Offer for DX Services plc

6th Jul 2006 07:00

Not for release, publication or distribution, in whole or in part, in or intoCanada, Australia, or Japan or any other jurisdiction where to do so wouldconstitute a violation of the relevant laws of such jurisdiction6 JULY 2006RECOMMENDED OFFER FOR DX SERVICES PLC ("DX SERVICES" OR THE "COMPANY") BY MAILACQUISITIONS LIMITED ("MAL")Summary of Offer * The Boards of DX Services and MAL are pleased to announce the terms of a recommended cash offer by MAL to acquire the whole of the issued and to be issued share capital of DX Services. * MAL is an English company, newly incorporated for the purposes of making the Offer, and is ultimately controlled by Candover Partners. * The Offer will be 415 pence in cash for each DX Share and values the existing issued share capital of DX Services at ‚£348.7 million. * The Offer represents: * a premium of 25.6 per cent. to the Closing Price of 330.5 pence per DX Share on 3 July 2006, being the last Business Day prior to the announcement by DX Services that it had received an approach which might lead to an offer for the Company; * a premium of 28.5 per cent. to the average Closing Price of 323.0 pence per DX Share in the period from 7 March 2006 (the date the Company announced its interim results for the 6 month period to 31 December 2005) to 3 July 2006; * a premium of 35.4 per cent. to the Closing Price of 306.5 pence per DX Share on 7 March 2006 (the date the Company announced its interim results for the 6 month period to 31 December 2005); * an enterprise value multiple of 12.6 x DX Services' pre-exceptional earnings before interest, tax, depreciation and amortisation (EBITDA) for the twelve month period ended 31 December 2005; and * a multiple of 20.6 x DX Services' pre-exceptional earnings for the twelve month period ended 31 December 2005. * The DX Directors, who have been so advised by UBS Investment Bank and Numis, consider the terms of the Offer to be fair and reasonable. In providing advice to the DX Directors, UBS and Numis have taken into account the commercial assessments of the DX Directors. UBS has a corporate advisory relationship with Candover and, as a consequence, is not with respect to the Offer an independent adviser in accordance with Rule 3 of the City Code. * The DX Directors intend unanimously to recommend the Offer and have irrevocably undertaken to accept, or to take all steps within their power to procure the acceptance of, the Offer in respect of their own beneficial holdings. Those holdings amount, in aggregate, to 72,443 DX Shares, representing 0.1 per cent. of the existing issued share capital of the Company. * In addition, MAL has received irrevocable undertakings from certain other DX Shareholders to accept the Offer in respect of a total of 23,511,343 DX Shares, representing, in aggregate, 28.0 per cent. of DX Services' existing issued share capital. * MAL has therefore received irrevocable undertakings to accept the Offer in respect of 23,583,786 DX Shares representing, in aggregate, 28.1 per cent. of DX Services' existing issued share capital. Acquisition of Secure Mail Services and information on the enlarged DX Services/Secure Mail Services group * Conditional upon the Offer being declared unconditional in all respects, the MAL Group has also agreed to acquire the entire issued share capital of Secure Mail Services. * Secure Mail Services is a leading provider of secure mail services in the UK, providing next day delivery of time- and value-sensitive documents, predominantly to residential addresses. * MAL believes that there is compelling strategic logic in bringing together DX Services, providing next day, early morning business-to-business mail delivery services, and Secure Mail Services, providing business-to-consumer secure mail services, to create the leading independent end-to-end service operator in the UK postal market. * MAL believes that the combination of DX Services and Secure Mail Services will enable further improvement to the range and quality of services offered to customers, provide more extensive coverage through an expanded delivery network, generate increased volumes for key business partners and suppliers and create new opportunities for employees. * In addition, in the wake of recent postal industry deregulation, the Enlarged Group will be well positioned as customers consider a move to use alternatives to Royal Mail. * The Enlarged Group has a combined pro-forma turnover of ‚£175 million, approximately 1,840 employees and handles over 270 million items of mail per annum. Information on Candover * Funding for equity investments in buyouts organised by Candover Partners is provided from two sources: from Candover Investments, an investment trust listed on the Official List with a market capitalisation of ¢â€š¬521 million, and from third party funds raised and managed by Candover Partners. Candover Partners is a wholly-owned subsidiary of Candover Investments and is currently investing the Candover 2005 Fund, a ¢â€š¬3.5 billion fund which it raised in November 2005. Commenting on the Offer, John Maxwell, Chairman of DX Services said:"This offer reflects a significant strategic premium from a trade purchaser andenables the shareholders of DX Services to realise, in full, the financialpotential of their investment in DX Services more rapidly than they would beable to do absent the Offer. In addition, the plans Mail Acquisitions Limitedhas to combine the businesses will, over time, create a stronger independentmail and parcels business, which will benefit the wider UK market".Commenting on the Offer, Marek Gumienny, a Managing Director of CandoverPartners said:"Since we first approached the DX Services Board in April, we have workedassiduously to complete our due diligence, greatly helped by the Company'sco-operation. With the recommendation and backing of DX Services' managementfor the Offer, we are looking forward to proceeding with the combination of theDX Services and Secure Mail Services businesses to create a competitive forcein the UK mail delivery market".There will be a conference call for analysts and investors at 9.00 am onThursday, 6 July 2006, which can be accessed by dialling +44 (0)1452 541 076.The call will be recorded and available for ten days following the call on +44(0)1452 550 000, access number 2642191#.This summary should be read in conjunction with the full text of the followingannouncement and the Appendices. Appendix I sets out the conditions andprincipal further terms of the Offer. Appendix II contains source notesrelating to certain information contained in this announcement. Certain termsused in this announcement (including the summary) are defined in Appendix IIIto this announcement.Enquiries:CandoverMarek Gumienny +44 (0)20 7489 9848PricewaterhouseCoopers (advisers to MAL and Candover Partners)Simon Boadle +44 (0)20 7583 5000Simon Hawes +44 (0)20 7583 5000Coolin Desai +44 (0)20 7583 5000Lazard (advisers to Candover Partners)Peter Kiernan +44 (0)20 7187 2000Samuel Bertrand +44 (0)20 7187 2000Panmure Gordon (broker to Candover Partners)Tim Linacre +44 (0)20 7459 3600Richard Gray +44 (0)20 7459 3600Tulchan (PR adviser to Candover Partners)Julie Foster +44 (0)20 7353 4200Peter Hewer +44 (0)20 7353 4200DX ServicesPaul Kehoe +44 (0)1753 630 630UBS Investment Bank (financial adviser and broker to DX Services)John Woolland +44 (0)20 7567 8000Peter Luck +44 (0)20 7567 8000Numis (Rule 3 adviser to DX Services)Michael Meade +44 (0)20 7776 1500Brunswick (PR adviser to DX Services)Rupert Young +44 (0)20 7404 5959PricewaterhouseCoopers LLP, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority for designated investment business,is acting exclusively for Mail Acquisition Limited and Candover Partners andfor no one else in relation to the Offer and will not be responsible to anyoneother than Mail Acquisition Limited and Candover Partners for providing theprotections afforded to clients of PricewaterhouseCoopers LLP, or for givingadvice in relation to the Offer or any matter referred to herein.Lazard, which is authorised and regulated in the United Kingdom by theFinancial Services Authority for investment business activities, is actingexclusively as financial adviser to Candover Partners and no one else inconnection with the Offer and will not be responsible to anyone other thanCandover Partners for providing the protections afforded to clients of Lazardor for providing advice in relation to the Offer or any other matters referredto herein.UBS is acting exclusively as financial adviser and broker to DX Services and noone else in connection with the Offer and will not be responsible to anyoneother than DX Services for providing the protections afforded to clients of UBSor for providing advice in relation to the Offer or in relation to the contentsof this announcement or any transaction or arrangement referred to herein.Numis, which is authorised and regulated in the United Kingdom by the FinancialServices Authority for investment business activities, is acting exclusively asadviser to DX Services in relation to Rule 3 of the City Code and no one elsein connection with the Offer and will not be responsible to anyone other thanDX Services for providing the protections afforded to clients of Numis or forproviding advice in relation to the contents of this announcement or anytransaction or arrangement referred to herein.This announcement is not intended to, and does not constitute or form any partof, an offer or an invitation to purchase any securities or the solicitation ofany vote or approval in any jurisdiction pursuant to the Offer or otherwise.The Offer will be made solely through the Offer Document and the Form ofAcceptance, which will together contain the full terms and conditions of theOffer, including details of how to accept the Offer. Any acceptance or otherresponse to the Offer should be made only on the basis of the