beoutstanding any statute, regulation, decision or order which would or might: (i) make the Offer, its implementation or the acquisition orproposed acquisition of any City North Shares by any member of the WiderGrainger Group void, unenforceable or illegal or restrict, prohibit, delay orotherwise interfere with the implementation of, or impose additional materiallyadverse conditions or obligations with respect to, or otherwise challenge orrequire amendment, of the Offer or the acquisition of any City North Shares byany member of the Wider Grainger Group; (ii) require, prevent or delay the divestiture or alter theterms envisaged for such divestiture by any member of the Wider Grainger Groupor by any member of the Wider City North Group of all or any part of theirrespective businesses, assets or properties or impose any material limitation ontheir ability to conduct their respective businesses or to own any of theirrespective assets or properties; in any such case to an extent which is materialin the context of the City North Group taken as a whole or the Grainger Grouptaken as a whole (as the case may be); (iii) impose any material limitation on, or result in a delay in,the ability of any member of the Wider Grainger Group to acquire or hold or toexercise effectively, directly or indirectly, all or any rights of ownership ofshares or other securities (or the equivalent) in City North or on the abilityof any member of the Wider City North Group or any member of the Wider GraingerGroup to hold or exercise effectively any rights of ownership of shares or othersecurities in or to exercise management control over any member of the WiderCity North Group; in any such case to an extent which is material in the contextof the Wider City North Group or the Wider Grainger Group (as the case may be); (iv) require any member of the Wider Grainger Group or the WiderCity North Group to acquire or offer to acquire any shares or other securities(or the equivalent) in any member of the Wider City North Group or any assetowned by any third party (other than in the implementation of the Offer); (v) require, prevent or delay a divestiture by any member ofthe Wider Grainger Group of any shares or other securities (or the equivalent)in City North; in any such case to an extent which is material in the context ofthe Wider Grainger Group; (vi) result in any member of the Wider City North Group ceasingto be able to carry on business under any name which it presently does so to anextent which is material in the context of the Wider City North Group; (vii) impose any material limitation on the ability of any memberof the Wider Grainger Group or any member of the Wider City North Group tointegrate or co-ordinate all or any part of its business with all or any part ofthe business of any other member of the Wider Grainger Group and/or the WiderCity North Group; or (viii) otherwise affect the business, assets, profits or prospects ofany member of the Wider Grainger Group or any member of the Wider City NorthGroup in a manner which is adverse to and material in the context of the WiderGrainger Group or the Wider City North Group (as the case may be); and all applicable waiting and other time periods during which any such ThirdParty could decide to take, institute or threaten any such action, proceeding,suit, investigation, enquiry or reference or otherwise intervene having expired,lapsed or been terminated; (e) all necessary notifications and filings having been made inconnection with the Offer and all necessary waiting periods (including anyextensions thereof) under any applicable legislation or regulation of anyjurisdiction having expired, lapsed or been terminated (as appropriate) and allstatutory and regulatory obligations in any jurisdiction having been compliedwith and all Authorisations which in the reasonable opinion of Grainger arenecessary or appropriate in any jurisdiction for or in respect of the Offer andthe acquisition or the proposed acquisition of any shares or other securities inor control of City North by any member of the Wider Grainger Group having beenobtained in terms and in a form reasonably satisfactory to Grainger from allappropriate Third Parties or (without prejudice to the generality of theforegoing) from any person or bodies with whom any member of the Wider CityNorth Group or the Wider Grainger Group has entered into contractualarrangements and all such Authorisations which in the reasonable opinion ofGrainger are necessary or appropriate to carry on the business of any member ofthe Wider City North Group in any jurisdiction having been obtained and all suchAuthorisations remaining in full force and effect at the time at which the Offerbecomes otherwise unconditional and there being no notice or intimation of anintention to revoke, suspend, restrict, modify or not to renew suchAuthorisations; (f) save as fairly disclosed to Grainger prior to 22 March 2005 oras publicly announced to a Regulatory Information Service by or on behalf ofCity North before 22 March 2005 there being no provision of any arrangement,agreement, licence, permit, lease or other instrument to which any member of theWider City North Group is a party or by or to which any such member or any ofits assets is or may be bound or be subject or any event or circumstance whichwould, as a consequence of the Offer or the acquisition or the proposedacquisition by any member of the Wider Grainger Group of any shares or othersecurities (or the equivalent) in City North or because of a change in thecontrol or management of any member of the Wider City North Group or otherwise,would or might reasonably be expected to result in, to an extent which ismaterial in the context of the Wider City North Group: (i) any monies borrowed by, or any other indebtedness, actualor contingent, of any member of the Wider City North Group being or becomingrepayable, or capable of being declared repayable, immediately or prior to itsor their stated maturity, or the ability of any such member to borrow monies orincur any indebtedness being withdrawn or inhibited; (ii) the rights, liabilities, obligations, interests or businessof any member of the Wider City North Group under any such