14th Dec 2006 07:22
Fonebak plc14 December 2006 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO ANY OF THE EXCLUDED TERRITORIES FOR IMMEDIATE RELEASE 14 December 2006 Recommended Cash Offer by KBC Peel Hunt Ltd on behalf of Fonebak plc to acquire the entire issued and to be issued ordinary share capital of CRC Group plc Summary The boards of Fonebak and CRC are pleased to announce that they have reachedagreement on the terms of a recommended cash offer to be made by KBC Peel Hunton behalf of Fonebak to acquire the entire issued and to be issued ordinaryshare capital of CRC for 50 pence per CRC Share. The Offer values the ExistingCRC Share Capital at approximately £12.3 million. Fonebak will fund the consideration under the Offer, together with therefinancing of existing bank facilities, through a proposed placing withinstitutional and other investors of 6,756,757 new Fonebak Shares to raiseapproximately £10.0 million (before expenses) and new bank facilities totalling£25.0 million provided by KBC Bank. The Placing has been fully underwritten byKBC Peel Hunt. The terms of the Offer: The Offer is for the entire issued and to be issued ordinary share capital ofCRC on the following basis: 50 pence in cash for each CRC Share The Offer represents a premium of approximately: • 78.6 per cent. to the closing price of 28 pence per CRC Share on 29 June 2006 being the last Business Day prior to the announcement by CRC that it had received an approach which may or may not lead to an offer; • 71.2 per cent. to the average closing price of 29.2 pence per CRC Share during the period from 29 June 2006, being the last Business Day prior to the announcement by CRC that it had received an approach which may or may not lead to an offer, to 4 December 2006, being the last Business Day prior to the announcement that CRC was in advanced discussions with a party regarding a possible cash offer for CRC at a price of 50 pence per CRC Share; and • 11.1 per cent. to the closing price of 45 pence per CRC Share on 13 December 2006, being the last Business Day prior to the Announcement. The CRC Directors, who have been so advised by Rothschild, believe the Offer tobe fair and reasonable so far as CRC Shareholders as a whole are concerned, andthey unanimously recommend that CRC Shareholders accept the Offer as they andcertain persons connected to them have irrevocably undertaken to do in respectof 1,181,111 CRC Shares which they and persons connected with them hold,representing approximately 4.8 per cent. of the Existing CRC Share Capital. In addition Fonebak has received an irrevocable undertaking from another CRCShareholder to accept the Offer in respect of a further 2,534,021 CRC Shares,representing approximately 10.3 per cent. of the Existing CRC Share Capital.This irrevocable undertaking will remain binding unless a third party announcesa competing offer for CRC which values each CRC Share at a price greater thanten per cent. higher in value than the Offer Price. Background to and reasons for the Offer The CRC Group provides technology repair services to service providers andmanufacturers in the communications and IT industries for electronic productsand technologies used in the home, in the work place and on the move. Theseproducts and technologies include mobile handsets, digital set-top boxes, cashdispensers (ATM's), chip and pin equipment, laptops, computer peripherals,satellite navigation devices and MP3 players. CRC's ordinary shares wereadmitted to trading on AIM in November 1997. The Fonebak Group is a leading outsource service provider for mobile phonehandset services, including fulfilment, repair, resale, recycling andenvironmental support services. It offers an end-to-end solution for the fulllife cycle of mobile phone handsets and associated products, which complies withproduct sale and environmental legislation. It works together with its clients (mobile phone network operators, manufacturers, retailers, charities andcorporate clients) to deliver a range of solutions that support their customeracquisition and retention strategies and cost reduction programmes, and supportsand protects its customers' brands both nationally and internationally. TheFonebak Shares were admitted to trading on AIM in March 2005. The Fonebak Directors believe that the acquisition of CRC represents anopportunity to: • achieve a further increase in the scale of the Fonebak Group's business and benefit from the associated economies of scale by: o extending the Fonebak business model to the CRC Group's client base; o accelerating the roll out of the Fonebak Group's European footprint utilising the CRC Group's current European infrastructure; and o sharing resources and exploiting synergies created by the Enlarged Group and maximising the efficiencies of the operating infrastructure; • improve profitability and cash flow by offering a "one-stop" pan-European capability for full life cycle product management across an expanded set of technologies, thereby producing market leadership from existing fragmentation; and • reinforce Fonebak's position as a market leader in environmental management services for the mobile telecommunications sector. The Fonebak Directors believe that the acquisition of CRC should presentopportunities for the Enlarged Group to accelerate its strategy and provide afull service model solution for the converging telecommunications, personalcomputing and media product sectors. In addition, the Enlarged Group will be well positioned to enter the growingoutsourced electronic devices service market both in the UK and across Europe,particularly in the context of the implementation of the Waste Electrical andElectronic Equipment ("WEEE") Directive (2002/96/EC and 2003/108/EC) acrossEurope. This Directive will place a number of operating and reportingrequirements on both producers and distributors/retailers of electronicequipment from the time that it comes into force, which is expected to beJanuary 2007. The Fonebak Group already has systems and procedures in place tosupport clients in meeting their obligations under the Directive. Upon the Offer becoming or being declared unconditional Gary Stokes, currentChief Executive Officer of CRC, will be appointed as Chief Executive Officer ofthe Enlarged Group. Commenting on the Offer, Gordon Shields, Non-executive Chairman of Fonebak,said: "We are delighted to have agreed to acquire CRC, with our offer beingrecommended unanimously by the CRC Board. Fonebak is a solid business in themobile phone market as demonstrated by its trading record but the acquisition ofCRC puts the enlarged business in a strong position to be able to take advantageof the consolidation occurring in consumer technology products as a result oftechnical development and consumer demand. Combining the two businesses providesclear benefits to both sides by underpinning its position, role and growth inthe consumer electrical products market." Commenting on the Offer, Jan Astrand, Chairman of CRC, said: "The CRC Board has carefully considered the offer by Fonebak and believes thatthe best interests of CRC and its shareholders are now served by accepting theOffer in full. The Offer provides greater certainty of value to CRC Shareholdersthan the alternative strategies available to the CRC Group at this time. Thecombination of Fonebak and CRC will create a wider European based group capableof servicing a broad range of warranty management and after-sales supportservices. I would like to thank all CRC's employees for their valuablecontribution to the business and in particular for their support during theuncertainty of recent months" Enquiries: Fonebak 01708 683 400Gordon Shields (Non-executive Chairman)Arthur Crocker (Finance Director) KBC Peel Hunt (Financial Adviser, Nominated Adviser and brokerto Fonebak) 0207 418 8900Jonathan MarrenGordon SuggettOliver Stratton Pelham Public Relations (PR adviser to Fonebak) 0207 743 6670James HendersonCharles VivianPhilip Dennis CRC 01844 261 900Gary Stokes (Chief Executive Officer)David Kelham (Chief Financial Officer) Rothschild (Financial Adviser and Nominated Adviser to CRC) 0121 600 5252Roger Hemming Weber Shandwick Square Mile (PR adviser to CRC) 020 7067 0700Chris Lynch This summary should be read in conjunction with the full text of theAnnouncement. Appendix I contains certain of the terms and conditions of theOffer. Appendix II contains a loss forecast from CRC. Appendix III contains thesources and bases of information contained in the Announcement. Appendix IVcontains definitions of certain terms used in this summary and the Announcement. KBC Peel Hunt, which is authorised and regulated by the Financial ServicesAuthority in the United Kingdom, for investment business activities, is actingas financial adviser to Fonebak in connection with the Offer and no one else,and will not be responsible to anyone other than Fonebak for providing theprotections afforded to clients of KBC Peel Hunt nor for providing advice inrelation to the Offer, or any arrangement referred to herein. KBC Peel Hunt has given and not withdrawn its written consent to the release ofthis announcement with the inclusion of the reference to its name in the formand context in which it is included. Rothschild, which is authorised and regulated by the Financial ServicesAuthority in the United Kingdom, is acting for CRC and no one else in relationto the Offer and will not be responsible to anyone other than CRC for providingthe protections afforded to clients of Rothschild nor for providing advice inrelation to the Offer or any arrangement referred to herein. Rothschild has given and not withdrawn its written consent to the release ofthis announcement with the inclusion of the reference to its name in the formand context in which it is included. KPMG Audit Plc has given and not withdrawn its written consent to the release ofthis announcement with the inclusion of its name and letter in the form andcontext in which they are included. The Fonebak Directors accept responsibility for the information contained inthis announcement other than that relating to the CRC Group, the CRC Directorsand members of their immediate families, related trusts and persons connectedwith them. To the best of the knowledge and belief of the Fonebak Directors (whohave taken all reasonable care to ensure that such is the case), the informationcontained in this announcement for which they are responsible is in accordancewith the facts and does not omit anything likely to affect the import of suchinformation. The CRC Directors accept responsibility for the information contained in thisannouncement relating to the CRC Group, the CRC Directors and members of theirimmediate families, related trusts and persons connected with them. To the bestof the knowledge and belief of the CRC Directors (who have taken all reasonablecare to ensure that such is the case), the information contained in thisannouncement for which they are responsible is in accordance with the facts anddoes not omit anything likely to affect the import of such information. The release, publication or distribution of this announcement in jurisdictionsother than the United Kingdom may be restricted by law and therefore persons insuch jurisdictions into which this announcement is released, published ordistributed should inform themselves about, and observe, such restrictions. Anyfailure to comply with the restrictions may constitute a violation of thesecurities laws of any such jurisdiction. The Offer is not being made, directly or indirectly, in or into, or by use ofthe mails, or by any means or instrumentality (including, without limitation,facsimile transmission, internet, email, telex or telephone) of interstate orforeign commerce, or of any facility of a national securities exchange, of anyof the Excluded Territories and cannot be accepted by any such use, means,instrumentality or facility or from within any of the Excluded Territories. Neither the Offer nor the Placing constitutes an offer of securities for sale,or the solicitation of an offer to buy securities in any Excluded Territory andthe new Fonebak Shares to be issued pursuant to the Placing have not been andwill not be registered under the United States Securities Act of 1933, or underthe laws of any state, district or other jurisdiction of the United States or ofany Excluded Territory and no regulatory clearances in respect of new FonebakShares have been or will be, applied for in any jurisdiction. Accordingly,unless an exemption under the US Securities Act of 1933 or other relevantsecurities laws is applicable, the new Fonebak Shares are not being, and may notbe offered, sold, resold, delivered or distributed, directly or indirectly, inor into the United States or any of the Excluded Territories or to, or for theaccount or benefit of, any US person or person resident in any of the ExcludedTerritories. This announcement contains a number of forward-looking statements relating tothe Fonebak Group and the CRC Group with respect to, among others, thefollowing: financial condition; results of operations; the business of theEnlarged Group; future benefits of the acquisition of the CRC Shares pursuant tothe Offer; and management plans and objectives. Fonebak and CRC consider anystatements that are not historical facts as "forward-looking statements". Theyinvolve a number of risks and uncertainties that could cause actual results todiffer materially from those suggested by the forward-looking statements.Important factors that could cause actual results to differ materially fromestimates or forecasts contained in the forward-looking statements include,among others, the following possibilities: future revenues are lower thanexpected; costs or difficulties relating to the integration of the businesses ofthe Fonebak Group and the CRC Group, or of other future acquisitions, aregreater than expected; expected cost savings from the transaction or from otherfuture acquisitions are not fully realised or realised within the expected timeframe; competitive pressures in the industry increase; general economicconditions or conditions affecting the relevant industries, whether globally orin the places where the Fonebak Group and the CRC Group conduct business areless favourable than expected, and/or conditions in the securities market areless favourable than expected. This Announcement does not constitute an offer to sell or an invitation topurchase any securities or the solicitation of an offer to purchase anysecurities, pursuant to the Offer or otherwise. The Offer will be made solely bythe Offer Document and, in the case of CRC Shares in certificated form, the Formof Acceptance accompanying the Offer Document, which will contain the full termsand conditions of the Offer, including details of how the Offer may be accepted. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of CRC, all "dealings" in any "relevant securities" ofthat company (including by means of an option in respect of, or a derivativereferenced to, any such "relevant securities") must be publicly disclosed by nolater than 3.30 pm (London time) on the Business Day following the date of therelevant transaction. This requirement will continue until the date on which theOffer becomes, or is declared, unconditional as to acceptances, lapses or isotherwise withdrawn or on which the "offer period" otherwise ends. If two ormore persons act together pursuant to an agreement or understanding, whetherformal or informal, to acquire an "interest" in "relevant securities" of CRCthey 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 CRC by CRC or Fonebak, or by any of their respective"associates", must be disclosed by no later than 12.00 noon (London time) on theBusiness Day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, 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 on thePanel's website. If you are in any doubt as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO ANY OF THE EXCLUDED TERRITORIES FOR IMMEDIATE RELEASE 14 December 2006 Recommended Cash Offer by KBC Peel Hunt Ltd on behalf of Fonebak plc to acquire the entire issued and to be issued ordinary share capital of CRC Group plc 1. Introduction The boards of Fonebak and CRC are pleased to announce that they have reachedagreement on the terms of a recommended cash offer to be made by KBC Peel Hunton behalf of Fonebak to acquire the entire issued and to be issued ordinaryshare capital of CRC for 50 pence per CRC Share. The Offer values the ExistingCRC Share Capital at approximately £12.3 million. The CRC Directors, who have been so advised by Rothschild, believe the Offer tobe fair and reasonable so far as CRC Shareholders as a whole are concerned, andthey unanimously recommend that CRC Shareholders accept the Offer as they andcertain persons connected to them have irrevocably undertaken to do in respectof 1,181,111 CRC Shares which they and persons connected with them hold,representing approximately 4.8 per cent. of the Existing CRC Share Capital. In addition Fonebak has received an irrevocable undertaking from another CRCShareholder to accept the Offer in respect of a further 2,534,021 CRC Shares,representing approximately 10.3 per cent. of the Existing CRC Share Capital.Further details of this irrevocable undertaking and set out in the Announcementand in the Offer Document which is expected to be posted to CRC Shareholders onor around 19 December 2006. 2. The Offer The Offer will be made on and subject to the terms and conditions set out inAppendix I to the Announcement and the further terms and conditions set out inthe Offer Document expected to be posted to CRC Shareholders on or around 19December 2006 and, in the case of CRC Shares held in certificated form, the Formof Acceptance which will accompany the Offer Document. The Offer is for the entire issued and to be issued ordinary share capital ofCRC on the following basis: 50 pence in cash for each CRC Share The Offer represents a premium of approximately: • 78.6 per cent. to the closing price of 28 pence per CRC Share on 29 June 2006 being the last Business Day prior to the announcement by CRC that it had received an approach which may or may not lead to an offer; • 71.2 per cent. to the average closing price of 29.2 pence per CRC Share during the period from 29 June 2006, being the last Business Day prior to the announcement by CRC that it had received an approach which may or may not lead to an offer, to 4 December 2006, being the last Business Day prior to the announcement that CRC was in advanced discussions with a party regarding a possible cash offer for CRC at a price of 50 pence per CRC Share; and • 11.1 per cent. to the closing price of 45 pence per CRC Share on 13 December 2006, being the last Business Day prior to the Announcement. The CRC Shares which are the subject of the Offer will be acquired by Fonebakfully paid and free from all liens, charges, equitable interests, encumbrances,rights of pre-emption and other third party rights or interests of any naturewhatsoever and together with all rights now or in the future attaching to them,including the right to receive and retain all dividends and other distributions(if any) declared, made or paid on or after the date of the Offer Document. The Offer is conditional, inter alia, on: (i) Fonebak Shareholders resolving toapprove the resolutions necessary to effect the Placing; (ii) the admission totrading on AIM of the Placing Shares in accordance with the AIM Rules; and (iii)valid acceptances being received in respect of not less than 90 per cent. (orsuch lesser percentage as the board of Fonebak may, subject to the City Code,decide with the approval of KBC Peel Hunt (under the Placing Agreement) and KBCBank (under the Facilities Agreement)) of the voting rights carried by the CRCShares to which the Offer relates. Fonebak will fund the consideration under the Offer through a proposed placingof 6,756,757 new Fonebak Shares to raise approximately £10.0 million (beforeexpenses) and new bank facilities totalling £25.0 million provided by KBC Bank.The new bank facilities with KBC Bank consist of a £17.5 million term loan and a£7.5 million revolving credit facility. The monies raised from the Placing andthe new bank facilities will also be used to refinance existing bank facilitiesin Fonebak and CRC. KBC Peel Hunt has conditionally agreed to procure placees for, or itselfsubscribe for, 6,756,757 new Fonebak Shares at a price of 148 pence per share,raising approximately £10.0 million (before expenses). The Placing Shares willrepresent approximately 35.2 per cent. of the Existing Fonebak Share Capital.The Placing is conditional, inter alia, on the Offer becoming or being declaredunconditional in all respects (save only for Admission) and on Admission. KBC Peel Hunt is satisfied that the necessary financial resources are availableto Fonebak to enable it to satisfy in full in cash the consideration payable byFonebak under the Offer. 3. Background to and reasons for the Offer Fonebak Shares were admitted to trading on AIM in March 2005 with the intentionof Fonebak becoming an outsourced service provider to the mobiletelecommunications sector by offering its clients a fully integrated solutionfor the full life cycle of products. The solution offered by Fonebak complieswith both product sale and environmental legislation, whilst also contributingto client cost reduction programmes. It protects and enhances client brands bothnationally and internationally. Initially, Fonebak's business was focused on mobile phones, but it was intendedto extend the business model to other technology and communication products inthe future. This strategy has been actively pursued and, following theacquisitions of Intec Group Limited and the Stoke based mobile phone repair andadministration business from DSG Retail Limited ("DSG"), Fonebak now offers afull spectrum of post product sale outsourced services to the mobiletelecommunications sector. The Fonebak Directors believe that the acquisition ofCRC represents an opportunity to: • achieve a further increase in the scale of the Fonebak Group's business and benefit from the associated economies of scale by: o extending the Fonebak business model to the CRC Group's client base; o accelerating the roll out of Fonebak's European footprint utilising the CRC Group's current European infrastructure; and o sharing resources and exploiting synergies created by the Enlarged Group and maximising the efficiencies of the operating infrastructure; • improve profitability and cash flow by offering a "one-stop" pan-European capability for full life cycle product management across an expanded set of technologies, thereby producing market leadership from existing fragmentation; and • reinforce Fonebak's position as a market leader in environmental management services for the mobile telecommunications sector. Immediately upon completion of the Offer, Fonebak intends to commenceintegration of the business of the CRC Group with its existing operations, whichwill involve, inter alia: • continuing with the current restructuring plan being implemented by the CRC Group; • combining the expertise and knowledge of the management and staff of Fonebak with those of CRC to create a strong team to manage and control the Enlarged Group as evidenced by the proposed appointment of Gary Stokes, the current Chief executive of CRC, to be Chief executive of the Enlarged Group; • integrating, where appropriate, the operations of the Fonebak Group and the CRC Group; • realisation of CRC corporate cost savings of approximately £1 million on an annualised basis; and • reducing the operating costs of the combined businesses. The Fonebak Directors believe that the acquisition of CRC should presentopportunities for the Enlarged Group to accelerate its strategy and provide afull service model solution for the converging telecommunications, personalcomputing and media product sectors. In addition, the Enlarged Group will be well positioned to enter the growingoutsourced electronic devices service market both in the UK and across Europe,particularly in the context of the implementation of the WEEE Directive acrossEurope. This European Directive is designed to reduce the quantity of waste fromelectrical and electronic products and increase re-use, recovery and recyclingfrom private households The WEEE Directive will place a number of operating andreporting requirements on both producers and distributors/retailers ofelectronic equipment from the time that it comes into force, which is expectedto be January 2007. The Fonebak Group already has systems and procedures inplace to support clients in meeting their obligations under the Directive. The proposed acquisition of CRC is not expected to have any impact on theFonebak Group's earnings for the current year but is expected to materiallyenhance earnings in the first full year following completion of the acquisition.This statement does not constitute a profit forecast and should not beinterpreted to mean that earnings for the year to 30 June 2007 or 30 June 2008and or any subsequent financial period would necessarily be greater than thosefor any preceding financial period. 