informationcontained in the Offer Document and the Form of Acceptance. The laws ofrelevant jurisdictions may affect the availability of the Offer to persons notresident in the United Kingdom or the United States. In particular, the Offeris not being made, directly or indirectly, in Canada, Australia or Japan.Persons who are not resident in the United Kingdom or the United States, or whoare subject to the laws of any jurisdiction other than the United Kingdom orthe United States, should inform themselves about and observe any applicablelegal and regulatory requirements.The Offer Document will be posted to shareholders shortly and thereafter willbe available for public inspection and will also be posted on the website of DXServices.The Offer will be for the securities of a corporation organised under the lawsof England and is governed by English law and is subject to the jurisdiction ofthe English courts. The Offer is subject to the City Code and only certainrequirements of US federal securities laws are applicable. The procedural anddisclosure requirements of England are different from those of the UnitedStates in certain material respects. The timing of payments, withdrawal rights,settlement procedures and other timing and procedural matters of the Offer areconsistent with UK practice, which differs from US domestic tender offerprocedures. In accordance with US federal securities laws, the Offer willremain open for at least 20 US Business Days from the date of the OfferDocument. The Offer will be made in the United States pursuant to Section 14(e)and Regulation 14E under the US Securities Exchange Act of 1934, as amended andotherwise in accordance with the requirements of UK takeover law and practice.The financial information relating to DX Services included in this announcementand to be included in the Offer Document has not been, and will not be,prepared in accordance with generally accepted accounting principles in theUnited States ("US GAAP") and thus may not be comparable to financialinformation of US companies or companies whose financial statements areprepared in accordance with US GAAP.Whilst the Offer is being made available to DX Shareholders in the UnitedStates, the right to tender DX Shares is not being made available in anyjurisdiction in the United States in which the making of such Offer or theright to tender such DX Shares would not be in compliance with the laws of suchjurisdiction.It may be difficult for DX Shareholders in the United States to enforce theirrights and any claim arising out of the US federal securities laws, since MALand DX Services are located outside of the United States and some or all oftheir officers and directors may be resident outside of the United States. DXShareholders in the United States may not be able to sue a foreign company orits officers or directors in a foreign court for violations of the USsecurities laws. Further, it may be difficult to compel a foreign company andits affiliates to subject themselves to a US court's judgment.This announcement, including information included or incorporated by referencein this announcement, may contain 'forward-looking statements' concerning theOffer, MAL and DX Services. Generally, the words 'will', 'may', 'should','could', 'would', 'can', 'continue', 'opportunity', 'believes', 'expects','intends', 'anticipates', 'estimates' or similar expressions identifyforward-looking statements. The forward-looking statements involve risks anduncertainties that could cause actual results to differ materially from thoseexpressed in the forward-looking statements. Many of these risks anduncertainties relate to factors that are beyond the companies' abilities tocontrol or estimate precisely, such as future market conditions and thebehaviours of other market participants, and therefore undue reliance shouldnot be placed on such statements. MAL and DX Services assume no obligation anddo not intend to update these forward-looking statements, except as requiredpursuant to applicable law or regulation, including the City Code.Dealing disclosure requirementsUnder the provisions of Rule 8.3 of the City Code (the "City Code"), if anyperson is, or becomes, 'interested' (directly or indirectly) in one per cent.or more of any class of 'relevant securities' of DX Services, all 'dealings' inany 'relevant securities' of DX Services (including by means of an option inrespect of, or a derivative referenced to, any such 'relevant securities') mustbe publicly disclosed by no later than 3.30 pm (London time) on the Londonbusiness day following the date of the relevant transaction. This requirementwill continue until the date on which the Offer becomes, or is declared,unconditional as to acceptances, lapses or is otherwise withdrawn or on whichthe 'offer period' otherwise ends. If two or more persons act together pursuantto an agreement or understanding, whether formal or informal, to acquire an'interest' in 'relevant securities' of DX Services, they will be deemed to be asingle person for the purpose of Rule 8.3.Under the provisions of Rule 8.1 of the City Code, all 'dealings' in 'relevantsecurities' of DX Services by MAL or DX Services or by any of their respective'associates', must be disclosed by no later than 12.00 noon (London time) onthe London business 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 securitiesin issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.'Interests in securities' arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an 'interest' byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities.Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a 'dealing' under Rule 8, you should consult the Panel.6 JULY 2006RECOMMENDED OFFER FOR DX SERVICES PLC ("DX SERVICES" OR "THE COMPANY") BY MAILACQUISITIONS LIMITED ("MAL")1. IntroductionThe Boards of DX Services and MAL announce that they have reached agreement onthe terms of a recommended cash offer for the acquisition of DX Services byMAL. MAL is an English company newly incorporated for the purposes of makingthe Offer. MAL is, and following the Offer becoming or being declaredunconditional will remain, ultimately controlled by Candover Partners on behalfof Candover Investments and the Candover 2005 Fund.The Offer will be 415 pence in cash for each DX Share and values the issuedshare capital of DX Services at ‚£348.7 million.2. Recommendation of the OfferThe DX Directors, who have been so advised by UBS and Numis, consider the termsof the Offer to be fair and reasonable. Numis is acting as the adviser to DXServices in relation to Rule 3 of the City Code. In providing advice to the DXDirectors, UBS and Numis have taken into account the commercial assessments ofthe DX Directors. The DX Directors are also being advised by UBS, which isacting as financial adviser and broker to DX Services. UBS has a corporateadvisory relationship with Candover Partners and, as a consequence, is not,with respect to the Offer, an independent adviser for the purposes of Rule 3 ofthe City Code.Accordingly, the DX Directors intend unanimously to recommend that DXShareholders accept the Offer, as they have irrevocably undertaken to do inrespect of their entire beneficial holdings, which amount, in aggregate, to72,443 DX Shares, representing 0.1 per cent. of the existing issued sharecapital of DX Services. These undertakings will continue to be binding if anyhigher competing offer is made for DX Services.3. Summary of the OfferUnder the Offer, which will be subject to the terms and conditions set outbelow and in Appendix I to this announcement and to be set out in the OfferDocument and the Form of Acceptance, DX Shareholders will receive: 415 pence in cash for each DX Share The Offer values the existing issued share capital of DX Services at ‚£348.7million.The Offer represents: * a premium of 25.6 per cent. to the Closing Price of 330.5 pence per DX Share on 3 July 2006, being the last Business Day prior to the announcement by DX Services that it had received an approach which might lead to an offer for the Company; * a premium of 28.5 per cent. to the average Closing Price of 323.0 pence per DX Share in the period from 7 March 2006 (the date the Company announced its interim results for the six month period to 31 December 2006) to 3 July 2006; * a premium of 35.4 per cent. to the Closing Price of 306.5 pence per DX Share on 7 March 2006 (the date the Company announced its interim results for the 6 month period to 31 December 2005); * an enterprise value multiple of 12.6 x DX Services' pre-exceptional earnings before interest, tax, depreciation and amortisation (EBITDA) for the twelve month period ended 31 December 2005; and * a multiple of 20.6 x DX Services' pre-exceptional earnings for the twelve month period ended 31 December 2005. DX Shares will be acquired fully paid and free from all liens, charges,equitable interests, encumbrances, rights of pre-emption and other third partyrights or interests, together with all rights attaching thereto, includingwithout limitation the right to receive all dividends and other distributions(if any) announced, declared, made or paid thereafter.4. Irrevocable undertakingsMAL has received irrevocable undertakings to accept the Offer in respect of atotal of 23,583,786 DX Shares, representing, in aggregate, approximately 28.1per cent. of DX Services' existing issued share capital, comprised as follows:(a) from DX Directors in respect of their entire beneficial holdings. Thoseholdings amount to, in aggregate, 72,443 DX Shares, representing, in aggregate,0.1 per cent. of the existing issued share capital of DX Services (the "Directors' Undertakings"). These irrevocable undertakings will continue to bebinding if a higher competing offer is made for DX Services; and(b) from Artemis Investment Management in respect of its entire holding of12,959,121 DX Shares, representing 15.4 per cent. of the existing issued sharecapital of DX Services. This