arrangement,agreement, licence, permit, lease or instrument or the interests or business ofany member of the Wider City North Group in or with any other firm or company orbody or person (or any agreement or arrangements relating to any such businessor interests) being terminated or adversely modified or affected or any onerousobligation or liability arising or any adverse action being taken thereunder; (iii) any member of the Wider City North Group ceasing to be ableto carry on business under any name under which it presently does so; (iv) any assets or interests of, or any asset the use of which isenjoyed by, any member of the Wider City North Group being or falling to bedisposed of or charged or any right arising under which any such asset orinterest could be required to be disposed of or charged or could cease to beavailable to any member of the Wider City North Group otherwise than in theordinary course of business; (v) the creation or enforcement of any mortgage, charge orother security interest over the whole or any part of the business, property orassets of any member of the Wider City North Group; (vi) the value of, or the financial or trading position orprospects of, any member of the Wider City North Group being prejudiced oradversely affected; (vii) the creation of any liability (actual or contingent) by anymember of the Wider City North Group; or (viii) any liability of any member of the Wider City North Group tomake any severance, termination, bonus or other payment to any director or otherofficer of any company in the Wider City North Group; (g) except as disclosed in this announcement or in the preliminarystatement of audited results of City North for the year ended 31 December 2004(the "City North Preliminary Results") or as publicly announced to a RegulatoryInformation Service by or on behalf of City North before 22 March 2005 or asfairly disclosed to Grainger before 22 March 2005, no member of the Wider CityNorth Group having since 31 December 2004 : (i) issued or agreed to issue or authorised or proposed theissue of additional shares of any class, or securities or securities convertibleinto, or exchangeable for, or rights, warrants or options to subscribe for oracquire, any such shares or convertible securities (save as between City Northand wholly-owned subsidiaries of City North and save for the grant of any CityNorth options and/or the issue of City North Shares on the exercise of optionsgranted before the date of this announcement in the ordinary course); (ii) recommended, declared, paid or made or proposed torecommend, declare, pay or make any bonus, dividend or other distribution; (iii) merged with or demerged or acquired any body corporate,partnership or business or acquired or disposed of, or, other than in theordinary course of business, transferred, mortgaged or charged or created anysecurity interest over, any assets or any right, title or interest in any asset(including shares and trade investments) or authorised, proposed or announcedany intention to do so to an extent which is material in the context of theWider City North Group; (iv) made, authorised, proposed or announced an intention topropose any change in its loan capital; (v) issued, authorised or proposed the issue of any debenturesor (other than in the ordinary course of business) incurred or increased anyindebtedness or contingent liability to an extent which is material in thecontext of the Wider City North Group; (vi) entered into or varied or announced its intention to enterinto or vary any contract, transaction, arrangement or commitment (whether inrespect of capital expenditure or otherwise) which is of a long term, unusual oronerous nature, or which involves or could involve an obligation of a nature ormagnitude which is, in any such case, material in the context of the City NorthGroup or which is or is likely to be restrictive on the business of any memberof the Wider City North Group or the Wider Grainger Group to an extent which ismaterial in the context of the Wider City North Group; (vii) entered into or varied the terms of any service agreementwith any director of the Wider City North Group; (viii) proposed, agreed to provide or modified the terms of any shareoption scheme, incentive scheme, or other benefit relating to the employment ortermination of employment of any employee of the Wider City North Group in amanner which is material in the context of the Wider City North Group; (ix) made or agreed or consented to any significant change to theterms of the trust deeds constituting the pension schemes established for itsdirectors, employees or their dependants or the benefits which accrue, or to thepensions which are payable, thereunder, or to the basis on which qualificationfor, or accrual or entitlement to, such benefits or pensions is calculated ordetermined or to the basis on which the liabilities (including pensions) of suchpension schemes are funded or made, or agreed or consented to any change to thetrustees, including the appointment of a trust corporation to an extent which ismaterial in the context of the Wider City North Group; (x) implemented, effected or authorised, proposed or announcedits intention to implement, effect, authorise or propose any reconstruction,amalgamation, commitment, scheme or other transaction or arrangement otherwisethan in the ordinary course of business to an extent which is material in thecontext of the Wider City North Group; (xi) purchased, redeemed or repaid or proposed the purchase,redemption or repayment of any of its own shares or other securities or reducedor made any other change to any part of its share capital; (xii) waived or compromised any claim otherwise than in theordinary course of business which is material in the context of the Wider CityNorth Group; (xiii) made any alteration to its memorandum or articles ofassociation or other incorporation documents; (xiv) taken or proposed any corporate action or had any legalproceedings instituted or threatened against it for its winding-up (voluntary orotherwise), dissolution, reorganisation or for the appointment of anyadministrator, administrative receiver, trustee or similar officer of all or anyof its assets or revenues or any analogous proceedings