Offer for Howle Holdings plc

28th Sep 2006 13:12

Elektron PLC28 September 2006 Not for release, publication or distribution in or into the United States ofAmerica, Canada, Australia, Republic of Ireland, Republic of South Africa orJapan or any other jurisdiction if to do so would constitute a violation of therelevant laws of such jurisdiction For immediate release 28 September 2006 Recommended Offer by Beaumont Cornish Limited ("Beaumont Cornish") on behalf of Elektron plc ("Elektron") for Howle Holdings plc ("Howle") Highlights • The Boards of Elektron and Howle today announce that they have reached agreement on the terms of a recommended offer to be made by Beaumont Cornish, on behalf of Elektron, for the whole of the issued and to be issued ordinary share capital of Howle • The Offer values each Howle Share at 9.97 pence (based on the Closing Price of one Elektron Share of 18.25 pence on 27 September 2006, being the last practicable Dealing Day prior to this announcement) and comprises: 29 New Elektron Shares and 468 pence in cash for every 100 Howle Ordinary Shares • The Offer values the entire issued and to be issued share capital of Howle at approximately £3.077 million and each Howle Ordinary Share at 9.97 pence representing a premium of 28.7 per cent. over the Closing Price of a Howle Ordinary Share of 7.75 pence on 27 September 2005, being the last practicable Dealing Day prior to this announcement • The Elektron Directors believe that the acquisition of Howle represents a diversification from Elektron's existing business of electromechanical components but that Elektron and Howle share similar characteristics since they both manufacture engineered components for industrial customers • The Offer will enable Howle Shareholders to participate in the benefits expected to arise from Howle becoming part of the enlarged Elektron Group • In aggregate, irrevocable undertakings to accept, or to procure the acceptance of, the Offer have been received in respect of 19,860,585 Howle Shares, representing 68.42 per cent. of the existing issued share capital of Howle Commenting on the Offer, Matthew Chaloner, Chief Executive of Howle, said: "The Howle Group is currently at a crossroads. The Board has stabilised theGroup, reducing net debt and returning it to profitability over a three yearrestructuring period. The next phase of the Howle Board's strategy involvessignificant investment to modernise the business and an increase in borrowingsto fund acquisitions. This strategy is not without risk and the margin for erroris small. The Offer by Elektron gives the Howle Group greater stability andaccess to funding for future expansion" Commenting on the Offer, Adrian Girling, Executive Chairman of Elektron, said: "Following the strengthening of our sales organisation in North America and AsiaPacific and the combining of the manufacturing operations of our existingelectromechanical businesses, we are eager to move forward with this timelyacquisition which will complement our existing activities. We are pleased towelcome Howle Shareholders, Customers and Employees to the Elektron Group andlook forward to working with them to make the acquisition a success." Enquiries ElektronTel: 07966 116664Adrian Girling, Executive Chairman Beaumont Cornish (Financial advisor to Elektron)Tel: 020 7628 3396Roland Cornish Howle Tel: 07808 320855Matthew Chaloner, Chief Executive of Howle City Financial Associates Limited (Financial advisor to Howle)Tel: 0207 090 7800Ross Andrews This summary should be read in conjunction with the full text of the attachedannouncement. The Offer will be subject to the conditions set out in Appendix Ito this announcement and to the full conditions and further terms which will beset out in the Offer Document and the form of acceptance which will be posted toHowle Shareholders as soon as practicable and in any event within 28 days ofthis announcement. Appendix II contains the sources and bases of information used in thisannouncement. Appendix III contains the definitions of certain expressions used in thisannouncement. Beaumont Cornish Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting for Elektron and forno-one else in connection with the Offer and will not be responsible to anyoneother than Elektron for providing the protections afforded to customers ofBeaumont Cornish Limited, nor for providing advice in relation to the Offer orany matters referred to herein. City Financial Associates Limited, which is authorised and regulated in theUnited Kingdom by the Financial Services Authority, is acting for Howle and forno-one else in connection with the Offer and will not be responsible to anyoneother than Howle for providing the protections afforded to customers of CityFinancial Associates Limited, nor for providing advice in relation to thecontents of the Offer or any matters referred to herein. This Announcement does not constitute, or form part of, an offer or aninvitation to purchase or subscribe for any securities. The Offer will be madesolely by the Offer Document and the Form of Acceptance, which will contain thefull terms and conditions of the Offer, including details of how the Offer maybe accepted. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the TakeoverCode (the "Code"), if any person is, or becomes, "interested" (directly orindirectly) in one per cent. or more of any class of "relevant securities" ofHowle or Elektron, all "dealings" in any "relevant securities" of Howle orElektron (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 London business day following the dateof the relevant transaction. This requirement will continue until the date onwhich the offer becomes, or is declared, unconditional as to acceptances, lapsesor is otherwise withdrawn or on which the "Offer Period" otherwise ends. If twoor more persons act together pursuant to an agreement or understanding, whetherformal or informal, to acquire an "interest" in "relevant securities" of Howleor Elektron, they will be deemed to be a single person for the purpose of Rule8.3 of the Code. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Elektron or Howle by Elektron or Howle, or by any of theirrespective "associates", must be disclosed by no later than 12.00 noon (Londontime) on the London business day following the date of the relevanttransaction. 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 agreementto purchase, option in respect 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 the application of Rule 8 of theCode to you, please contact an independent financial adviser duly authorisedunder the Financial Services and Markets Act 2000, consult the Panel's websiteat www.thetakeoverpanel.org.uk or contact the Panel on telephone number +44 (0)20 7382 9026 or fax number +44 (0) 20 7236 7005. If you are in any doubt as towhether or not you are required to disclose a "dealing" under Rule 8 of theCode, you should consult the Panel. In accordance with Rule 2.10 of the Code, Elektron has 78,308,602 ordinaryshares of 5p each in issue with ISIN GB00B0C5RG72. Howle has 29,025,759ordinary shares of 5p each in issue with ISIN GB0004413208. Not for release, publication or distribution in or into the United States ofAmerica, Canada, Australia, Republic of Ireland, Republic of South Africa orJapan or any other jurisdiction if to do so would constitute a violation of therelevant laws of such jurisdiction For immediate release 28 September 2006 Recommended Offer by Beaumont Cornish on behalf of Elektron plc ("Elektron") for Howle Holdings plc ("Howle") 1. Introduction The Elektron Board and the Howle Board announced today that they had reachedagreement on the terms of a recommended offer to be made by Beaumont Cornish, onbehalf of Elektron, to acquire the entire issued and to be issued share capitalof Howle. 2. Summary terms of the Offer On behalf of Elektron, Beaumont Cornish hereby offers to acquire, on the termsand subject to the conditions set out or referred to in the Offer Document andthe Form of Acceptance (in respect of certificated Howle Shares), the HowleShares, on the following basis: For every 100 Howle Ordinary 29 New Elektron Shares and 468 pence inShares cash and so in proportion for any other number of Howle Shares held. The Offer extends to the holders of all of the issued Howle Shares and to theholders of any Howle Shares which are unconditionally allotted or issued priorto the date on which the Offer closes (or by such earlier date as Elektron may,subject to the Code, decide) including Howle Shares to be issued pursuant to theexercise of rights under the Howle Share Schemes. Based on the Closing Price of an Elektron Share on 27 September 2006, being thelast business day prior to the publication of the announcement of the Offer, theOffer values the entire issued share capital of Howle (assuming full exercise ofoptions and entitlements under the Howle Share Schemes) at approximately £3.077million and each Howle Share at 9.97 pence. At 9.97 pence, the Offer representsa premium of approximately 28.7 per cent to the Closing Price of 7.75 pence perHowle Share on 27 September 2006, being the last Business Day prior to thecommencement of the Offer Period. Full acceptance of the Offer (assuming full exercise of options and entitlementsunder the Howle Share Schemes) on the basis set out above and on the Bases andSources of Information set out in Appendix II of this Announcement would resultin the issue of up to 8,949,553 New Elektron Shares (representing approximately10.26 per cent. of the enlarged share capital of the Enlarged Group) and a cashpayment of approximately £1.445 million. The cash payment under the Offer isbeing funded by Elektron from its existing cash balances and facilities. As fractions of New Elektron Shares will not be allotted or issued to acceptingHowle Shareholders, fractional entitlements to New Elektron Shares will beaggregated and sold in the market and the net proceeds of sale will be retainedfor the benefit of the Enlarged Group. Fractions of pence to which acceptingHowle Shareholders would be entitled will not be distributed but will also beretained for the benefit of the Enlarged Group. The Howle Shares will be acquired pursuant to the Offer fully paid and free fromall liens, charges, equitable interests, encumbrances and rights of pre-emptionand any other interests of any nature whatsoever and together with all rightsnow or hereafter attaching thereto including, without limitation, voting rightsand the right to receive and retain all dividends or other distributionsdeclared, made or paid after the date of this announcement. The New Elektron Shares will be issued credited as fully paid and will rank paripassu in all respects with