undertaking will cease to be binding if acompeting offer is made for DX Services which exceeds the value of the Offer bymore than 10 per cent., is recommended and is not met with a higher revisedoffer from MAL within 7 days; and(c) from Majedie Asset Management in respect of the 5,114,614 DX Shares overwhich it has discretionary control, representing 6.1 per cent. of the existingissued share capital of DX Services. This undertaking will cease to be bindingif a competing offer is made for DX Services which exceeds the value of theOffer by more than 10 per cent., is recommended and is not met with a higherrevised offer from MAL within 7 days; and(d) from Ronald Edwin Frost and Derrick Charles Frost in respect of theirholdings of 3,998,285 and 1,439,323 DX Shares respectively, representingtogether 6.5 per cent. of the existing issued share capital of DX Services.These undertakings will cease to be binding if a competing offer is made for DXServices which exceeds the value of the Offer.5. Background to and reasons for the OfferBackground to the OfferThe Board of DX Services, in considering the Offer, reviewed with UBS and Numisthe full range of strategic alternatives available to DX Services includingcontinuing the restructuring of the DX Group and remaining a standalonebusiness centred on DX Services' Document Exchange service. The Board of DXServices know the Secure Mail Services business and concluded that thestrategic rationale for a combination was more attractive than other optionscurrently available to DX Services, in the context of a rapidly consolidatingUK mail and parcels market.The Board of DX Services therefore entered into exclusive discussions with theBoard of MAL since they believed that the approach by MAL afforded DX Servicesan opportunity to extract a significant strategic premium from a tradepurchaser.The Board of DX Services has concluded that the cash offer announced today byMAL enables the shareholders of DX Services to realise, in full, the financialpotential of their investment in DX Services more rapidly than they would beable to do absent the Offer, and as such the Board of DX Services intends torecommend the Offer.Reasons for the OfferConditional upon the Offer being declared unconditional in all respects, theMAL Group has also agreed to acquire the entire issued share capital of SecureMail Services.Secure Mail Services is a leading provider of secure mail services in the UK,providing next day delivery of time- and value-sensitive documents,predominantly to residential addresses.MAL believes that there is compelling strategic logic in bringing together DXServices, providing next day, early morning business-to-business mail deliveryservices, and Secure Mail Services, providing business-to-consumer secure mailservices, to create the leading independent end-to-end service operator in theUK postal market.The combination of DX Services and Secure Mail Services will enable furtherimprovement to the range and quality of services offered to customers, providemore extensive coverage through an expanded delivery network, generateincreased volumes for key business partners and suppliers and create newopportunities for employees.In addition, in the wake of recent postal industry deregulation, the EnlargedGroup will be well positioned as customers move to consider alternatives toRoyal Mail.The Enlarged Group has a combined pro-forma turnover of ‚£175 million,approximately 1,840 employees and handles over 270 million items of mail perannum.6. Information on Secure Mail ServicesSecure Mail Services is a leading provider of secure mail services in the UK,providing next day delivery of time- and value-sensitive documents,predominantly to residential addresses.Secure Mail Services' audited report and accounts for the year ended 31 March2006 reported turnover of ‚£45.6 million (2005: ‚£44.0 million), profit beforetax of ‚£2.7 million (2005: ‚£1.6 million) and net liabilities of ‚£0.2 million(2005: net liabilities of ‚£1.9 million).The Chief Executive of Secure Mail Services is James Greenbury, who will becomethe Chief Executive of the Enlarged Group.7. Information on MAL and CandoverMAL is a new company, incorporated in England on 13 June 2006 at the directionof Candover Partners for the purpose of making the Offer. Since itsincorporation, MAL has not traded, other than to the extent necessary tofinance and make the Offer. Upon the Offer being declared wholly unconditional,the voting share capital of MAL will be majority controlled by CandoverPartners on behalf of Candover Investments and the Candover 2005 Fund, with themanagement of Secure Mail Services holding a minority equity investment in MAL.The current directors of MAL are James Greenbury, the Chief Executive of SecureMail Services, Ian Gray, a director of Candover Partners, and Bill Rogers andEmma Wilkinson, employees of Candover Partners. Candover Investments and theCandover 2005 Fund are providing part of the funding to MAL to implement theOffer. Further details about the financing of the Offer are set out inparagraph 10 below.Established in 1980 and listed on the London Stock Exchange in December 1984,Candover Investments specialises in arranging and leading large buyouts andbuy-ins, actively seeking opportunities across Europe with particular focus onthe UK, France, Germany, Italy, Spain, Scandinavia and Benelux. CandoverInvestments is headquartered in London, with offices in Paris, Dƒ¼sseldorf andMilan and a local adviser in Madrid.To date Candover Investments has invested in 128 deals with a total value ofover ¢â€š¬35 billion. Since 1980, almost 90 per cent. of companies backed byCandover Investments have achieved successful exits via stock market listingsor trade sales.For the year ended 31 December 2005, Candover Investments reported operatingprofit of ‚£16.6 million (2004: ‚£19.0 million), profit before tax of ‚£16.5million (2004: ‚£19.0 million) and net assets of ‚£380.3 million (2004: ‚£320.9million).Funding for equity investments in buyouts managed by Candover Partners isprovided from two sources: from Candover Investments and from third party fundsraised and managed by Candover Partners, a wholly-owned subsidiary of CandoverInvestments. Candover Partners' current fund, the Candover 2005 Fund, closed at¢â€š¬3.5 billion in November 2005. As at 5 July 2006, the fund had made investmentsin two companies, UPC Norway (a leading cable company in Norway) andEurotaxGlass's Group (a leading European provider of automotive data andintelligence services based in Switzerland).8. Information on DX ServicesDX Services, founded in 1975, is the UK's leading independent provider of earlymorning, next day mail and parcels services via a delivery network thatsupports both pre-9 am and post-9 am deliveries. The DX Group delivers over onemillion items each working day and operates a UK-wide, end-to-end networkincluding collection, sortation and final mile delivery.With effect from 1 July 2006, the business has been managed along the lines offive business units, each focused on a different target market with theexception of Network Services which is responsible for the management of thenetwork. The business units are: * Professional Services - mainly providing the Document Exchange service for legal, financial and other professional services organisations. * Retail Services - managing DX Services' parcels service, mainly to customers in the optical, travel, retail finance and betting industries. * Public Services - consisting of DX Services' existing Government Service contracts plus all new public sector activity generated both through the Office of Government Commerce (OGC) Framework Agreement and through other tender processes. * DX Ireland - which has been a self-contained profit centre since it was established and which will continue on a stand alone basis. * Network Services - formerly the operations division, the Network Services business unit focuses on network optimisation ensuring that DX Services continues to provide a high quality, low cost service. 9. Current trading and prospectsOn 7 March 2006, DX Services reported slightly disappointing interim resultsfor the six months ended 31 December 2005. In response to the performanceissues within the business and having completed his business review, PaulKehoe, the recently appointed Chief Executive, announced a number of strategicinitiatives. These were designed to reverse the trend of net customer lossesand to reduce the cost base of the business. The intention was to simplify andimprove the efficiency of the existing network in the very short term, win newDocument Exchange blue box customers, provide a simple, easier approach topricing than Royal Mail's upcoming "pricing in proportion", redefine andstreamline internal processes and introduce new customer relationshipmanagement systems.The changes implemented by the restructured DX Services management team underPaul Kehoe's direction have already had an impact in reducing costs. However,the business still needs to demonstrate that it can improve customer retentionand grow revenue organically. Sales activity is now focused on generating newbusiness that meets the network's delivery and profitability profiles.As a result of the cost savings achieved to date, performance for the full yearwill be slightly ahead of the Board of DX Services' prior expectations.10. Financing for the OfferThe consideration payable under the Offer will be financed by funds providedunder a facility to be provided by Bank of Scotland Corporate (part of the HBOSGroup), by funds provided by Candover Investments and the Candover 2005 Fund,and by a subscription for shares in MAL by James Greenbury (the Chief Executiveof Secure Mail Services). PricewaterhouseCoopers and Lazard are satisfied thatthe necessary financial resources are available to MAL to enable it to satisfyin full the consideration payable by MAL under the terms of the Offer.11. Management and