in any jurisdiction orappointed any analogous person in any jurisdiction; (xv) been unable, or admitted in writing that it is unable, to payits debts or having stopped or suspended (or threatened to stop or suspend)payment of its debts generally or ceased or threatened to cease carrying on allor a substantial part of its business; or (xvi) entered into any contract, commitment, agreement or arrangementor passed any resolution with respect to or announced an intention to effect orpropose any of the transactions, matters or events referred to in thisparagraph; (h) except as disclosed in this announcement or in the City NorthPreliminary Results or as publicly announced to a Regulatory Information Serviceby or on behalf of City North before 22 March 2005 or as fairly disclosed toGrainger before 22 March 2005, since 31 December 2004: (i) there having been no adverse change in the business,assets, financial or trading position or profits or prospects of any member ofthe Wider City North Group to an extent which is material in the context of tothe Wider City North Group; (ii) no litigation, arbitration proceedings, prosecution orother legal proceedings having been threatened, announced or instituted by oragainst or remaining outstanding against any member of the Wider City NorthGroup or to which any member of the Wider City North Group is or may become aparty (whether as plaintiff or defendant or otherwise) and no enquiry orinvestigation by or complaint or reference to any Third Party against or inrespect of any member of the Wider City North Group having been threatened,announced or instituted or remaining outstanding, against or in respect of anymember of the Wider City North Group which, in any such case, would reasonablybe expected materially and adversely to affect any member of the Wider CityNorth Group to an extent which is material in the context of the Wider CityNorth Group; (iii) no contingent or other liability having arisen or becomeapparent to Grainger which would reasonably be expected materially and adverselyto affect the business, assets, financial or trading position or profits orprospects of any member of the Wider City North Group to an extent which ismaterial in the context of the Wider City North Group; and (iv) no steps having been taken and no omissions having been madewhich are likely to result in the withdrawal, cancellation, termination ormodification of any licence held by any member of the Wider City North Group,which is necessary for the proper carrying on of its business to an extent whichis material in the context of the Wider City North Group; (i) except as fairly disclosed to Grainger prior to 22 March 2005Grainger not having discovered (after the date of this announcement and prior tothe Offer becoming unconditional in all respects): (i) that any financial, business or other informationconcerning the Wider City North Group publicly disclosed or disclosed to anymember of the Wider Grainger Group at any time by or on behalf of any member ofthe Wider City North Group which is material in the context of the acquisitionof City North by any member of Grainger Group is misleading, contains amisrepresentation of fact or omits to state a fact necessary to make theinformation contained therein not misleading and which was not, if material inthe context of the Wider City North Group, corrected by a subsequentannouncement to a Regulatory Information Service prior to 22 March 2005; (ii) that any member of the Wider City North Group is subject toany liability, contingent or otherwise, which is not disclosed in the City NorthAnnual Accounts, and which is material in the context of the Wider City NorthGroup; or (iii) any information which affects the import of any informationdisclosed to Grainger at any time by or on behalf of any member of the WiderCity North Group and which would have a material adverse effect on the WiderCity North Group; (j) in relation to any release, emission, accumulation, discharge,disposal or other fact or circumstance which has caused or might impair theenvironment (including property) or harm human health, no past or present memberof the Wider City North Group, in a manner or to an extent which is material inthe context of the Offer, (i) having committed any violation of any laws,statutes, regulations, notices or other requirements of any Third Party and/or(ii) having incurred any liability (whether actual or contingent) to any ThirdParty; and/or (iii) being likely to incur any liability (whether actual orcontingent), or be required, to make good, remediate, repair, re-instate orclean up the environment (including any property) which would be material in thecontext of the Wider City North Group. Grainger reserves the right to waive in whole or in part all or any ofconditions (c) to (j) inclusive. Conditions (b) to (j) inclusive must besatisfied as at, or waived (where possible) on or before, the 21st day after thelater of the first closing date of the Offer and the date on which condition (a)is fulfilled (or, in each case, such later date as the Panel may agree).Grainger shall be under no obligation to waive, to determine to be or treat asfulfilled, any of conditions (b) to (j) inclusive by a date earlier than thedate specified above for the fulfilment thereof notwithstanding that the otherconditions of the Offer may at such earlier date have been waived or fulfilledand that there are at such earlier date no circumstances indicating that any ofsuch conditions may not be capable of fulfilment. If Grainger is required by the Panel to make an offer for City North Sharesunder the provisions of Rule 9 of the Code, Grainger may make such alterationsto the terms and conditions of the Offer as are necessary to comply with theprovisions of that Rule. PART 2 CERTAIN FURTHER TERMS OF THE OFFER The City North Shares will be acquired by Grainger free from all liens,equities, charges, encumbrances, rights of pre-emption and any other third partyrights or interests of any nature whatsoever and together with all rightsattaching thereto including the right to receive in full all dividends and otherdistributions declared, paid or made after 22 March 2005 other than the CityRelated Shares:
Grainger plcCondor Gold