existing Elektron Shares and will be entitled to alldividends and other distributions declared, made or paid after 27 September2006. The Offer is subject to the applicable rules and regulations of the London StockExchange and the City Code. The Offer is governed by English law and is subjectto the jurisdiction of the English courts and to the terms and conditions setout in this Document and in the Form of Acceptance (in respect of certificatedHowle Shares), including, without limitation, the acquisition or receipt ofvalid acceptances in respect of not less than 90 per cent of the Howle Shares towhich the Offer relates (or such lower percentage, not being less than 50 percent, as Elektron may decide). Details of the further terms and conditions of the Offer are set out below andin Appendix 1 of this Announcement. 3. Howle Share Schemes The Offer will extend to Howle Shares issued or unconditionally allotted uponthe exercise of options under the Howle Share Option Scheme or entitlementsunder the Howle SAYE Share Scheme whilst the Offer remains open for acceptance(or by such earlier date as Elektron may, subject to the Code, decide) not beingearlier than the date on which the Offer becomes unconditional as toacceptances, or if later, the first Closing Date of the Offer. To the extentthat such options or entitlements have not been exercised in full, in the eventthat the Offer becomes or is declared unconditional in all respects, Elektronwill make appropriate proposals to the holders of options or entitlementsgranted under the Howle Share Schemes as soon as is reasonably practicablethereafter. 4. Howle Deferred Shares Elektron is not making an offer for the existing unconditionally allotted orissued and fully paid Deferred Shares of 20p each. The holders of the DeferredShares have no voting or dividend rights whatsoever. On a winding up theDeferred Shares shall have no rights to participate in any surplus until afterthe holders of Howle Shares have been repaid in full plus an amount of£10,000,000 per Howle Ordinary Share. Howle is entitled to execute transfers of,cancel or acquire these Deferred Shares without sanction of the holders thereof.It is the intention of Elektron to procure that the Howle Deferred Shares arecancelled or acquired by Elektron once the offer has become unconditional. 5. Irrevocable undertakings to accept the Offer Elektron has received irrevocable undertakings from all of the Howle Directorsand their connected persons and family members who hold Howle Shares to accept,or procure the acceptance of the Offer in respect of their beneficial interestsin Howle Shares amounting, in aggregate, to 5,625,108 Howle Shares, representing19.38 per cent. of Howle's entire issued ordinary share capital. All of theseundertakings are binding, even if a higher competing offer is announced by athird party unless the Offer lapses or is withdrawn. In addition, Elektron has received irrevocable undertakings received fromcertain Howle Shareholders to accept, or procure the acceptance of the Offer inrespect of their beneficial interests in Howle Shares amounting, in aggregate,to 14,235,477 Howle Shares, representing 49.04 per cent. of Howle's entireissued ordinary share capital. All of these undertakings are binding, even if ahigher competing offer is announced by a third party unless the Offer lapses oris withdrawn. Accordingly, Elektron has received irrevocable undertakings to accept, orprocure the acceptance of the Offer from Howle Shareholders in respect of, inaggregate, to 19,860,585 Howle Shares, representing 68.42 per cent. of Howle'sentire issued ordinary share capital. 6. Background to and reasons for the Offer Although Elektron and Howle operate in different product and customer markets,Elektron and Howle are similar in so far as they are both manufacturers of smallengineered components serving industrial customers. The Directors of Elektronbelieve that the management skills required to manage both companies areessentially the same. The Directors of Elektron further believe that theaddition of Howle's subsidiaries of Howle Carbides (a tungsten carbide hardmetal tip and wear parts manufacturer) and Titman Tip Tools (a tungsten carbidewood routing tools manufacturer) to the Elektron Group will represent a valuablediversification from Elektron's traditional business of electromechanicalcomponents. 7. Future intentions regarding Howle Elektron believes that it can add value to Howle Carbides and Titman Tip Toolsin that: •Elektron has considerable experience of marketing its products worldwide. In the year ended 31 January 2006, 66 per cent. of Elektron's products were sold outside the UK. In the year ended 30 September 2005 only 21 per cent. of Howle's products were sold outside the UK. The Directors of Elektron believe that there is an opportunity to increase the proportion of sales of Howle Carbides and Titman Tip Tools in overseas markets. •Elektron operates lower cost manufacturing plants in Tunisia and China as well as the UK. The Directors of Elektron intend in due course to seek to establish satellite manufacturing plants offshore in order to facilitate any increase in sales at Howle Carbides and Titman Tip Tools. •The Directors of Elektron believe that the Enlarged Group will be better positioned with greater financial resources to maintain an appropriate level of investment in Howle Carbides and Titman Tip Tools. •In due course the Directors of Elektron intend to locate suitable acquisitions to increase the size of Howle Carbides and Titman Tip Tools. On completion of the Offer, Elektron will review the operating activities of theHowle Group's other subsidiaries of Richard Lloyd (an engineers' cutting andmilling tool manufacturer) and NPE-Innotek (a dies and forming toolsmanufacturer). Elektron also intends in due course to dispose of Howle's property assetslocated at Tenbury Wells, Princes Risborough, Clacton and Neath by way of saleand leaseback arrangements. 