employeesThe Board of MAL has given assurances to the DX Directors that, on the Offerbecoming or being declared wholly unconditional, the existing employment rightsof all management and employees of the DX Group will be honoured and pensionobligations complied with. MAL's plans for DX Services do not involve anyimmediate change in the conditions of employment of DX Services employees andit is MAL's intention that, going forward, employees will continue to enjoyterms and conditions that overall are as favourable as those that currentlyapply.Both DX Services and Secure Mail Services currently have plans for developingtheir businesses and MAL will be assisting management in achieving these goals.In particular, MAL intends that DX Services will continue the programme ofsimplifying its management structure and streamlining its internal processes,which was announced by the Company on 30 May 2006. In addition, a joint teamfrom DX Services and Secure Mail Services will be set up to assess how best totake advantage of the combined businesses' strong strategic position and growthopportunities, including a review of the Enlarged Group's operating locationsand associated staffing levels.Following the Offer becoming or being declared wholly unconditional, MALintends to appoint new directors to the Board of DX Services to conform toMAL's corporate governance guidelines. It is expected that the existingdirectors, apart from Paul Kehoe, will resign from the Board of DX Services toaccommodate the new appointments. However, it is expected that the seniormanagement of DX Services will continue to be directly involved in the on-goingbusiness of DX Services. It is also expected that Paul Kehoe will remain asChief Executive of DX Services and James Greenbury, who is currently ChiefExecutive of Secure Mail Services, will become the Chief Executive of theEnlarged Group.Paul Kehoe has entered into a revised service contract with DX Services for afixed term of two years, terminable prior to the expiry of the fixed term bythe Company on 12 months' notice (or by payment in lieu) if certain performanceconditions are not met and on 18 months' notice (or by payment in lieu) in anyother circumstances. Mr Kehoe may terminate the employment at any time prior tothe expiry of the fixed term by giving 12 months' notice.Numis, as independent adviser to DX Services under Rule 3 of the City Code, hasreviewed the revised terms of the contract and confirms its view that itconsiders them to be fair and reasonable.Based on the information made available to them from MAL, the Board of DXServices believes that the plans of the Board of MAL referenced abovecomplement and are similar to their own plans to restructure the business, theintention for such restructuring being announced on 7 March 2006. The Directorsof MAL have given assurances regarding the protection of the existing rights ofall the DX Group's employees. Accordingly, the Board of DX Services believesthat the position of the employees of DX Services will not be prejudiced as aresult of the Offer. Moreover, the Board of DX Services believes that theproposal to create a combined DX Services and MAL team will allow the combinedbusiness to best exploit the opportunities available to it, whilst thecontinuance of Paul Kehoe as Chief Executive of DX Services will add stabilityto the Enlarged Group.12. Option plans and share awardsThe Offer will extend to any DX Shares which are unconditionally allotted,issued or transferred from treasury stock while the Offer remains open foracceptance (or by such earlier date as MAL may, subject to the City Code orwith the consent of the Panel, determine) as a result of the exercise ofoptions or the vesting of awards granted under the DX Share Schemes.In the event that the Offer becomes or is declared unconditional in allrespects, MAL will make appropriate proposals to participants in the DX ShareSchemes, to the extent that their options or awards granted under the DX ShareSchemes have not been exercised or have not vested. In connection with theOffer, MAL and DX Services have agreed certain employee matters including thefollowing:(i) Options under the DX Save-As-You-Earn Scheme will become exercisable on thedate the Offer becomes or is declared wholly unconditional over less than thefull number of DX Shares otherwise available on the maturity of their savingscontracts. MAL has agreed that it will pay compensation to participants in thescheme equal to the additional profit which the participants would havereceived had they continued to make savings under the scheme for an additionalsix months. This compensation payment will be subject to income tax andemployee's and employer's national insurance contributions.(ii) MAL has agreed to provide run-off directors' and officers' liabilityinsurance for a period of three years for directors and former directors of DXServices and its subsidiaries.13. Disclosure of interests in DX ServicesExcept as disclosed below, as at the date of this announcement, neither MAL northe directors of MAL nor, so far as MAL is aware, any party acting in concertwith MAL, has an interest in, or has any right to subscribe for, any relevantsecurities of DX Services, nor are they party to any short positions (whetherconditional or absolute and whether in the money or otherwise) relating torelevant securities of DX Services, including short positions underderivatives, agreements to sell or any delivery obligations or rights torequire another person to take delivery. Neither MAL nor the directors of MALnor, so far as MAL is aware, any person acting in concert with MAL, hasborrowed or lent any relevant securities of DX Services.Marek Gumienny, the Managing Director of Candover Partners, and his immediatefamily, related trusts and connected persons are beneficially interested in anaggregate of 2,500 DX Shares.James Greenbury, a director of MAL, and his immediate family, related trustsand connected persons are beneficially interested in an aggregate of 120 DXShares.14. De-listingSubject to MAL acquiring, by virtue of the Offer or otherwise, DX Sharescarrying 75 per cent. of the voting rights of DX Services, and subject to theOffer becoming or being declared unconditional in all respects, MAL intends togive notice in accordance with the Listing Rules for the cancellation of thelisting and admission to trading of DX Shares on the Official List. It isintended that DX Shares will cease to be admitted to trading on the OfficialList shortly after the Offer is declared wholly unconditional.15. Inducement feeDX Services has agreed to pay MAL an inducement fee equal to one per cent. ofthe value of the Offer (inclusive of value added tax, if any, except to theextent any such value added tax is recoverable by DX Services). It is payableonly if:(i) a person other than MAL or a third party acting in concert (as defined inthe City Code) with MAL (a "MAL Concert Party") makes or announces an intentionto make an offer (whether by tender offer, scheme of arrangement or otherwise,whether pre-conditional or not) for, or agrees to acquire all or a materialpart of the assets of DX Services or of the DX Group (a "Competing Offer") at aprice or value per DX Share which is in excess of 415 pence which becomesunconditional in all respects or is otherwise consummated; or(ii) a person other than MAL or a MAL Concert Party announces a Competing Offerat a price or value per DX Share which is in excess of 415 pence which isrecommended by the Board of DX Services prior to the Offer lapsing or beingwithdrawn (with the consent of the Panel); or(iii) a person other than MAL or a MAL Concert Party has not announced aCompeting Offer at a price or value per DX Share which is in excess of 415pence but the recommendation of the Offer by the DX Services Board is withdrawnor modified in a manner which is adverse to the likelihood of the Offerbecoming or being declared unconditional in all respects and, in each case,prior to the Offer lapsing or being withdrawn (with the consent of the Panel).16. Availability of the Offer and other informationThe availability of the Offer to persons not resident in the UK or US may beaffected by the laws of the relevant jurisdiction. In particular, the Offer isnot being made, directly or indirectly, in Canada, Australia or Japan. Anypersons who are subject to the laws of any jurisdiction other than the UK or USshould inform themselves about and observe any applicable requirements.The Offer will be governed by English law and will be subject to thejurisdiction of the English courts. The Offer will be subject to the City Codeand only certain requirement of US federal securities laws are applicable. Theprocedural and disclosure requirements of England are different from those ofthe United States in certain material respects. The timing of payments,withdrawal rights, settlement procedures and other timing and proceduralmatters of the offer are consistent with UK practice, which differs from USdomestic tender offer procedures. In accordance with US federal securitieslaws, the Offer will remain open for at least 20 US Business Days from the dateof the Offer Document.Appendix I sets out the conditions and principal further terms of the Offer.Appendix II contains source notes relating to certain information contained inthis announcement. Certain terms used in this announcement are defined inAppendix III to this announcement.Enquiries:MALMarek Gumienny +44 (0)20 7489 9848PricewaterhouseCoopers (advisers to MAL and Candover Partners)Simon Boadle +44 (0)20 7583 5000Simon Hawes +44 (0)20 7583 5000Coolin Desai +44 (0)20 7583 5000Lazard (advisers to Candover Partners)Peter Kiernan +44 (0)20 7187 2000Samuel Bertrand +44 (0)20 7187 2000Panmure Gordon (broker to Candover Partners)Tim Linacre +44 (0)20 7459 3600Richard Gray +44 (0)20 7459 3600Tulchan (PR adviser to Candover Partners)Julie Foster +44 (0)20 7353 4200Peter Hewer +44 (0)20 7353 4200DX