4. Background to and reasons for recommending the Offer Background to recommending the Offer The CRC Directors believe that the terms of the Offer represent an opportunityfor CRC Shareholders to realise their investment in cash, providing certainty ofvalue after a challenging period for the CRC Group. Since the second half of 2005, the CRC Group has experienced a number ofset-backs, of both a trading and non-trading nature, which have adverselyimpacted its business. Following an encouraging start to 2005, the CRC Groupexperienced a decline in trading performance as certain customers deferredbusiness with CRC and weak market conditions impacted the UK business inparticular. In addition an adverse business mix, shifting towards lower margintype products, also reduced profitability. These weaknesses highlightedunderlying issues in the CRC Group which have become more evident through 2006. In addition the CRC Group has experienced some significant customer losses ,notably the notification in January 2006 that Unipart Logistics Limited ("UTL")intends to take Vodafone's repair business in the UK back in house during 2007and the collapse of BenQ Mobile GmbH's Italian operations which led to theadministration of CRC's Italian operations. A wrongful disposal of stock belonging to a major customer was a significantnon-trading issue for the CRC Group in early 2006 and indicated the requirementfor CRC to improve its financial and operational controls. On 26 May 2006 CRC announced that the new executive team, under the leadershipof Gary Stokes, had completed a thorough review of the business, the defining ofa restructuring plan and the trading outlook for the remainder of the year. Thisled to the conclusion that CRC anticipated making a pre tax loss for the fullyear. Since then this new management team, including David Kelham, the newly appointedChief Financial Officer, who joined on 6 June 2006, have made progress instabilising the CRC Group's business and in identifying and addressing theissues giving rise to the difficulties in the CRC Group's strategy. However,while there are signs of recovery and new sales opportunities have presentedthemselves, including new contracts secured with Tom Tom, Sony, Epson, Lipman,ACER, Wistron and Toshiba, risks remain in the execution of the restructuringplan, particularly given the relatively high indebtedness of the business andCRC's weakened capital base. Furthermore, in order to continue theimplementation of the restructuring plan on a stand alone basis, the managementteam concluded that a refinancing of the business would be required, includingthe injection of further equity funding from shareholders and the continuedsupport of the CRC Group's bank. On 30 June 2006 it was announced that CRC had received an early stage expressionof interest from a party in making an offer for the entire issued share capitalof CRC. The announcement stated that the Board was also considering otherstrategic options to maximise CRC Shareholder value, including a standalonerestructuring plan and its additional funding requirements. Following a thorough review of the expressions of interest received since thenand the other options available to CRC, the CRC Board has concluded that, inlight of the risks associated with the CRC Group's standalone restructuring planand the requirement for a substantial injection of equity into the business inorder to implement the plan, a strategic offer for CRC would deliver morecertain value for CRC Shareholders than if the CRC Group remained independent. Reasons for recommending the Offer Accordingly the Board believes the Offer to be in the best interests of CRCShareholders and has, for the following reasons, concluded that the Offer isfair and reasonable: • despite the progress made by the new management team over recent months, there are still many challenges to overcome. The execution of the recovery plan is essential to the future prospects of the CRC Group and carries with it uncertainty as to its success; • while management has identified further opportunities for the CRC Group, the risks in exploiting them are significant for a business of the CRC Group's size and indebtedness and would require a refinancing of the business and the continuing support of the CRC Group's bank; • the technology repair market has been consolidating across Europe. The weakened financial state of the CRC Group means that it is not able to act as a consolidator in the technology repair market and cannot provide the same breadth of support as certain of its competitors; • by being part of a larger group, the CRC Group should be able to compete more effectively in the technology repair market, benefiting from the Fonebak Group's refurbishment and end of life re-use and recycling capabilities and complementary geographic footprint; • the CRC Board has explored a number of expressions of interest and has also reviewed the alternative of a standalone restructuring plan with the CRC Group remaining independent and concluded that the Offer represents the best way of delivering certainty of value to CRC Shareholders, particularly given the requirement for a refinancing of the business including an injection of equity if a stand alone plan were to be pursued; • the CRC Board believes that the cash offer from Fonebak provides immediate certainty of value to CRC Shareholders at a level that is unlikely to be achieved by CRC Shareholders in the near future. The Offer represents a premium of approximately 78.6 per cent. to the closingmiddle market price of 28 pence per CRC Share on 29 June 2006, the Business Dayprior to the announcement that CRC had received preliminary approaches which mayor may not lead to an offer for the issued and to be issued share capital ofCRC. 5. Irrevocable undertakings Fonebak has received irrevocable undertakings to accept the Offer from each ofthe CRC Directors who holds CRC Shares and from certain persons connected withthe CRC Directors in respect of, in aggregate, 1,181,111 CRC Shares,representing approximately 4.8 per cent. of the Existing CRC Share Capital.These irrevocable undertakings, which require each person who has given one toaccept or procure the acceptance of the Offer in respect of the number of CRCShares which are the subject of the irrevocable undertaking, will continue to bebinding in the event of a competing offer for CRC. In addition, Fonebak has received an irrevocable undertaking to accept the Offerfrom another CRC Shareholder in respect of a further 2,534,021 CRC Shares,representing approximately 10.3 per cent. of the Existing CRC Share Capital.This irrevocable undertaking will remain binding unless a third party announcesa competing offer for CRC which values each CRC Share at a price greater thanten per cent. higher in value than the Offer Price. Accordingly, Fonebak has received irrevocable undertakings to accept the Offerin respect of, in aggregate, 3,715,132 CRC Shares representing approximately15.1 per cent. of the Existing CRC Share Capital. Fonebak has also received a letter from INVESCO Asset Management Ltd ("IAML"), aCRC Shareholder, confirming its current intention, following the posting of theOffer Document to accept (or to use all their reasonable endeavours to procureacceptance of) the Offer in respect of a further 3,427,500 CRC Shares,representing 13.9 per cent. of the Existing CRC Share Capital. They reservetheir right to revise their current intention in light of any additionalinformation at any time. The letter is not legally binding. To the extent thatIAML ceases to control any or all of these shares, the letter will cease toapply to such shares. Further details of these irrevocable undertakings to accept the Offer will beset out in the Offer Document. 6. Inducement fee As part of the negotiations between CRC and Fonebak, CRC entered into aninducement fee arrangement with Fonebak on 3 October 2006. The inducement fee,which is equal to one per cent. of the fully diluted value of CRC at the OfferPrice (inclusive of irrecoverable VAT, if any), is payable by CRC to Fonebak incertain events including, inter alia, CRC breaching the terms of the exclusivityagreement between CRC and Fonebak dated 3 October 2006; the CRC Directors, orany independent committee of the Board, withdrawing or modifying, in a manneradverse to Fonebak, its recommendation to CRC Shareholders in respect of theOffer; or any person or entity (other than Fonebak) making a higher competingoffer which is recommended by the CRC Directors. Nothing in the agreement shalloblige CRC to pay any amount which the Panel determines would not be permittedby Rule 21.2 of the Code. Pursuant to Rule 21.2 of the Code, Rothschild and CRC have confirmed to thePanel that they consider the terms of the inducement fee to be in the bestinterests of CRC Shareholders. Further details relating to the inducement fee will be set out in the OfferDocument. 7. Information on the Fonebak Group The Fonebak Group is a leading outsource service provider for mobile phonehandset services, including fulfilment, repair, resale, recycling andenvironmental support services. It offers an end-to-end solution for the fulllife cycle of mobile phone handsets and associated products, which complies withproduct sale and environmental legislation. It works together with its clients (mobile phone network operators, manufacturers, retailers, charities andcorporate clients) to deliver a range of solutions that support their customeracquisition and retention strategies and cost reduction programmes, and supportsand protects its customers' brands both nationally and internationally. Theservice encompasses stock management, back office, call centre andadministration support, repair and refurbishment, product resale andenvironmental management. The services provided are intended to positively impact customer perception ofthe Fonebak Group's clients' organisations and to generate financial returns forthem, rather than incurring net costs. Clients use the services to support theirenvironmental and corporate responsibility policies. Since 1 July 2002, theFonebak Group has processed approximately ten million mobile phones for re-useand recycling, approximately 3.5 million of which were processed in the 12months to 30 November 2006. The Fonebak Group is responsible for managing each repair, refurbishment orrecycling project to ensure that its clients' needs are met and financialreturns are maximised whilst meeting environmental regulatory requirements. Thiscan range from developing marketing campaigns and setting up software systems tocollections in retail outlets and providing a complete audit trail of allproducts received. The Fonebak Group has invested significant amounts in systemsand software and offers its clients a range of online tools including softwarefor recording and facilitating the receipt and payment for mobile phonesreturned during their trade-in processes and software to facilitate marketingcampaigns. Following repair and/or refurbishment, mobile phones are repackaged and thensold to retailers and distributors predominantly in Africa and the Asia Pacificregion. In these regions, mobile phones are not normally subsidised by thenetwork providers and new handsets are usually prohibitively expensive for themajority of the population. The Fonebak Directors believe that the business model is a showcase for thetelecommunications industry, complying with current legislation including theforthcoming WEEE Directive, which sets guidelines and targets for the take-backand recycling of potentially harmful electrical waste. This European Directiveis designed to reduce the quantity of waste from electrical and electronicproducts and increase re-use, recovery and recycling from private households. Fonebak's acquisition of Intec Group Limited in July 2005 and DSG's Stoke basedmobile phone repair and administration business in September 2006 extended theFonebak Group's support services activities to include call centre and insuranceadministration and fulfilment services for both mobile phones and other digitalproducts. The Fonebak Group has an experienced international sales team with a wide rangeof technical sales expertise and market knowledge. The customer base, whichtypically includes small to medium sized retailers and distributors, ispredominantly drawn from Africa and the Asia Pacific region. The Fonebak Groupis committed to the development of new markets and to the continual expansion ofits client base. In addition, the Fonebak Group has experience with highsecurity shipping and consignments can often be shipped within 24 hours. In 2005, Fonebak opened a new logistics hub in France (Lille) and three newmarketing offices in Portugal (Lisbon), Italy (Rome) and Turkey (Istanbul). Regulatory and market drivers Fonebak supports clients in all aspects of current and forthcoming environmentalcompliance, including waste transfer regulations, duty of care responsibilities,special waste regulations and the forthcoming WEEE Directive. The WEEE Directivedirectly affects the electronics sector in the UK and Europe. In the UK, theregulations are anticipated to come into effect in January 2007. The WEEE Directive deals with both the recovery of electrical goods and the safetreatment of the products received with verified recycling rates. The FonebakGroup's integrated service already meets all of the criteria in relation tomobile phone handsets and accessories with established, well-publicisedtake-back mechanisms, product tracking and reporting that includes a provenrecycling rate which meets the 65 per cent. recycling rate specified within theregulations. Protection of the environment is central to the Fonebak Group's businessstrategy and accordingly an environmental management system has been developedto ISO 14001 standards. The system has been incorporated into all operations toensure that environmental risk is managed, minimised and measured to enableannual public reporting of the Fonebak Group's environmental performance. Allother systems in the UK and Romania are also certified to ISO 14001. Competition The Fonebak Directors believe that Fonebak leads the re-use and recycling marketfor mobile phones in the UK. Competitors are mainly small operators, independentbrokers and various charity collectors. The European market is still developingand competition is fragmented. The Fonebak Directors believe that Fonebak has the following key strengths whichcreate barriers to entry: • long established relationships with network operators; • software systems developed specifically to provide product tracking and reporting; • established environmental reputation; • project management skills that combine market awareness with in-depth environmental awareness and compliance; • an international sales team with market knowledge, relationships and technical expertise; • cost effective refurbishment capability with substantial expansion capacity; • technical capabilities; and • an integrated offering providing full life cycle services. Financial information In the year ended 30 June 2006, Fonebak reported an audited consolidatedoperating profit before exceptional items and goodwill amortisation of £3.75million on turnover of £60.4 million. This yielded a profit on ordinaryactivities before taxation, exceptional items and goodwill amortisation of £3.3million. Consolidated net assets as at 30 June 2006 were £16.0 million. 