8. Management and employees The Elektron Board has given assurances to the Howle Directors that, on theOffer becoming or being declared unconditional in all respects, the ElektronBoard intends that the existing rights, including pension rights, of all HowleGroup management and employees will be respected. Subject to the review of theoperating activities referred to above, Elektron has no current plans to makesignificant cuts in employee numbers or to change the current locations of HowleCarbides or Titman Tip Tools. The headcount at two subsidiaries, Richard Lloydand NPE-Innotek, will need to be reviewed in the light of losses currently beingmade. The Elektron Board does not expect that the acquisition will affect theemployment prospects of existing Elektron employees. 9. Information on Elektron The principal activity of the Elektron Group is the design and manufacture ofcomponents for industrial companies, principally in electromechanical markets. The registered office of Elektron is: Alfred's WayBarkingEssexIG11 0AZ The Board of Elektron comprises the following Directors: Adrian Charles Nigel Girling Executive ChairmanChristopher Michael Leigh Finance DirectorKeith Anthony Daley Non-executive Director Financials Elektron's Annual Report for the year ended 31 January 2006 was approved on 23June 2006, and Elektron's interim results for the 6 months ending on 31 July2006 were announced on 18 September 2006. For the 6 month period ended 31 July2006, Elektron reported turnover on continuing operations of £12.95 million(2005: £11.11 million), and profit before taxation and exceptional costs of£1.17 million (2005: £1.06 million) and underlying earnings per share beforeexceptional costs of 1.08 pence (2005: 0.97 pence). As at 31 July 2006, theElektron Group had net assets of £6.89 million (2005: £6.20 million) and grossassets of £10.89 million (2005: £10.54 million). The Elektron Group employsapproximately 923 people The Elektron Chairman's statement included in the interim results for the 6month period ended 31 July 2006 is reproduced below: "Chairman's Statement The first half of the current financial year has seen good progress in our longterm plans to develop the Group. The recent past has seen us successfullytransition from a UK manufacturer incurring losses to a profitable UK andoffshore manufacturer with much lower costs of production. The closure of theBarking based Bulgin factory later this year and consequent transfer to ourTunisian factory will elicit further annualised savings in the region of£900,000. We have also been taking action to secure future growth in revenue streams byinvesting in sales and product development capability. In particular, we haverecruited sales managers in Beijing and Shanghai to target opportunities inChina as well as designing and developing a number of new electronic productswhich will be exhibited at the Electronica exhibition in November. Financial results Group sales have increased by 17% with increases in all the markets we serve.Domestic sales were up 15% to £4.3 million, European sales by 15% to £4.3m,North American sales by 20% to £2.1 million and rest of the world by 22% to £2.2million. Group operating profits of £1,173,000 before exceptional items were 11% ahead ofthose in first half of last year. Gross margins have remained steady at 38% as aresult of increasing metal prices offset by a reduction in labour costs andproduct mix. The dramatic increases in raw material costs have allowed us to persuadecustomers in most of our markets to accept price increases, the benefits ofwhich should be seen in the second half. Since the year-end, moulding plant and machinery used by Bulgin has begun to betransferred to Tunisia following the leasing of additional space and it isexpected that this process will be largely completed by our coming year-end.Consequently, all Bulgin manufacturing will cease at Barking and the factoryvacated by March 2007. This will incur one-time revenue costs of £1 million ofwhich £476,000 has been incurred in the first half. The weakening of the US dollar has impacted and we have incurred a loss onforeign currency transactions and translations of £91,000 compared with a gainof £75,000 in the comparative period last year. Cash generated from operations was up 25% on the corresponding period to£972,000. £419,000 was spent on plant and equipment, £280,000 on repayment ofhire purchase and lease finance obligations and £132,000 on purchase of ownshares. At 31 July 2006, net funds, being cash less borrowings, had increased to£886,000. Acquisitions In the Annual Report I stated that the Board was optimistic about concluding atransaction in the current year. At that time we were considering twoopportunities having reached agreements on