ServicesPaul Kehoe +44 (0)1753 630 630UBS Investment Bank (financial adviser and broker to DX Services)John Woolland +44 (0)20 7567 8000Peter Luck +44 (0)20 7567 8000Numis (Rule 3 adviser to DX Services)Michael Meade +44 (0)20 7776 1500Brunswick (PR adviser to DX Services)Rupert Young +44 (0)20 7404 5959PricewaterhouseCoopers LLP, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority for designated investment business,is acting exclusively for MAL and Candover Partners and for no one else inrelation to the Offer and will not be responsible to anyone other than MailAcquisition Limited and Candover Partners for providing the protectionsafforded to clients of PricewaterhouseCoopers LLP, or for giving advice inrelation to the Offer or any matter referred to herein.Lazard, which is authorised and regulated in the United Kingdom by theFinancial Services Authority for investment business activities, is actingexclusively as financial adviser to Candover Partners and no one else inconnection with the Offer and will not be responsible to anyone other thanCandover Partners for providing the protections afforded to clients of Lazardor for providing advice in relation to the Offer or any other matters referredto herein.UBS is acting exclusively as financial adviser and broker to DX Services and noone else in connection with the Offer and will not be responsible to anyoneother than DX Services for providing the protections afforded to clients of UBSor for providing advice in relation to the Offer or in relation to the contentsof this announcement or any transaction or arrangement referred to herein.Numis, which is authorised and regulated in the United Kingdom by the FinancialServices Authority for investment business activities, is acting exclusively asadviser to DX Services in relation to Rule 3 of the City Code and no one elsein connection with the Offer and will not be responsible to anyone other thanDX Services for providing the protections afforded to clients of Numis or forproviding advice in relation to the contents of this announcement or anytransaction or arrangement referred to herein.This announcement is not intended to, and does not constitute or form any partof, an offer or an invitation to purchase any securities or the solicitation ofany vote or approval in any jurisdiction pursuant to the Offer or otherwise.The Offer will be made solely through the Offer Document and the Form ofAcceptance, which will together contain the full terms and conditions of theOffer, including details of how to accept the Offer. Any acceptance or otherresponse to the Offer should be made only on the basis of the informationcontained in the Offer Document and the Form of Acceptance. The laws ofrelevant jurisdictions may affect the availability of the Offer to persons notresident in the United Kingdom or the United States. In particular, the Offeris not being made, directly or indirectly, in Canada, Australia or Japan.Persons who are not resident in the United Kingdom or the United States, or whoare subject to the laws of any jurisdiction other than the United Kingdom orthe United States, should inform themselves about and observe any applicablelegal and regulatory requirements.The Offer Document will be posted to shareholders shortly and thereafter willbe available for public inspection and will also be posted on the website of DXServices.The Offer will be for the securities of a corporation organised under the lawsof England and is governed by English law and is subject to the jurisdiction ofthe English courts. The Offer is subject to the City Code and only certainrequirements of US federal securities laws are applicable. The procedural anddisclosure requirements of England are different from those of the UnitedStates in certain material respects. The timing of payments, withdrawal rights,settlement procedures and other timing and procedural matters of the Offer areconsistent with UK practice, which differs from US domestic tender offerprocedures. In accordance with US federal securities laws, the Offer willremain open for at least 20 US Business Days from the date of the OfferDocument. The Offer will be made in the United States pursuant to Section 14(e)and Regulation 14E under the US Securities Exchange Act of 1934, as amended andotherwise in accordance with the requirements of UK takeover law and practice.The financial information relating to DX Services included in this announcementand to be included in the Offer Document has not been, and will not be,prepared in accordance with generally accepted accounting principles in theUnited States ("US GAAP") and thus may not be comparable to financialinformation of US companies or companies whose financial statements areprepared in accordance with US GAAP.Whilst the Offer is being made available to DX Shareholders in the UnitedStates, the right to tender DX Shares is not being made available in anyjurisdiction in the United States in which the making of such Offer or theright to tender such DX Shares would not be in compliance with the laws of suchjurisdiction.It may be difficult for DX Shareholders in the United States to enforce theirrights and any claim arising out of the US federal securities laws, since MALand DX Services are located outside of the United States and some or all oftheir officers and directors may be resident outside of the United States. DXShareholders in the United States may not be able to sue a foreign company orits officers or directors in a foreign court for violations of the USsecurities laws. Further, it may be difficult to compel a foreign company andits affiliates to subject themselves to a US court's judgment.This announcement, including information included or incorporated by referencein this announcement, may contain 'forward-looking statements' concerning theOffer, MAL and DX Services. Generally, the words 'will', 'may', 'should','could', 'would', 'can', 'continue', 'opportunity', 'believes', 'expects','intends', 'anticipates', 'estimates' or similar expressions identifyforward-looking statements. The forward-looking statements involve risks anduncertainties that could cause actual results to differ materially from thoseexpressed in the forward-looking statements. Many of these risks anduncertainties relate to factors that are beyond the companies' abilities tocontrol or estimate precisely, such as future market conditions and thebehaviours of other market participants, and therefore undue reliance shouldnot be placed on such statements. MAL and DX Services assume no obligation anddo not intend to update these forward-looking statements, except as requiredpursuant to applicable law or regulation, including the City Code.Dealing disclosure requirementsUnder the provisions of Rule 8.3 of the City Code (the "City Code"), if anyperson is, or becomes, 'interested' (directly or indirectly) in one per cent.or more of any class of 'relevant securities' of DX Services, all 'dealings' inany 'relevant securities' of DX Services (including by means of an option inrespect of, or a derivative referenced to, any such 'relevant securities') mustbe publicly disclosed by no later than 3.30 pm (London time) on the Londonbusiness day following the date of the relevant transaction. This requirementwill continue until the date on which the Offer becomes, or is declared,unconditional as to acceptances, lapses or is otherwise withdrawn or on whichthe 'offer period' otherwise ends. If two or more persons act together pursuantto an agreement or understanding, whether formal or informal, to acquire an'interest' in 'relevant securities' of DX Services, they will be deemed to be asingle person for the purpose of Rule 8.3.Under the provisions of Rule 8.1 of the City Code, all 'dealings' in 'relevantsecurities' of DX Services by MAL or DX Services or by any of their respective'associates', must be disclosed by no later than 12.00 noon (London time) onthe London business 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 securitiesin issue, can be found on the Panel's website at www.thetakeoverpanel.org.uk.'Interests in securities' arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an 'interest' byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities.Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a 'dealing' under Rule 8, you should consult the Panel. APPENDIX I CONDITIONS AND PRINCIPAL FURTHER TERMS OF THE OFFER The Offer will be subject to the following conditions:(a) valid acceptances being received (and not, where permitted, withdrawn) bynot later than 3.00 pm on the first closing date of the Offer (or such latertime(s) and/or date(s) as MAL may, subject to the rules of the City Code,decide) in respect of not less than 90 per cent. (or such lesser percentage asMAL may decide) in nominal value of the DX Shares to which the Offer relates,and not less than 90 per cent. (or such lesser percentage as MAL may decide) ofthe voting rights carried by the DX Shares to which the Offer relates, providedthat, unless agreed by the Panel, this condition will not be satisfied unlessMAL has acquired or agreed to acquire (pursuant to the Offer or otherwise),directly or indirectly, DX Shares carrying, in aggregate, over 50 per cent. ofthe voting rights then normally exercisable at general meetings of DX Serviceson such basis as may be required by the Panel (including for this purpose, tothe extent (if any) required by the Panel, any voting rights attaching to anyshares which are unconditionally allotted or issued before the Offer becomes oris declared unconditional as to acceptances, whether pursuant to the exerciseof conversion or subscription rights or otherwise); and for this purpose (i)the expression 'DX Shares to which the Offer relates' shall be construed inaccordance with Schedule 2 to the Takeovers Directive (Interim Implementation)Regulations 2006 (SI 2006/1183); (ii) DX Shares which have been unconditionallyallotted shall be deemed to carry the