8. Information on the CRC Group The CRC Group provides technology repair services to service providers andmanufacturers in the communications and IT industries for electronic productsand technologies used in the home, in the work place and on the move.Approximately 50 per cent. of current year revenues are derived from the repairand servicing of mobile handsets, approximately 25 per cent. from the repair andservicing of digital set top boxes and the balance from the repair and servicingof IT equipment which includes cash dispensers (ATM's), chip and pin equipment,laptops and computer peripherals. The business Originally established in 1984 as a division of distribution group Memec GroupHoldings Limited, CRC was acquired by the then management team in 1994 andsubsequently admitted to trading on AIM on 14 November 1997. A number of key acquisitions took place between 1998 and 2005, including:Automated Integrated Diagnosis Limited; Communication Repair Centre (UK)Limited; the repair centre of Siemens Business Services GmbH, an unincorporatedbusiness, using CRC (Deutschland) GmbH; the Wincor Nixdorf Engineering Centre,an unincorporated business, using CRC (Grossbeeren) GmbH; ADP Technical ServicesLimited; Teleca Telephone Service S.p.A ("Teleca"); and Kronos 2002 S.r.l("Kronos"). As a result, by the start of 2006, the CRC Group had established a network ofeleven repair sites across Europe. These were in Glenrothes in Scotland;Nottingham, Huntingdon and Thame in England; Warsaw in Poland; Catania, Milan,Reggio Emilia and Rome in Italy; and Paderborn and Grosbeeren in Germany. Until early 2006, the CRC Group's business was organised between itscommunications division and its information technology division. Thecommunications division, focused on the repairs of mobile phones for customerssuch as Siemens, Sony Ericsson, Nokia, Motorola and Vodafone. The informationtechnology division, serviced a broad range of products including ATMs, digitalset-top boxes, computers and other technology products for customers such asFujitsu Siemens, NTL/Telewest, Wincor Nixdorf and Apple. In the second half of 2005, CRC reported a decline in trading performancefollowing the deferral of business from certain customers, notification of anumber of contract losses and an adverse shift in the product mix which resultedin lower margins being experienced in the communications division. In January 2006 CRC received notice from Vodafone that it would be outsourcingall UK mobile phone reverse logistics to UTL, including repair, with theconsequence that the CRC Group's business with Vodafone undertaken at theNottingham facility would be transferred to UTL's own logistics centre. Whilethe impact of the Vodafone decision will not be felt until 2007, the transferwill significantly reduce the revenues and profits of the CRC Group if it isfully implemented. In February 2006, the CRC Group announced that it had discovered tradingactivities in one part of the business that included the wrongful disposal ofstock held on behalf of a third party. Following a comprehensive investigationit was confirmed that the activity was confined to a handful of employees in onebusiness unit and that within the rest of the CRC Group's business no furtheruntoward stock or other such trading issues were identified. Subsequently CRCreinstated the customer to its original position, and the transactions andcorrective actions were reflected fully in the 2005 audited accounts. Given these difficulties a new management team was appointed in the first halfof 2006, the divisional management structure was removed and the remainingcorporate functions downsized and replaced with a leaner country basedmanagement structure. The Chief Executive, Gary Stokes, supported by the ChiefFinancial Officer, David Kelham, undertook a thorough review of the CRC Group,its business and opportunities. As a result a number of underperforming and lossmaking units were identified which needed to be addressed. In August 2006 the closure of the Thame site was announced. Headcount at theHuntingdon site has also been reduced to reflect the current level of activitywhilst capacity and space at Glenrothes are being increased to accommodate workdisplaced from other sites as well as additional volumes from new businessdevelopment activities. The combined impact of these factors has been lower sales on a year on yearbasis for the UK business with a consequent negative impact on profits althoughoperational improvements amounting to at least £4.0 million per annum on anannualised basis have been achieved. A goodwill impairment charge amounting to£4.9 million relating to the UK mobile phone repair business was recorded in theinterim accounts to June 2006. The trading performance of CRC Italia (the business formed by the merger ofTeleca and Kronos in June 2006) since acquisition had been disappointing. Anumber of customers withdrew their business in 2005, and the two principalcustomers suffered a fall in market share which adversely affected the residualbusiness. CRC Italia struggled to acquire new customers quickly enough toreplace these volume shortfalls. To recover the situation the management of CRCItalia commenced a significant restructuring of the business in early 2006. Actions taken to improve the performance of the businesses included the closureof the Catania site, the relocation to a lower cost centre in Milan and therecruitment of additional sales resource to secure more business. Despite these actions, the Italian businesses continued to sustain losses whichrequired significant funding in order to enable it to continue trading. Giventhe deteriorating position in Italy the CRC Board sanctioned the appointment ofadvisors to explore the possibility of the sale of the business. However, inOctober 2006 CRC was notified of the collapse of BenQ Mobile GmbH, the principalcustomer to CRC Italia representing approximately 50 per cent. of CRC Italia'srevenues. Despite efforts to secure the future of CRC Italia the CRC Board couldnot justify the commitment of any further funding to Italy given the increasinglosses, and consequently on 2 November 2006 CRC announced that the board of CRCItalia had decided to make an application to the relevant authorities to appointan administrator. A non-cash charge of £2.1 million was made to cover the write down of loans madeto CRC Italia since its acquisition, and a further charge of £0.5 million wasmade to cover other potential liabilities. The goodwill arising on theacquisition of CRC Italia (£5.4 million) had been written off in the interimaccounts to June 2006. Previously the CRC Group has commented that the German operations haveexperienced price pressures leading to a decline in margins although contractshave now been renewed with the main customers, Fujitsu Siemens and WincorNixdorf. In order to compete more effectively in Germany, options to reduceoperating costs are currently being explored and negotiations have commencedwith the Works Councils in Paderborn and Grosbeeren. Financial information On 20 March 2006, CRC published the CRC Group's results for the year ended 31December 2005. In this period, CRC reported audited consolidated turnover of£78.8 million (2004: £69.3 million) and consolidated operating profit beforeamortisation of goodwill and exceptional items of £3.1 million (2004: £5.6million). As at 31 December 2005, the CRC Group had consolidated net assets of£24.5 million. In addition, on 29 September 2006, CRC announced the CRC Group's unauditedinterim results for the six months ended 30 June 2006. In this period, CRCreported CRC Group consolidated turnover of £38.4 million (six months ended 30June 2005: £38.0 million) and operating profit before amortisation of goodwilland exceptional items of £0.1 million (six months ended 30 June 2005: £3.0million). As at 30 June 2006, the CRC Group had consolidated net assets of £10.4million. 9. CRC Share Schemes The Offer extends to any CRC Shares unconditionally allotted or issued whilstthe Offer remains open for acceptance (or such earlier date as Fonebak may,subject to the Code, determine, such earlier date not, without the consent ofthe Panel, being earlier than the date on which the Offer becomes unconditionalas to acceptances or, if later, the first closing date) as a result of theexercise of options granted under the CRC Share Schemes or otherwise. In the event that the Offer becomes or is declared unconditional in allrespects, Fonebak will write to the participants in the CRC Share Schemes toinform them of the effect of the Offer on their rights under the CRC ShareSchemes and to set out appropriate proposals to be made in respect of theiroptions. It should be noted, however, that the exercise price of all the optionsgranted by CRC are all greater than the Offer Price. 10. CRC management and employees The CRC Board are pleased to confirm that the Fonebak Board has given assurancesthat, following the Offer becoming or being declared unconditional in allrespects, the existing employment rights, including pension rights, of allemployees and management of the CRC Group will be fully safeguarded. Fonebakintends to continue the implementation of the restructuring plans alreadyannounced by CRC during 2006, following the Offer becoming unconditional, astrategy which the CRC Board supports. In the medium term an evaluation of thebusiness of the CRC Group (having regard to the business needs and operationalefficiencies of the Enlarged Group) will be undertaken by Fonebak. All of the non-executive CRC Directors (namely; Jan Astrand, David Bird, RobertGogel and Pat Thompson) have agreed to resign upon the Offer becoming or beingdeclared unconditional in all respects. Each will receive a termination paymentequal to his contractual notice entitlement, further details of which will beset out in the Offer Document. Following the Offer becoming or being declaredunconditional in all respects, Fonebak intends to appoint new directors to theboard of CRC as replacements for the non-executive directors. David Kelham (Chief Financial Officer) has also agreed to resign following theOffer becoming or being declared unconditional in all respects. A compromiseagreement reflecting his entitlement under his employment contract was enteredinto on 13 December 2006 with CRC and the payments to be made under hiscontractual entitlement will be set out in the Offer Document. The compromiseagreement and payment due under the terms of the agreement are conditional onthe Offer becoming or being declared unconditional in all respects. David Kelham has agreed to assist with transitional arrangements for a shortperiod following the Offer becoming or being declared unconditional,notwithstanding that his current employment will terminate immediately upon theOffer becoming or being declared unconditional in all respects. David willprovide services to the Enlarged Group on agreed terms, further details of whichwill be set out in the Offer Document. Upon the Offer becoming or being declared unconditional Gary Stokes, currentChief Executive Officer of CRC, will be appointed as Chief Executive Officer ofthe Enlarged Group. Gary Stokes will enter into a new service agreement withFonebak on substantially the same terms and conditions as his current agreement,save that he will be granted options over 500,000 Fonebak Shares. Pursuant to a resolution of the remuneration committee of the CRC Board dated 29June 2006, it was agreed that as the share options held by each of Gary Stokesand David Kelham over CRC Shares were significantly below the option price, suchoptions provided no incentive or benefit to the individuals. The remunerationcommittee of the CRC Board resolved to cancel the existing options and awarded abonus of £100,000 to Gary Stokes and £70,000 to David Kelham payable, in eachcase, on either the successful sale or refinancing of CRC in recognition of theeffort and commitment demonstrated by those individuals to effect such a sale orrefinancing. The bonus, is payable, in each case, in two equal instalments, thefirst when a contractually binding agreement has been signed relating to a saleof share capital or other change of control and the second when the transactionis complete, or, in the case of re-financing, the first when an arrangement hasbeen made the subject of written agreement and the second when drawdowncommences or additional share capital is received. The CRC Board intends to makethese payments in full upon the Offer becoming wholly unconditional. 