voting rights which they will carry onissue and; (iii) shares that cease to be held in treasury are DX Shares towhich the Offer relates;(b) no applicable central bank, government or governmental, quasi-governmental,supranational, statutory or regulatory body, or any applicable court,institution, investigative body, association, trade agency or professional orenvironmental body or (without prejudice to the generality of the foregoing)any other person or body in any jurisdiction (each, a "Relevant Authority")having decided to take, instituted, implemented or threatened any action,proceedings, suit, investigation or enquiry or enacted, made or proposed anystatute, regulation or order or otherwise taken any other step or done anything, and there not being outstanding any statute, legislation or order, ineach case which is likely to be material in the context of the Offer and thatwould or might reasonably be expected to:(i) restrict, restrain, prohibit, delay, impose additional conditions orobligations with respect to, or otherwise interfere with the implementation of,the Offer or the acquisition of any DX Shares by MAL;(ii) require, prevent, materially delay or adversely affect the divestiture byany member of the Wider MAL Group or any member of the Wider DX Group of all orany portion of their businesses, assets or property or of any DX Shares orother securities in DX Services or impose any limitation on the ability of anyof them to conduct their respective businesses or own their respective assetsor properties or any part thereof;(iii) impose any material limitation on the ability of any member of the WiderMAL Group to acquire or hold or exercise effectively, directly or indirectly,all rights of all or any of the DX Shares (whether acquired pursuant to theOffer or otherwise);(iv) except pursuant to Schedule 2 to the Takeovers Directive (InterimImplementation) Regulations 2006 (SI 2006/1183), require any member of theWider MAL Group or the Wider DX Group to offer to acquire any shares or othersecurities or rights thereover in any member of the Wider DX Group (other thanin DX Services) owned by any third party;(v) make the Offer or its implementation or the proposed acquisition of DXServices or any member of the Wider DX Group or of any DX Shares or any othershares or securities in, or control of, DX Services, illegal, void orunenforceable in or under the laws of any jurisdiction; or(vi) result in any member of the Wider MAL Group or Wider DX Group ceasing tobe able to carry on business in a manner in which it presently does so; or(vii) otherwise adversely affect any or all of the business, assets, prospectsor profits of any member of the Wider MAL Group or the Wider DX Group or theexercise of rights over shares of any company in the DX Group, to an extentmaterial to the Wider DX Group taken as a whole;(c) all authorisations, orders, grants, consents, clearances, filings,licences, permissions and approvals ("Authorisations"), in any applicablejurisdiction, which are reasonably considered necessary or appropriate by MALfor or in respect of the Offer, the proposed acquisition of any shares orsecurities in, or control of, DX Services or any member of the Wider DX Groupby any member of the Wider MAL Group or the carrying on of the business of anymember of the Wider DX Group being obtained from all appropriate RelevantAuthorities or (without prejudice to the generality of the foregoing) from anypersons or bodies with whom any members of the Wider DX Group has entered intocontractual arrangements in each case where the absence of such Authorisationwould have a material adverse effect on the Wider DX Group taken as a whole andsuch Authorisations remaining in full force and effect and there being nointimation of any intention to revoke or not to renew the same and allnecessary filings having been made and all necessary statutory or regulatoryobligations in any applicable jurisdiction in respect of the Offer or theproposed acquisition of DX Services by MAL or of any DX Shares or any mattersarising therefrom having been complied with;(d) since 30 June 2005 (being the date to which the latest published auditedreport and accounts of DX Services were made up) and save as disclosed in theinterim financial statements of DX Services for the six months ended 31December 2005 or announced publicly, and in each case delivered to a RegulatoryInformation Service, on or prior to the time of this announcement, there beingno provision of any agreement, instrument, permit, licence or other arrangementto which any member of the Wider DX Group is a party or by or to which it orany of its assets may be bound or subject which, as a consequence of the Offeror the acquisition of DX Shares or because of a change in the control ormanagement of DX Services or any member of the DX Group or otherwise, couldreasonably be expected to have the result that (in any case to an extent whichis or would be material in the context of the Wider DX Group taken as a whole):(i) an amount of any monies borrowed by, or any other indebtedness, actual orcontingent, of, or grant available to, any member of the Wider DX Group becomesor is capable of being declared repayable immediately or earlier than therepayment date stated in such agreement, instrument or other arrangement or theability of any member of the Wider DX Group to incur an amount of indebtednessis withdrawn, inhibited or adversely affected;(ii) any mortgage, charge or other security interest is created over the wholeor any part of the business, property or assets of any member of the Wider DXGroup otherwise than solely by operation of law in the ordinary course ofbusiness or any such security (whenever arising) being enforced;(iii) any such agreement, instrument, permit, licence or other arrangement, orany right, interest, liability or obligation of any member of the Wider DXGroup therein, is terminated or adversely modified or affected or any action istaken or obligation or liability arises thereunder;(iv) the value of any member of the Wider DX Group or its financial or tradingposition is prejudiced or adversely affected;(v) other than in the ordinary course of business, any asset of the Wider DXGroup being or falling to be charged or disposed of;(vi) the rights, liabilities, obligations or interests or business of anymember of the Wider DX Group in or with any other person, firm or company (orany arrangement relating to such interest or business) is terminated, modifiedor adversely affected;(vii) any liability (actual, contingent or otherwise) is created oraccelerated;(viii) any third party receiving additional or enhanced rights with respect tothe intellectual property of the Wider DX Group; or(ix) any member of the Wider DX Group ceases to be able to carry on businessunder any name under which it currently does so;(e) since 30 June 2005 (being the date to which the latest published auditedreport and accounts of DX Services were made up) and save as disclosed in theinterim financial statements of DX Services for the six months ended 31December 2005 or announced publicly, and in each case delivered to a RegulatoryInformation Service, or as disclosed in writing to MAL or its agents oradvisers on or prior to the time of this announcement, no member of the DXGroup having:(i) issued or agreed to issue or authorised the issue of additional shares ofany class or issued or authorised the issue of or granted securitiesconvertible into or rights, warrants or options to subscribe for or acquiresuch shares or convertible securities or redeemed, purchased or reduced orannounced any intention to do so or made any other change to any part of itsshare capital, save for options and awards granted pursuant to the DX ShareSchemes or DX Shares issued or allotted upon exercise of options or the vestingof awards, and save as between DX Services and its wholly owned subsidiaries;(ii) sold or transferred or agreed to sell or transfer any treasury shares,save for treasury shares sold or transferred in satisfaction of the exercise ofoptions or the vesting of awards under the DX Share Schemes;(iii) recommended, declared, paid or made any dividend, bonus or otherdistribution other than dividends lawfully paid to DX Services or wholly-ownedsubsidiaries of DX Services;(iv) authorised or announced its intention to propose any merger or acquisitionor disposal or transfer of assets or shares or any change in its share or loancapital other than any acquisition or disposal in the ordinary course ofbusiness or a transaction between DX Services and its wholly owned subsidiariesor between such wholly-owned subsidiaries;(v) issued or authorised the issue of any debentures or (except in the ordinarycourse of business) incurred or increased any indebtedness or contingentliability other than between DX Services and its wholly owned subsidiaries andwhich in any case is material in the context of the Wider DX Group taken as awhole;(vi) disposed of or transferred, mortgaged or encumbered any material asset orany right, title or interest in any asset or entered into or varied anycontract, commitment or arrangement (whether in respect of capital expenditureor otherwise) which is of a long term or unusual nature or which involves orcould involve an obligation of a nature or magnitude which is material orauthorised the same other than between DX Services and its wholly ownedsubsidiaries and which in any case is material in the context of the Wider DXGroup taken as a whole;(vii) entered into or varied or authorised the entry into or variation of anymaterial contract, reconstruction, amalgamation, arrangement or othertransaction which is of a long term or unusual or onerous nature or isotherwise than in the ordinary course of business other than between DXServices and its wholly owned subsidiaries and which in any case is material inthe context of the Wider DX Group taken as a whole;(viii) entered into, or varied the terms