11. Compulsory acquisition and cancellation of trading If the Offer becomes or is declared unconditional in all respects, Fonebakintends to procure the making of an application by CRC as soon as it isappropriate to do so to cancel admission to trading of the CRC Shares on AIM. Itis anticipated that such cancellation of admission to trading will take effectno earlier than 20 Business Days after the Offer becomes or is declaredunconditional in all respects. Such cancellation would significantly reduce theliquidity and marketability of any CRC Shares not acquired by Fonebak pursuantto the Offer. If Fonebak receives acceptances under the Offer in respect of, and/or otherwiseacquires, 90 per cent. or more of the CRC Shares to which the Offer relates andthe Offer becomes or is declared unconditional in all respects, Fonebak intendsto exercise its rights pursuant to the provisions of sections 428 to 430F(inclusive) of the Companies Act to acquire compulsorily any remaining CRCShares to which the Offer relates and which are not acquired or agreed to beacquired by Fonebak pursuant to the Offer on the same terms as the Offer. If the Offer becomes or is declared unconditional in all respects, Fonebak willseek to procure the re-registration of CRC as a private company in due course. 12. Expected timetable of principal events First closing date of the Offer 10 January 2007Fonebak extraordinary general meeting 10.00 a.m on 11 January 2007Admission and commencement of dealings in the Placing Shares on 18 January 2007AIM*CREST stock accounts credited in respect of Placing Shares to 18 January 2007be held in uncertificated form*Despatch of definitive share certificates in respect of Placing 25 January 2007Shares to be held in certificated form* * The above times and dates assume that the Offer becomes or is declaredunconditional in all respects (other than in respect of Admission) immediatelyfollowing the Fonebak extraordinary general meeting referred to above. In theevent that any of the dates set out in the Expected timetable of principalevents set out above is changed, Fonebak will notify such amended dates througha Regulatory Information Service and to shareholders of CRC and Fonebak asappropriate. Enquiries:Fonebak 01708 683 400Gordon Shields (Non-executive Chairman)Arthur Crocker (Finance Director) KBC Peel Hunt (Financial Adviser, Nominated Adviser and brokerto Fonebak) 0207 418 8900Jonathan MarrenGordon SuggettOliver Stratton Pelham Public Relations (PR adviser to Fonebak) 0207 743 6670James HendersonCharles VivianPhilip Dennis CRC 01844 261 900Gary Stokes (Chief Executive Officer)David Kelham (Chief Financial Officer) Rothschild (Financial Adviser and Nominated Adviser to CRC) 0121 600 5252Roger Hemming Weber Shandwick Square Mile (PR adviser to CRC) 020 7067 0700Chris Lynch Appendix I contains certain of the terms and conditions of the Offer. AppendixII contains a loss forecast from CRC. Appendix III contains the sources andbases of information contained in this announcement. Appendix IV containsdefinitions of certain terms used in this announcement. KBC Peel Hunt, which is authorised and regulated by the Financial ServicesAuthority in the United Kingdom, for investment business activities, is actingas financial adviser, to Fonebak in connection with the Offer and no one else,and will not be responsible to anyone other than Fonebak for providing theprotections afforded to clients of KBC Peel Hunt nor for providing advice inrelation to the Offer, or any arrangement referred to herein. KBC Peel Hunt has given and not withdrawn its written consent to the release ofthis announcement with the inclusion of the reference to its name in the formand context in which it is included. Rothschild, which is authorised and regulated by the Financial ServicesAuthority in the United Kingdom, is acting for CRC and no one else in relationto the Offer and will not be responsible to anyone other than CRC for providingthe protections afforded to clients of Rothschild nor for providing advice inrelation to the Offer or any arrangement referred to herein. Rothschild has given and not withdrawn its written consent to the release ofthis announcement with the inclusion of the reference to its name in the formand context in which it is included. KPMG Audit Plc has given and not withdrawn its written consent to the release ofthis announcement with the inclusion of its name and letter in the form andcontext in which they are included. The Fonebak Directors accept responsibility for the information contained inthis announcement other than that relating to the CRC Group, the CRC Directorsand members of their immediate families, related trusts and persons connectedwith them. To the best of the knowledge and belief of the Fonebak Directors (whohave taken all reasonable care to ensure that such is the case), the informationcontained in this announcement for which they are responsible is in accordancewith the facts and does not omit anything likely to affect the import of suchinformation. The CRC Directors accept responsibility for the information contained in thisannouncement relating to the CRC Group, the CRC Directors and members of theirimmediate families, related trusts and persons connected with them. To the bestof the knowledge and belief of the CRC Directors (who have taken all reasonablecare to ensure that such is the case), the information contained in thisannouncement for which they are responsible is in accordance with the facts anddoes not omit anything likely to affect the import of such information. The release, publication or distribution of this announcement in jurisdictionsother than the United Kingdom may be restricted by law and therefore persons insuch jurisdictions into which this announcement is released, published ordistributed should inform themselves about, and observe, such restrictions. Anyfailure to comply with the restrictions may constitute a violation of thesecurities laws of any such jurisdiction. The Offer is not being made, directly or indirectly, in or into, or by use ofthe mails, or by any means or instrumentality (including, without limitation,facsimile transmission, internet, email, telex or telephone) of interstate orforeign commerce, or of any facility of a national securities exchange, of anyof the Excluded Territories and cannot be accepted by any such use, means,instrumentality or facility or from within any of the Excluded Territories. Neither the Offer nor the Placing constitutes an offer of securities for sale,or the solicitation of an offer to buy securities in any Excluded Territory andthe new Fonebak Shares to be issued pursuant to the Placing have not been andwill not be registered under the United States Securities Act of 1933, or underthe laws of any state, district or other jurisdiction of the United States or ofan Excluded Territory and no regulatory clearances in respect of new FonebakShares have been or will be, applied for in any jurisdiction. Accordingly,unless an exemption under the US Securities Act of 1933 or other relevantsecurities laws is applicable, the new Fonebak Shares are not being, and may notbe offered, sold, resold, delivered or distributed, directly or indirectly, inor into the United States or any of the Excluded Territories or to, or for theaccount or benefit of, any US person or person resident in any of the ExcludedTerritories. The Announcement contains a number of forward-looking statements relating to theFonebak Group and the CRC Group with respect to, among others, the following:financial condition; results of operations; the business of the Enlarged Group;future benefits of the acquisition of the CRC Shares pursuant to the Offer; andmanagement plans and objectives. Fonebak and CRC consider any statements thatare not historical facts as "forward-looking statements". They involve a numberof risks and uncertainties that could cause actual results to differ materiallyfrom those suggested by the forward-looking statements. Important factors thatcould cause actual results to differ materially from estimates or forecastscontained in 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 the Fonebak Group and the CRCGroup, or of other future acquisitions, are greater than expected; expected costsavings from the transaction or from other future acquisitions are not fullyrealised or realised within the expected time frame; competitive pressures inthe industry increase; general economic conditions or conditions affecting therelevant industries, whether globally or in the places where the Fonebak Groupand the CRC Group conduct business are less favourable than expected, and/orconditions in the securities market are less favourable than expected. The Announcement does not constitute an offer to sell or an invitation topurchase any securities or the solicitation of an offer to purchase anysecurities, pursuant to the Offer or otherwise. The Offer will be made solely bythe Offer Document and, in the case of CRC Shares in certificated form, the Formof Acceptance accompanying the Offer Document, which will contain the full termsand conditions of the Offer, including details of how the Offer may be accepted. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of CRC all "dealings" in any "relevant securities" of thatcompany (including by means of an option in respect of, or a derivativereferenced to, any such "relevant securities") must be publicly disclosed by nolater than 3.30 pm (London time) on the Business Day following the date of therelevant transaction. This requirement will continue until the date on which theOffer becomes, or is declared, unconditional as to acceptances, lapses or isotherwise withdrawn or on which the "offer period" otherwise ends. If two ormore persons act together pursuant to an agreement or understanding, whetherformal or informal, to acquire an "interest" in "relevant securities" of CRCthey 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 CRC by CRC or by Fonebak, or by any of their respective"associates", must be disclosed by no later than 12.00 noon (London time) on theBusiness Day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, 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 on thePanel's website. If you are in any doubt as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. APPENDIX I - CONDITIONS OF THE OFFER Conditions of the Offer The Offer is subject to the following conditions: 1. Acceptances Valid acceptances being received (and not, where permitted, withdrawn) by nolater than 1.00pm on the first closing date of the Offer (or, subject to theCode or with consent of the Panel, such later time(s) and/or dates(s) as Fonebakmay decide) in respect of not less than 90 per cent. (or such lesser percentageas Fonebak may, subject to the Code, decide with the prior approval of KBC PeelHunt (under the Placing Agreement) and KBC Bank (under the FacilitiesAgreement)) of the voting rights carried by the CRC Shares to which the Offerrelates. However, this condition will not be satisfied unless Fonebak and/or itswholly owned subsidiaries have acquired or agreed to acquire (whether pursuantto the Offer or otherwise) CRC Shares carrying, in aggregate, over 50 per cent.of the voting rights then normally exercisable at general meetings of CRCincluding, for this purpose, to the extent (if any) required by the Code, thevoting rights attaching to any CRC Shares which may be unconditionally allottedor issued before the Offer becomes or is declared unconditional as toacceptances whether pursuant to the exercise of any outstanding subscription orconversion rights or otherwise. In this condition: 1.1 the expression "CRC Shares to which the Offer relates" shall beconstrued in accordance with sections 428 to 430F (inclusive) of the CompaniesAct; and 1.2 CRC Shares that cease to be held in treasury are "CRC Shares towhich the Offer relates"; and 1.3 CRC Shares which have been unconditionally allotted but not issued shall bedeemed to carry the voting rights which they will carry when they are issued;and 1.4 valid acceptances shall be treated as having been received in respect of anyCRC Shares that Fonebak and/or its wholly owned subsidiaries shall, pursuant tosection 429(8) and, if applicable, section 430E of the Companies Act, be treatedas having acquired or contracted to acquire by virtue of acceptances of theOffer. 