of, any contract or agreement with anyof the directors or senior executives of DX Services;(ix) taken or authorised any corporate action or had any legal proceedingsstarted or threatened against it for its winding-up, dissolution orreorganisation or for the appointment of a receiver, administrator,administrative receiver, trustee or similar officer of all or any of its assetsand revenues which in any case is material in the context of the Wider DX Grouptaken as a whole;(x) waived or compromised any claim which is material in the context of theWider DX Group taken as a whole other than in the ordinary course of business;(xi) (save for subsidiaries of DX Services) made any amendment to itsmemorandum or articles of association or other incorporation documents which ismaterial in the context of the Offer;(xii) made or agreed or consented to:(i) any change to:(a) the terms of the trust deeds constituting the pension scheme(s) establishedfor its directors, employees or their dependants; or(b) the benefits which accrue or to the pensions which are payable thereunder;or(c) the basis on which qualification for, or accrual or entitlement to suchbenefits or pensions are calculated or determined; or(d) the basis upon which the liabilities (including pensions) or such pensionschemes are funded or made;in each case, which has an effect that is material in the context of the WiderDX Group taken as a whole; or(ii) any change to the trustees including the appointment of a trustcorporation;(xiii) entered into any contract, transaction or arrangement (other than in theordinary course of business) which is or may be restrictive on the business ofany member of the Wider DX Group or the Wider MAL Group and which, in any case,is material in the context of the Wider DX Group taken as a whole;(xiv)entered into any contract, commitment or agreement with respect to any ofthe transactions or events referred to in this condition (f); or(xv) been unable or admitted that it is unable to pay its debts or havingstopped or suspended (or threatened to stop or suspend) payment of its debtsgenerally or ceased or threatened to cease carrying on all or a substantialpart of its business;(f) since 30 June 2005 and save as disclosed in the interim financialstatements of DX Services for the six months ended 31 December 2005 orannounced publicly, and in each case delivered to a Regulatory InformationService (as defined in the Listing Rules), or as disclosed in writing to MAL orits agents or advisers, in any such case on or prior to the time of thisannouncement:(i) no litigation, arbitration, prosecution or other legal proceedings havingbeen instituted, announced or threatened or become pending or remainedoutstanding by or against any member of the Wider DX Group or to which anymember of the Wider DX Group is or may become a party (whether as plaintiff,defendant or otherwise) which, in any case, is material in the context of theWider DX Group taken as a whole;(ii) no adverse change having occurred in the business, assets, financial ortrading position, profits or prospects of any member of the Wider DX Groupwhich in any case is material in the context of the Wider DX Group taken as awhole;(iii) no steps having been taken which would or are reasonably likely to resultin the withdrawal, cancellation, termination or modification of any licenceheld by any member of the Wider DX Group which is necessary for the propercarrying on of its business and which, in any case, is material in the contextof the Wider DX Group taken as a whole;(iv) no investigation by any Relevant Authority having been threatened,announced, implemented or instituted or remaining outstanding which in any caseis material in the context of the Wider DX Group taken as a whole;(v) otherwise than in the ordinary course and in the context of the Offer, noliability (actual, contingent or otherwise) having arisen which in any case ismaterial in the context of the Wider DX Group taken as a whole; or(vi) the Wider DX Group not having made or agreed to make any capitalexpenditure exceeding in aggregate ‚£5,000,000.(g) MAL not having discovered that:(i) any business, financial or other information concerning any member of theDX Group disclosed, publicly or otherwise at any time to MAL, by or on behalfof any member of the DX Group, either contains a misrepresentation of fact oromits to state a fact necessary to make the information contained therein notmisleading and which was not subsequently corrected by public announcementbefore the Announcement Date and which in any case, is material in the contextof the Wider DX Group taken as a whole; or(ii) any member of the Wider DX Group is subject to any liability, actual orcontingent, which is not disclosed in the annual report and accounts of DXServices for the financial year ended 30 June 2005 or the interim financialstatements of DX Services for the six months ended 31 December 2005 or whichwas not otherwise disclosed by public announcement before the Announcement Dateand which in any case, is material in the context of the Wider DX Group takenas a whole; and(h) MAL not having discovered, other than to the extent disclosed publiclybefore the Announcement Date, that:(i) any past or present member of the Wider DX Group has not complied with allapplicable legislation or regulations of any jurisdiction with regard to thestorage, disposal, discharge, spillage, leak or emission of any waste orhazardous substance or any substance likely to impair the environment or toharm human health or otherwise relating to environmental matters (whichnon-compliance might give rise to any liability (whether actual or contingent)on the part of any member of the Wider DX Group) or that there has otherwisebeen any such disposal, discharge, spillage, leak or emission (whether or notthe same constituted a non-compliance by any person with any such legislationor regulations and wherever the same may have taken place) which in any suchcase might give rise to any liability (whether actual or contingent) on thepart of any member of the Wider DX Group which in any case is material in thecontext of the Wider DX Group taken as a whole;(ii) there is or is likely to be any liability (whether actual or contingent)to make good, repair, reinstate or clean up any property now or previouslyowned, occupied or made use of by any past or present member of the Wider DXGroup or any controlled waters under any environmental legislation, regulation,notice, circular or order of any Relevant Authority or third party or otherwisewhich in any case is material in the context of the Wider DX Group taken as awhole;(iii) that circumstances exist (whether as a result of the making of the Offeror otherwise) which might lead to any Relevant Authority instituting or anymember of the Wider DX Group or the Wider MAL Group might be required toinstitute, an environmental audit or take any other steps which in any suchcase might result in any actual or contingent liability to improve or installnew plant or equipment or make good, repair, re-instate or clean up any land orother asset now or previously owned, occupied or made use of by any member ofthe Wider DX Group which in any case is material in the context of the Wider DXGroup taken as a whole;(iv) the Wider DX Group has not complied with any applicable law or regulationgoverning the conduct of its business in any respect which is material in thecontext of the Wider DX Group taken as a whole;(v) any contract, agreement or other arrangement which is or may be restrictiveto a material extent on the business of any member of the Wider DX Group or theWider MAL Group which is material in the context of the Wider DX Group taken asa whole;(vi) the conduct of the business of the Wider DX Group infringes theintellectual property rights of any third party in any respect which ismaterial in the context of the Wider DX Group taken as a whole; or(vii) circumstances exist whereby a person or class of persons might have anyclaim or claims in respect of any product or process of manufacture ormaterials used therein now or previously manufactured, sold or carried out byany past or present member of the Wider DX Group in any respect which ismaterial in the context of the Wider DX Group taken as a whole.MAL reserves the right to waive all or any of conditions (b) to (h) (inclusive)above, in whole or in part. Conditions (b) to (h) (inclusive) must be satisfiedas at, or waived on or before, 21 days after the later of the first closingdate of the Offer and the date on which condition (a) is fulfilled (or in eachcase such later date as the Panel may agree) provided that MAL shall be underno obligation to waive or treat as satisfied any of conditions (b) to (h)(inclusive) by a date earlier than the latest date specified above for thesatisfaction thereof notwithstanding that the other conditions of the Offer mayat such earlier date have been waived or fulfilled and that there are at suchearlier date no circumstances indicating that any of such conditions may not becapable of fulfilment.If MAL is required by the Panel to make an offer for DX Shares under theprovisions of Rule 9 of the City Code, MAL may make such alterations to theconditions as are necessary to comply with the provisions of that Rule.The Offer will lapse if it is referred to the Competition Commission before (inany such case) the later of the first closing date of the Offer and the datewhen the Offer becomes or is declared unconditional as to acceptances.MAL reserves the right to elect to implement the acquisition of DX Services,with the consent of DX Services, by way of scheme of arrangement under section425 of the Companies Act. In such event, such scheme will be implemented on thesame terms (subject to appropriate amendment) as contained in this document. APPENDIX II BASES AND SOURCES OF INFORMATION (a) Unless otherwise stated information relating to DX Services has beenextracted from the company's unaudited interim results for the six months ended31 December 2005 and the company's audited report and accounts for the yearended 30 June 2005.(b) Unless otherwise stated information relating to Candover Investments andCandover Partners has been extracted from the relevant audited report andaccounts for the years ended 31 December 2005 and 31 December 2004.(c) Unless otherwise stated information relating to Secure Mail Services hasbeen extracted from the company's audited report and accounts for the yearsended 31 March 2006 and 31 March 2005.(d) The value placed by the Offer on the existing issued share capital of DXServices of ‚£348.7 million is based upon 84,022,880 DX Shares in issue on 5July 2006, being the issued share capital of 86,794,556 less 2,771,676 treasuryshares.(e) The Closing Prices of DX Shares represent the closing middle-market pricesfor DX Shares on the relevant dates sourced from Fidessa.(f) The Offer premium of 28.5 per cent. to the average Closing Price of 323.0pence over the period from 7 March 2006 (the date the Company announced itsinterim results for the 6 month period to 31 December 2005) to 3 July 2006, asstated in paragraph 3 has been calculated using Closing Prices on each businessday over the relevant period.(g) The Offer enterprise value multiple of 12.6 x DX Service's pre-exceptionalEBITDA for the twelve month period ended 31 December 2005 as stated inparagraph 3 has been calculated as follows:(i) The enterprise value of ‚£418.7 million is calculated as the value of theOffer of ‚£348.7 million plus the net debt position of DX Services taken fromthe interim accounts as at 31 December 2005 of ‚£70.0 million.(ii) DX Services' pro-forma pre-exceptional EBITDA is ‚£33.3 million for thetwelve months ended 31 December 2005. This has been calculated by subtractingthe pre-exceptional EBITDA for the six months ended 31 December 2004 of ‚£18.3million from the pre-exceptional EBITDA for the 12 months ended 30 June 2005 of‚£36.4 million and adding the result to the pre-exceptional EBITDA for the sixmonths ended 31 December 2005 of ‚£15.2 million.(iii) The offer enterprise value multiple of 12.6 x DX Services'pre-exceptional EBITDA is calculated by dividing the enterprise value of ‚£418.7million by the pro-forma pre-exceptional EBITDA of ‚£33.3 million for the twelvemonths ended 31 December 2005.(h) The Offer multiple of 20.6 x DX Services' pre-exceptional earnings asstated in paragraph 3 is calculated using the information below:(i) The value placed by the Offer on the existing issued share capital of DXServices of ‚£348.7 million(ii) DX Services pro-forma pre-exceptional earnings are ‚£16.9 million for thetwelve months ended 31 December 2005. This has been calculated by subtractingthe pre-exceptional earnings for the six months ended 31 December 2004 of ‚£9.3million from the pre-exceptional earnings for the 12 months ended 30 June 2005of ‚£18.5 million and adding the result to the pre-exceptional earnings for thesix months ended 31 December 2005 of ‚£7.7 million.(iii) The multiple of DX Services pre-exceptional earnings of 20.6 x iscalculated by dividing the offer value of ‚£348.7 million by the pro-formapre-exceptional earnings for the twelve months ended 31 December 2005 of ‚£16.9million.(i) The calculation of pro-forma information on the Enlarged Group as stated inparagraph 5 is calculated using the information below:(i) Enlarged Group turnover of ‚£175 million is calculated by combining theturnover for the year ended 30 June 2005 of DX Services of ‚£131.1 million andthe turnover for the year ended 31 March 2005 of Secure Mail Services of ‚£43.9million.(ii) The approximate number of Enlarged Group employees of 1,840 is calculatedby combining the average number of employees for the year ended 30 June 2005 ofDX Services of 1,384 and the average number of employees for the year ended 31March 2005 of Secure Mail Services of 457.(iii) The number of Enlarged Group items of mail handled (270 million) iscalculated by combining the sum of DX Services' one million of items handledper working day multiplied by approximately 250 working days, and Secure MailServices' 20 million items handled per annum. APPENDIX III DEFINITIONS The following definitions apply throughout this announcement, unless thecontext requires otherwise:"Announcement Date" means 6 July 2006, being the date of this announcement ofthe Offer."Associate" has the meaning given in paragraph 8 of schedule 2 of theRegulations."Bank of Scotland Corporate" means a division of HBOS plc."Board of MAL" means the board of directors of MAL."Business Day" means a day, not being a public holiday, Saturday or Sunday, onwhich clearing banks in London are open for normal business."Candover" means Candover Partners, Candover Investments and the Candover 2005Fund."Candover 2005 Fund" means the fund of that name managed by Candover Partners."Candover Investments" means Candover Investments plc, an investment trustlisted on the Official List of the London Stock Exchange."Candover Partners" means Candover Partners Limited, a wholly-owned subsidiaryof Candover Investments, which manages investments on behalf of, among others,Candover Investments and the Candover 2005 Fund."City Code" means The City Code on Takeovers and Mergers."Closing Price" means the closing middle market quotation of a DX Share asderived from the Daily Official List."Companies Act" means the Companies Act 1985, as amended."Competition Commission" means the UK Competition Commission."DX Services" or the "Company" means DX Services plc."DX Directors", "Directors of DX" or "Board of DX Services" means the board ofdirectors of DX Services."DX Group" means DX Services, its subsidiaries and subsidiary undertakings."DX Share Schemes" means the DX Services plc Long Term Co-investment Plan, theDX Services plc Restricted Share Plan and the DX Services Save-As-You-EarnScheme."DX Share(s)" means the fully paid ordinary shares of 5 pence each in thecapital of DX Services."DX Shareholders" means the holders of DX Shares."EBITDA" means earnings before interest, tax, depreciation and amortisation"Enlarged Group" means the MAL Group, as enlarged by the acquisitions of SecureMail Services and DX Services after the Offer has been declared whollyunconditional."Euro" or "¢â€š¬" means euro, the currency of participating countries of the memberstates of the European Union that adopt the European single currency, and "cent" shall be construed accordingly."Form of Acceptance" means the form of acceptance which will accompany theOffer Document."Holder" means a registered holder of DX Shares."Lazard" means Lazard & Co., Limited, financial adviser to Candover Partners."Listing Rules" means the rules and regulations made by the Financial ServicesAuthority in its capacity as the UK Listing Authority under the FinancialServices and Markets Act 2000 and contained in the UK Listing Rules publicationof the same name."London Stock Exchange" means London Stock Exchange plc."MAL" means Mail Acquisitions Limited."MAL Group" means MAL; its immediate holding company, Mail Acquisitions FinanceLimited; the immediate subsidiary of Mail Acquisitions Finance Limited, MailAcquisitions 1 Limited (incorporated at the direction of Candover Partners toacquire the share capital of Secure Mail Services); and the immediate holdingcompany of Mail Acquisitions Finance Limited, Mail Acquisitions HoldingsLimited."Numis" means Numis Securities Limited."Offer" means the recommended offer to be made by MAL for DX Services by way ofcash offer."Offer Document" means the formal document to be sent to holders of DX Sharescontaining the Offer."Offer Period" means the period commencing on 4 July 2006 and ending on thedate on which the Offer becomes or is declared wholly unconditional."Official List" means The Official List of the UK Listing Authority."Panel" means The Panel on Takeovers and Mergers."Pound Sterling" or "‚£" means UK pound sterling (and references to "pence"shall be construed accordingly)."PricewaterhouseCoopers" means PricewaterhouseCoopers LLP, financial adviser toMAL and Candover Partners."Registrar of Companies" means the Registrar of Companies in England and Wales."Regulations" means the Uncertificated Securities Regulations 2001 (SI 2001 No.3755)."Regulatory Information Service" means any of the services set out in schedule12 of the Listing Rules."Secure Mail Services" means Secure Mail Services Limited."subsidiary", "subsidiary undertaking", "associated undertaking" or "undertaking" shall be construed in accordance with the Companies Act."Substantial Interest" means a direct or indirect interest in 20 per cent. ormore of the voting or equity capital (or equivalent) of an undertaking."UBS" or "UBS Investment Bank" means UBS Limited."United Kingdom" or "UK" means the United Kingdom of Great Britain and NorthernIreland and its dependent territories."United States" or "US" means the United States of America, its territories andor possessions, any state of the United States and the District of Columbia."US Business Day" means any day other than a Saturday, Sunday or a federalholiday in the US."Wider MAL Group" means MAL and the subsidiaries and subsidiary undertakings ofMAL and associated undertakings (including any joint venture, partnership, firmor company in which any member of the MAL Group is interested or anyundertaking in which MAL and such undertakings (aggregating their interests)have a Substantial Interest)."Wider DX Group" means DX Services and the subsidiaries and subsidiaryundertakings of DX Services and associated undertakings (including any jointventure, partnership, firm or company in which any member of the DX Group isinterested or any undertaking in which DX Services and such undertakings(aggregating their interests) have a Substantial Interest).6367994/7/ADJ/ADJ 4 January 1970 00:005 July 2006 22:44ENDCANDOVER INVESTMENTS PLC

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