2. Shareholder approval and Admission of Placing Shares 2.1 The passing at an extraordinary general meeting of Fonebak (or anyadjournment thereof) of such resolutions as may be necessary to approve,implement and effect the Placing and the issue of the Placing Shares; and 2.2 the admission of the Placing Shares to trading on AIM becoming effective inaccordance with the AIM Rules. 3. Authorisations 3.1 All authorisations in any jurisdiction which Fonebak reasonably considersnecessary or appropriate for, or in respect of, the Offer, its implementation orany acquisition of any shares in, or control of, CRC or any other member of theWider CRC Group by any member of the Wider Fonebak Group having been obtained interms and in a form satisfactory to Fonebak (acting reasonably) from anyrelevant person or from any person or body with whom any member of the Wider CRCGroup has entered into contractual arrangements and all such authorisationsremaining in full force and effect and there being no intimation of anyintention to revoke, suspend, restrict, modify or not renew the same. 3.2 All authorisations which Fonebak reasonably considers necessary to carry onthe business of any member of the Wider CRC Group remaining in full force andeffect and there being no intimation of any intention to revoke or not to renewthe same. 3.3 All filings which Fonebak reasonably considers necessary having been madeand all applicable waiting and other periods having expired, lapsed or beenterminated and all applicable statutory or regulatory obligations in anyjurisdiction having been complied with. 4. Regulatory Intervention No relevant person having taken, instituted, implemented or threatened anyaction, proceeding, suit, investigation, enquiry or reference or having made,proposed or enacted, any statute, regulation, order or decision or taken anyother measures or steps or required any action to be taken or information to beprovided and there not continuing to be outstanding any statute, regulation,order or decision that would or might reasonably be expected to: 4.1 make the Offer, its implementation or the acquisition or proposedacquisition of any shares in, or control or management of, the Wider CRC Groupby Fonebak illegal, void or unenforceable in any jurisdiction; or 4.2 otherwise directly or indirectly prevent, prohibit or otherwise materiallyrestrict, restrain, delay or interfere in the implementation of or imposeadditional conditions or obligations with respect to or otherwise impede,challenge or interfere or require amendment of the Offer or the proposedacquisition of CRC by Fonebak or any acquisition of shares in CRC by Fonebak orany acquisition of control or management of CRC or the Wider CRC Group byFonebak; or 4.3 require, prevent or delay the divestiture by Fonebak of any shares or othersecurities in CRC in any such case in a manner or to an extent which would bematerial in the context of the Wider CRC Group or Wider Fonebak Group taken as awhole; or 4.4 limit or delay or impose any limitation on the ability of any member of theWider Fonebak Group or any member of the Wider CRC Group to acquire or hold orexercise effectively, directly or indirectly, any rights of ownership of sharesor other securities or the equivalent in any member of the Wider CRC Group ormanagement control over any member of the CRC Group in any such case in a manneror to an extent which is material to Fonebak in the context of the Offer or asthe case may be, in the context of the Wider Fonebak Group or the Wider CRCGroup taken as a whole; or 4.5 require, prevent or delay the disposal by CRC, or require the disposal oralter the terms of any proposed disposal by any member of the Wider CRC Group,of all or any material part of their respective businesses, assets or propertiesor impose any limitation on the ability of any of them to conduct theirrespective businesses or own their respective assets or properties in each casein a manner or to an extent which would be material and adverse in the contextof the CRC Group taken as a whole; or 4.6 limit the ability of Fonebak or any member of the Wider CRC Group to conductits business, or any part of it, with the businesses or any part of thebusinesses of any member of the Wider CRC Group or Wider Fonebak Group in anysuch case to an extent which is material in the context of the Wider CRC Groupor the Wider Fonebak Group taken as a whole; or 4.7 require any member of the Wider Fonebak Group or of the CRC Group to offerto acquire any shares or other securities (or the equivalent) in any member ofthe Wider CRC Group owned by any third party (in each case, other than inimplementation of the Offer) where such acquisition would be material to Fonebakin the context of the Offer or as the case may be, in the context of the WiderCRC Group or the Wider Fonebak Group taken as a whole; or 4.8 result in any member of the Wider CRC Group ceasing to be able to carry onbusiness under any name under which it presently does so to an extent which ismaterial to Fonebak in the context of the Offer or, as the case may be, in thecontext of the Wider CRC Group taken as a whole; or 4.9 otherwise materially adversely affect in the context of the CRC Group takenas a whole any or all of the businesses, assets, prospects, financial or tradingposition or profits of any member of the Wider CRC Group; and all applicable waiting and other time periods during which any such relevantperson could institute, implement or threaten any legal proceedings havingexpired, lapsed or been terminated. 5. Consequences of the Offer Save as Publicly Announced or Disclosed there being no provision of anyagreements to which any member of the Wider CRC Group is a party, or by or towhich any such member, or any part of its assets, may be bound, entitled orsubject, which would or might be reasonably expected to, in each case as aconsequence of the Offer or of the acquisition or proposed acquisition of all orany part of the issued share capital of, or change of control or management of,CRC or any other member of the CRC Group result in (to an extent which would bematerial and adverse in the context of the CRC Group taken as a whole): 5.1 any assets or interests of any member of the Wider CRC Group being orfalling to be disposed of or charged in any way or ceasing to be available toany member of the Wider CRC Group or any rights arising under which any suchasset or interest could be required to be disposed of or charged in any way orcould cease to be available to any member of the Wider CRC Group otherwise thanin the ordinary course of business; or 5.2 any moneys borrowed by or other indebtedness or liabilities (actual orcontingent) of, or any grant available to, any member of the Wider CRC Groupbeing or becoming repayable or capable of being declared repayable immediatelyor earlier than the repayment date stated in such agreement or the ability ofsuch member of the Wider CRC Group to incur any such borrowing or indebtednessbecoming or being capable of becoming withdrawn, inhibited or prohibited; or 5.3 any such agreement or the rights, liabilities, obligations or interests ofany such party to it or any such member under it being terminated or adverselymodified or affected or any onerous obligation arising or any adverse actionbeing taken under it; or 5.4 the interests or business of any such member in or with any third party (orany arrangements relating to any such interests or business) being terminated oradversely modified or affected; or 5.5 the financial or trading position or prospects or value of any member of theWider CRC Group being prejudiced or adversely affected; or 5.6 the creation of any mortgage, charge or other security interest over thewhole or any part of the business, property, interests or assets of any memberof the Wider CRC Group or any such mortgage, charge or other security interest(whenever arising or having arisen) becoming enforceable or being enforced; or 5.7 the creation of actual or contingent liabilities by any member of the WiderCRC Group other than in the ordinary course of business; and no event having occurred which, under any provision of any such agreement towhich any member of the Wider CRC Group is a party, or by or to which any suchmember, or any of its assets, may be bound, entitled or subject, could or whichmay reasonably be expected to result in any of the events or circumstances asare referred to in subparagraphs 5.1 to 5.7 inclusive. 6. No corporate action taken since the Accounting Date Since the Accounting Date, save as otherwise Publicly Announced or Disclosed orpursuant to transactions in favour of CRC or a wholly owned subsidiary of CRC,no member of the Wider CRC Group having: 6.1 issued or agreed to issue or authorised or proposed the issue or grant ofadditional shares of any class or securities convertible into or exchangeablefor, or rights, warrants or options to subscribe for or acquire, any such sharesor convertible securities or transferred or sold any shares out of treasury(save pursuant to the CRC Share Schemes); or 6.2 redeemed, purchased, repaid or reduced or proposed the redemption, purchase,repayment or reduction of any part of its share capital or made or proposed themaking of any other change to its share capital or loan capital; or 6.3 recommended, declared, paid or made or proposed to recommend, declare, payor make any dividend, bonus issue or other distribution whether payable in cashor otherwise; or 6.4 merged or demerged with or from, or acquired, any body corporate,partnership or business or authorised or proposed or announced any intention topropose any such merger or demerger; or 6.5 other than in the ordinary course of business acquired or disposed of,transferred, mortgaged or charged, or created or granted any security interestover, any assets (including shares and trade investments) or authorised orproposed or announced any intention to propose any acquisition, disposal,transfer, mortgage, charge or creation or grant of any security interest whichin any case is material in the context of the Wider CRC Group taken as a whole;or 6.6 issued or authorised or proposed the issue of any debentures or incurred orsave in the ordinary course of business, increased any borrowings, indebtednessor liability (actual or contingent) of an aggregate amount which is material inthe context of the Wider CRC Group taken as a whole; or 6.7 entered into, implemented, effected or varied, or authorised or proposed theentry into, implementation or variation of, or announced its intention to enterinto or vary, any transaction, arrangement, contract or commitment (whether inrespect of capital expenditure or otherwise) which is of a long term, onerous orunusual nature or magnitude or could involve an obligation of such nature ormagnitude or which is or could be restrictive to the existing business of anymember of the Wider CRC Group or which is other than in the ordinary course ofbusiness and which in any such case is material in the context of the CRC Grouptaken as a whole; or 6.8 entered into, implemented, effected, authorised or proposed or announced itsintention to enter into, implement, effect, authorise or propose anyreconstruction, amalgamation, scheme, commitment or other transaction orarrangement otherwise than in the ordinary course of business and which in anysuch case is material in the context of the CRC Group taken as a whole; or 6.9 waived or compromised any claim which is material in the context of the CRCGroup taken as a whole; or 6.10 entered into or varied or made any offer (which remains open foracceptance) to enter into or vary the terms of any contract with any of the CRCDirectors or, to the extent it is material in the context of the Wider CRC Grouptaken as a whole, any of the directors of any other member of the Wider CRCGroup; or 6.11 made or permitted a variation in the terms or rules governing theCRC Share Schemes or any other incentive scheme or any other benefit relating tothe employment or termination of employment of any person employed by the WiderCRC Group which, taken as a whole, are material in the context of the Wider CRCGroup taken as a whole; or 6.12 taken or proposed any corporate action or had any legal proceedingsinstituted or threatened against it or petition presented for its winding up(voluntary or otherwise), dissolution or reorganisation or for the appointmentof a receiver, administrator, administrative receiver, trustee or similarofficer of all or any of its assets and revenues or for any analogousproceedings or steps in any jurisdiction or for the appointment of any analogousperson in any jurisdiction and which in any such case is material in the contextof the CRC Group taken as a whole; or 6.13 been unable, or admitted in writing that it is unable, to pay its debts orhas stopped or suspended (or threatened to stop or suspend) payment of its debtsgenerally or ceased or threatened to cease carrying on all or a substantial partof its business in any case which is or would be material in the context of theWider CRC Group taken as a whole; or 6.14 made any alteration to its memorandum or articles of association or otherincorporation documents; or 6.15 in relation to the pension schemes established for its directors and/orother employees and/or their dependants, made or consented to any change in anycase which is or would be material in the context of the Wider CRC Group takenas a whole, to: (i) the terms of the trust deeds constituting such pension schemes or to the benefits which accrue; (ii) the pensions which are payable, under them; (iii) the basis on which qualifications for or accrual of or entitlement to such benefits or pensions are calculated or determined; (iv) the basis upon which the liabilities (including pensions) of such pension schemes are funded or made; (v) agreed or consented to any change to the trustees of such pension schemes; or 6.16 entered into any agreement or passed any resolution or made any offer(which remains open for acceptance) or proposed or announced any intention withrespect to any of the transactions, matters or events referred to in thiscondition 6 which is material in the context of the CRC Group taken as a whole. 7. Other events since the Accounting Date In the period since the Accounting Date, save as Publicly Announced orDisclosed: 7.1 no litigation or arbitration proceedings, prosecution, investigation orother legal proceedings having been announced, instituted, threatened orremaining outstanding by, against or in respect of, any member of the Wider CRCGroup or to which any member of the Wider CRC Group is or may become a party(whether as claimant, defendant or otherwise) which is material in the contextof the CRC Group taken as a whole; or 7.2 no material adverse change or deterioration having occurred in the businessor assets or financial or trading position or prospects, assets or profits ofany member of the Wider CRC Group which is material in the context of the CRCGroup taken as a whole; or 7.3 no enquiry or investigation by, or complaint or reference to, any relevantperson against or in respect of any member of the Wider CRC Group having beenthreatened, announced, implemented or instituted or remaining outstanding by,against or in respect of, any member of the Wider CRC Group which is material inthe context of the CRC Group taken as a whole; 7.4 no material contingent or other liability having arisen or become apparentor increased which is material in the context of the CRC Group taken as a whole;or 7.5 no steps having been taken which are likely to result in the withdrawal,cancellation, termination or modification of any material licence or permit heldby any member of the CRC Group which is necessary for the proper carrying on ofthe business of the CRC Group taken as a whole. 8. Environmental and other issues Save as Publicly Announced or Disclosed, Fonebak not having discovered that: Environmental 8.1 any past or present member of the Wider CRC Group has not complied in allmaterial respects with all applicable legislation or regulations orauthorisations of any jurisdiction with regard to the use, handling, storage,transport, production, supply, treatment, keeping, disposal, discharge,spillage, leak or emission of any waste or hazardous substance or any substancelikely to damage or impair the environment or harm human health or otherwiserelating to environmental matters or the health and safety of any person or thatthere has otherwise been any such use, handling, storage, transport, production,supply, treatment, keeping, disposal, discharge, spillage, leak or emission(whether or not the same constituted a non-compliance by any person with anysuch legislation or regulations or authorisations and wherever the same may havetaken place), which, in any such case, would be likely to give rise to anyliability (whether actual or contingent) or cost on the part of any member ofthe Wider CRC Group in any case which is material in the context of the WiderCRC Group taken as a whole; or 8.2 there has been a material disposal, discharge, release, spillage, leak oremission of any waste or hazardous substance or any substance likely to damageor impair the environment or harm human health which would be likely to giverise to any liability (whether actual or contingent) or cost on the part of anymember of the Wider CRC Group in any case which is material in the context ofthe Wider CRC Group taken as a whole; or 8.3 there is, or is likely to be any liability (whether actual or contingent) orcost on the part of any member of the Wider CRC Group to make good, repair,reinstate or clean up any relevant asset or any other property or any controlledwaters under any environmental legislation, regulation, notice, circular, orderor other lawful requirement of any relevant person or third party or otherwisein any case which is material in the context of the Wider CRC Group taken as awhole; or 8.4 circumstances exist (whether as a result of the making of the Offer orotherwise): (i) which would be likely to lead to any relevant personinstituting; or (ii) whereby any past or present member of the Wider CRC Groupwould be likely to be required to institute an environmental audit or take any steps which would in any such case be likelyto result in any actual or contingent liability to improve or modify existingplant or install new plant, machinery or equipment or carry out any changes inthe processes carried out or make good, repair, reinstate or clean up anyrelevant asset or any other property or any controlled waters in any case whichis material in the context of the Wider CRC Group taken as a whole; Product Liability 8.5 circumstances exist whereby a person or class of persons would belikely to have any claim or claims in respect of any product or process ofmanufacture or materials used therein now or previously manufactured, sold orcarried out by any past or present member of the Wider CRC Group in any casewhich is material in the context of the Wider CRC Group taken as a whole; or Information 8.6 any financial, business or other information disclosed at any time by anymember of the Wider CRC Group (and not subsequently superseded by subsequentdisclosures), whether publicly or in the context of the Offer, either ismaterially misleading, contained a material misrepresentation of fact or omittedto state a fact necessary to make the information disclosed not misleading in amaterial respect; or 8.7 any member of the Wider CRC Group is subject to any liability (actual orcontingent) which is not Disclosed or Publicly Announced and which in any caseis material in the context of the Wider CRC Group taken as a whole. Certain Further Terms of the Offer The conditions are inserted for the benefit of Fonebak and no CRC Shareholdershall be entitled to waive any of the conditions without the prior consent ofFonebak. Subject to the requirements of the Panel, Fonebak reserves the right to waiveall or any of conditions 2 to 8 (inclusive) in whole or in part. Each of conditions 1 to 8 shall be regarded as a separate condition and shallnot be limited by reference to any other condition. The Offer will lapse if the proposed acquisition of CRC is referred to theCompetition Commission or if the European Commission either initiatesproceedings under Article 6 (1)(c) of the ECMR or makes a referral to acompetent authority of the United Kingdom under Article 9 (1) of the ECMR before1.00 p.m. on the first closing date or the time and date on which the Offerbecomes or is declared unconditional as to acceptances (whichever is the later). If the Offer lapses, it will cease to be capable of further acceptance andpersons accepting the Offer and Fonebak shall thereupon cease to be bound byacceptances submitted before the time the Offer lapses. The Offer will lapse unless all of the conditions relating to the Offer havebeen fulfilled or (if capable of waiver) waived by, or, where appropriate, havebeen determined by Fonebak to be, and remain satisfied by, midnight on thetwenty first day after the later of: (a) the first closing date; or (b) the date on which the Offer becomes unconditional as to acceptances or such later date as Fonebak may, with the consent of the Panel, decide.Fonebak shall be under no obligation to waive or treat as satisfied anycondition by a date earlier than the latest date specified above for itssatisfaction even though the other conditions of the Offer may, at such earlierdate, have been waived or fulfilled and there are, at such earlier date, nocircumstances indicating that any such conditions may not be capable offulfilment. If Fonebak is required by the Panel to make an offer for CRC Shares under Rule 9of the Code, Fonebak may make such alterations to the conditions of the Offerset out above, including condition 1, as are necessary to comply with that Rule. CRC Shares will be acquired by Fonebak fully paid and free from all liens,equities, charges, equitable interests, encumbrances, rights of pre-emption andany other third party right and/or interests of any nature whatsoever andtogether with all rights attaching to them, now or in the future, including theright to receive and retain all dividends, interest and other distributionsdeclared, paid or made after the date of the Offer Document. The Offer will not be made, directly or indirectly, in, into or by use of themails of, or by any means or instrumentality (including, without limitation,telephonically or electronically) of interstate or foreign commerce of, or anyfacilities of a national securities exchange of any of the Excluded Territories.This announcement does not constitute an offer in the Excluded Territories orany such other jurisdiction and the Offer should not be accepted by any suchuse, means, instrumentality or facilities or otherwise from or within theExcluded Territories or any such other jurisdiction. Accordingly, copies of thisannouncement are not being and must not be mailed, transmitted or otherwisedistributed in whole or in part, in, into or from the Excluded Territories orany such other jurisdiction and persons receiving this announcement (including,without limitation, custodians, nominees and trustees) must not mail orotherwise forward, distribute or send it in, into or from the ExcludedTerritories or any such other jurisdiction. Doing so may render invalid anypurported acceptance of the Offer. The Offer will be governed by English Law and the Code and is subject to thejurisdiction of the English courts. APPENDIX II - CRC LOSS FORECAST On 26 May 2006, CRC announced the following trading update: "Current trading is particularly disappointing and has led the Company toreassess its outlook for the remainder of the year. It is now anticipated thatthe reduced sales level will lead to a shortfall in operating profits resultingin the Company trading below break-even (pre-amortisation of goodwill). With anumber of one-off costs noted below, the Company now anticipates reportingbefore tax losses in both the first half and the full year." This announcement constitutes a loss forecast for the year ending 31 December2006, as defined by Rule 28 of the Code. The loss forecast has been made in respect of the loss before tax afteraccounting for the impairment of goodwill and other exceptional items related tothe ongoing restructuring of the CRC Group. The CRC Directors have considered and re-confirm the loss forecast statementthat the CRC Group will make a loss before tax for first half, ended 30 June2006, and the full year ending 31 December 2006. The loss forecast is based onCRC's unaudited interim financial statements for the 6 months ended 30 June 2006the unaudited management accounts for the four months ended 31 October 2006together with the forecasts prepared by the CRC Directors for the six monthsending 31 December 2006. The principal assumptions upon which the loss forecast is based are: • that there will be no acquisitions or disposals in the period between the date of this announcement and the 31 December 2006, which will have a material impact on the loss forecast; and • that there will be no material new contract wins or exceptional profits before the 31 December 2006, which will have a material impact on the loss forecast. The CRC Board confirms that the loss forecast has been properly compiled on thebasis of the assumptions stated above and that the basis of accounting isconsistent with UK GAAP as applied by CRC in the preparation of its financialstatements for the year ended 31 December 2005. The accounting policies and calculations for this loss forecast have beenexamined and reported on by KPMG Audit Plc in accordance with Rule 28.3 (b) ofthe Code. Reports KPMG Audit Plc's report and a letter from Rothschild on the loss forecast areset out below and will be included in the Offer Document: Report from KPMG Audit Plc addressed to the CRC Directors and Rothschild "We report on the loss forecast comprising the forecast loss before taxation ofCRC Group plc ("the Company") and its subsidiaries ("the Group") for the yearending 31 December 2006 ("the Loss Forecast"). The Loss Forecast, and thematerial assumptions upon which it is based, are set out in the announcementdated 14 December 2006 issued in connection with the bid for the Company ("theAnnouncement"). This report is required by Rule 28.3(b) of the City Code onTakeovers and Mergers ('the City Code') and is given for the purpose ofcomplying with that rule and for no other purpose. Accordingly, we assume noresponsibility in respect of this report to the offeror or to any personconnected to, or acting in concert with, the offeror, or to any other person whois seeking or may in future seek to acquire control of the Company ('anAlternative Offeror') or to any person connected to, or acting in concert with,an Alternative Offeror. Responsibilities It is the responsibility of the directors of the Company ('the Directors') toprepare the Loss Forecast in accordance with the requirements of the City Code. It is our responsibility to form an opinion as required by the City Code as tothe proper compilation of the Loss Forecast and to report that opinion to you. Save for any responsibility which we may have to those persons to whom thisreport is expressly addressed, to the fullest extent permitted by law we do notassume any responsibility and will not accept any liability to any other personfor any loss suffered by any such other person as a result of, arising out of,or in connection with this report or our statement, required by and given solelyfor the purposes of complying with Rule 28.4 of the City Code, consenting to itsinclusion in the Announcement. Basis of Preparation of the Loss Forecast The Loss Forecast has been prepared on the basis stated in the Announcement andis based on the unaudited interim financial results for the six months ended 30June 2006, the unaudited management accounts for the four months ended 31October 2006 and a forecast to 31 December 2006. The Loss Forecast is requiredto be presented on a basis consistent with the accounting policies of the Group. Basis of opinion We conducted our work in accordance with Standards for Investment Reportingissued by the Auditing Practices Board in the United Kingdom. Our work includedevaluating the basis on which the historical financial information included inthe Loss Forecast has been prepared and considering whether the Loss Forecasthas been accurately computed based upon the disclosed assumptions and theaccounting policies of the Group. Whilst the assumptions upon which the LossForecast are based are solely the responsibility of the Directors, we consideredwhether anything came to our attention to indicate that any of the assumptionsadopted by the Directors which, in our opinion, are necessary for a properunderstanding of the Loss Forecast have not been disclosed or if any materialassumption made by the Directors appears to us to be unrealistic. We planned and performed our work so as to obtain the information andexplanations we considered necessary in order to provide us with reasonableassurance that the Loss Forecast has been properly compiled on the basis stated. Since the Loss Forecast and the assumptions on which it is based relate to thefuture and may therefore be affected by unforeseen events, we can express noopinion as to whether the actual results reported will correspond to those shownin the Loss Forecast and differences may be material. Opinion In our opinion the Loss Forecast, so far as the accounting policies andcalculations are concerned, has been properly compiled on the basis of theassumptions made by the Directors and the basis of accounting used is consistentwith the accounting policies of the Group." Letter from Rothschild addressed to the CRC Directors "We have discussed with you as Directors of CRC Group plc, the forecast pre-taxloss after goodwill amortisation, exceptional items and any goodwill impairmentcharge relating to CRC Group plc (''the Company'') and its subsidiaries (''theGroup'') for the 6 months ended 30 June 2006 and the year ending 31 December2006 and the bases and assumptions on which it has been prepared. We have alsodiscussed the accounting policies and basis of calculation for the loss forecastwith KPMG Audit Plc, the CRC Group plc's auditors, and we have considered theirletter of today's date addressed to both yourselves and ourselves on thismatter. On the basis of the foregoing, we consider that the loss forecast for which youas Directors of CRC Group Plc are solely responsible, has been compiled with duecare and consideration. This letter is provided to you solely in connection with Rule 28.3(b) of theCity Code on Takeovers and Mergers and for no other purpose." APPENDIX III - SOURCES AND BASES OF INFORMATION 1. General Unless otherwise stated, the financial information relating to the CRC Group hasbeen extracted from the audited consolidated financial statements of CRC for theyears ended 31 December 2005, 31 December 2004 and 31 December 2003 or theconsolidated unaudited interim results of CRC for the six months ended 30 June2006. Unless otherwise stated, the financial information relating to the Fonebak Grouphas been extracted from the audited consolidated financial statements of Fonebakfor the financial year ended 30 June 2006, and for the period ended 30 June2005. 2. Value of the Offer The value placed by the Offer on the Existing CRC Share Capital is based on24,635,401 CRC Shares in issue on 13 December 2006 (the last Business Day priorto the date of the Announcement). 3. Share prices The closing prices of a CRC Share on 29 June, 4 December and 13 December 2006are taken from the London Stock Exchange website. APPENDIX IV - DEFINITIONS "Accounting Date" 31 December 2005"Admission" the admission of the Placing Shares to trading on AIM in accordance with the AIM Rules"AIM" a market operated by the London Stock Exchange"AIM Rules" the rules of AIM published by the London Stock Exchange from time to time"Announcement" this announcement dated 14 December 2006"Board" or "CRC the board of CRC DirectorsBoard""Associated to be construed in accordance with the Companies Act (but forundertaking" or this purpose ignoring paragraph 20(1)(b) of Schedule 4A"undertaking" thereof)"Business Day" any day other than Saturday, Sunday or Bank Holidays on which the clearing banks in London are open for business"Code" or "City the City Code on Takeovers and MergersCode""the Companies the Companies Act 1985, save to the extent this Act isAct" or "the Act" amended or repealed by the Companies Act 2006, references to, or parts of, the Companies Act or the Act in this announcement shall be deemed to be interpreted by reference to the relevant sections or parts of the Companies Act 2006, to the extent such sections or parts are in force"CREST" the Relevant System (as defined in the CREST Regulations) in respect of which CRESTCo Limited is the Operator (as defined in the CREST Regulations)"CRC" CRC Group plc, a public limited company incorporated under the laws of England and Wales"CRC Group" CRC, its subsidiaries and subsidiary undertakings at the date of this announcement"CRC Italia" the CRC Group's Italian operation formed by the merger of Teleca and Kronos in June 2006"CRC Option holders of options over CRC Shares granted under the CRCHolders" Share Schemes"CRC Shares" the existing unconditionally allotted or issued and fully paid ordinary shares of 2 pence each of CRC and any further such shares which are unconditionally allotted or issued fully paid, or credited as fully paid, before the date on which the Offer closes (or before such earlier date as Fonebak may, subject to the Code, decide not being earlier than (a) the date on which the Offer becomes or is declared unconditional as to acceptances or (b), if later, the first closing date of the Offer)"CRC Share the CRC Group plc Unapproved Executive Share Option Scheme,Schemes" The CRC Group plc Company Share Option Plan 2001, The CRC Group plc Executive Share Option Scheme 2004 and The CRC Group plc Employee Share Ownership Plan"CRC Shareholders" holders of CRC Shares"Directors" or Jan Astrand, Gary Stokes, David Kelham, David Bird, Robert"CRC Directors" Gogel and Pat Thompson"Disclosed" fairly disclosed in writing by or on behalf of CRC to Fonebak or its advisers prior to the date of the Announcement"ECMR" Council regulation (EC) No 139/2004"Enlarged Group" Fonebak and its subsidiaries and subsidiary undertakings immediately following completion of the Offer and Admission"Enlarged Share the issued ordinary share capital of Fonebak immediatelyCapital" following Admission, as enlarged by the Placing"Excluded Canada, Australia, Japan, the Republic of South Africa andTerritories" their respective provinces and territories and any other jurisdiction where the making or acceptance of the Offer would constitute a violation of the laws of such jurisdiction or would require a registration, filing or other formality which Fonebak regards as unduly onerous subject, however, to Rule 30.3 of the City Code"Existing CRC the issued ordinary share capital of CRC at the date of theShare Capital" Announcement"Existing Fonebak the issued ordinary share capital of Fonebak at the date ofShare Capital" the Announcement"Facilities the debt and working capital facilities agreements dated 14Agreement" December 2006 between Fonebak and KBC Bank"first closing the date falling 21 days after the date on which the Offerdate" Document is posted"Fonebak" Fonebak plc, the offeror, a public limited company incorporated under the laws of England and Wales"Fonebak Board" the board of Fonebak Directors"Fonebak the directors of Fonebak as at the date of this announcementDirectors""Fonebak Group" Fonebak, its subsidiaries and subsidiary undertakings at the date of this announcement"Fonebak holders of Fonebak SharesShareholders""Fonebak Shares" ordinary shares of 2 pence each in Fonebak"Form of the form of acceptance and authority relating to the OfferAcceptance" which, in the case of CRC Shares held in certificated form, will accompany the Offer Document"KBC Bank" KBC Bank NV"KBC Peel Hunt" KBC Peel Hunt Ltd, Fonebak's financial adviser, nominated adviser and broker, a member of the London Stock Exchange and which is authorised and regulated by the Financial Services Authority"London Stock London Stock Exchange plcExchange""Offer" the recommended cash offer to be made by KBC Peel Hunt on behalf of Fonebak to acquire all of the issued and to be issued CRC Shares on the terms and subject to the conditions set out in this announcement and to be set out in the Offer Document and in respect of CRC Shares in certificated form, the Form of Acceptance and, where the context so requires, any subsequent revision, variation, extension or renewal thereof"Offer Document" the document to be sent to CRC Shareholders containing the terms and conditions of the Offer"Offer Period" the period commencing on 30 June 2006 until the later of: (i) the first closing date, (ii) the date on which the Offer becomes unconditional as to acceptances, or (iii) the date on which the Offer lapses or is withdrawn"Offer Price" 50 pence per CRC Share"Panel" the Panel on Takeovers and Mergers"Placing" the conditional placing by KBC Peel Hunt of 6,756,757 new Fonebak Shares at the Placing Price"Placing the placing agreement in relation to the Placing dated 14Agreement" December 2006 between Fonebak, the Fonebak Directors and KBC Peel Hunt"Placing Price" 148 pence per Placing Share"Placing Shares" 6,756,757 new Fonebak Shares to be issued pursuant to the Placing"Publicly specifically disclosed in the annual report and accounts ofAnnounced" CRC for the year ended on the Accounting Date or in this announcement or in any other announcement made to a Regulatory Information Service since the date of publication of such report and accounts and prior to the date of the Announcement"Regulatory as defined in the AIM RulesInformationService" or "RIS""Rothschild" NM Rothschild & Sons Limited, financial adviser and nominated adviser to CRC"Subsidiary" and Have the meanings given to these expressions in the Companies"subsidiary Actundertaking""Substantial a direct or indirect interest in 20 per cent. or more of theInterest" equity capital of an undertaking"United States" or the United States of America, its territories and"US" possessions, any state of the United States and the District of Columbia and all other areas subject to its jurisdiction"US Person" a US person as defined in Regulation 5 under the US Securities Act"US Securities the US Securities Act of 1933, as amended, and the rules andAct" regulations as promulgated thereunder"Wider Fonebak Fonebak and its subsidiaries, subsidiary undertakings,Group" associated undertakings and any other undertakings in which Fonebak and/or such subsidiaries or undertakings (aggregating their interests) have a Substantial Interest"Wider CRC Group" CRC and its subsidiaries, subsidiary undertakings, associated undertakings and any other undertakings in which CRC and/or such subsidiaries or undertakings (aggregating their interests) have a Substantial Interest This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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