price subject to due diligence. The first opportunity, which is a manufacturer of components in Europe andTunisia, is still under discussion as a result of findings during the duediligence process. Due diligence is currently continuing on another opportunity.We have written off £41,000 as exceptional costs in respect of these potentialtransactions. Earnings per share, share buy back and dividends The underlying earnings per share before exceptional costs were 1.08p comparedwith 0.97p in 2005. Basic and diluted earnings per share were 0.60p (2005:0.93p). During the period 764,500 shares were bought on-market at a cost of £132,000. The Board has considered the payment of an interim dividend, but in the light ofcurrent projects has decided to retain cash. Providing progress continues to bemade the Directors intend to review the rate of the dividend at the year-end. Employees I should like to thank all of our staff for their continued hard work,particularly those at Bulgin who have worked diligently and professionally inthe light of the announcement that the factory would close and operations betransferred to Tunisia. Outlook Orders received to date are currently up 8% on this time last year and with newproducts coming on stream we are well placed to continue progress. Adrian Girling Executive Chairman" 10. Current trading and prospects for Elektron As set out in the Chairman's statement of Elektron's interim results for theperiod ended 31 July 2006, which is repeated in full above and which wasannounced on 18 September 2006, orders received to date are currently up 8 percent. on this time last year and with new products coming on stream the ElektronDirectors believe Elektron is well placed to continue progress. On a pro forma basis calculated by reference to the most recent Interim accountsof Elektron and Howle (and without taking into account any changes since thedate of the respective interim accounts) the Enlarged Group would haveconsolidated tangible net assets of approximately £8.5 million and borrowings ofapproximately £5.7 million. The Board of Elektron intends however to dispose ofthe freehold properties and review the operations of the two subsidiaries,Richard Lloyd and NPE-Innotek. In addition it will be necessary to bring theaccounting policies of Howle into line with the rest of the Elektron Group. Theeffect of these actions (which cannot be precisely quantified at the presenttime) may lead to a reduction in Enlarged Group tangible net assets, borrowingsand financial gearing. The Enlarged Group is expected to have annual sales ofaround £30 million after these structural changes have been made. Theacquisition is not expected to have a material effect on the profits of theEnlarged Group in the current financial year. 11. Information on Howle The principal activities of companies in the Howle Group are the manufacture ofengineers' cutting tools, tungsten carbide hard metal tips, tungsten carbidetipped wood routing tools and other tungsten carbide wear products. The Howle Board comprises: Richard Guy Anniss ChairmanMatthew Chaloner Chief ExecutiveJohn Frederick Gibson Executive Director Richard Anniss, being a non-executive director of Howle, will resign from theHowle Board upon the Offer becoming or being declared unconditional in allrespects. Financials For the six months ended 31 March 2006, Howle reported turnover of £5.13 millionand a pre-tax profit of £82,000. For the year ended 30 September 2005, Howlereported turnover of £10.20 million (2004: £11.15 million), a loss beforetaxation of £52,000 (2004: profit of £53,000) and a loss per share of 0.4 pence(2004: loss 0.1 pence). As at 31 March 2006, the Howle Group had net assets of £5.65 million and gross assets of £11.81 million. The Howle Group employsapproximately 216 people. The Howle Chairman's statement included in the interim results announcement forthe six months ended 31 March 2006 is reproduced below: "Chairman's Report The six months to 31 March 2006 has seen modest progress in the Group's tradingperformance with turnover increasing by £192,000 (3.9%) against the second halfof 2005. There was a small reduction in sales of £137,000 (2.6%) over the sameperiod last year but adjusting for the loss of a major oil contract in the firstquarter of 2005, sales actually increased. The Group has seen a recovery inbusiness across the majority of Group Companies particularly at Titman Tip ToolsLimited ("Titman"). The Group started to see a recovery in the latter part ofJanuary and this has continued. It is pleasing to report an improvement in themarkets served by Richard Lloyd Limited ("Galtona"). Financial Results Profit before tax was £82,000 (2005: loss of £8,000). Improvements in operatingefficiencies at Howle Carbides Limited ("Carbides") and Galtona have helped tooffset the raw material price increases and maintain margins. We are beginningto see some easing in raw material prices. The earnings per share for the periodwas 0.1p (2005: loss per share 0.1p). In view of the high level of borrowingsthe Directors are unable to recommend a dividend for the period. The Group's borrowings during the period remained static at £4.9 million. NetCash inflow from operating activities for the period was £94,000 as an adverseworking capital swing of £306,000 eroded cash flows. The working capitalmovement is mainly due to increased trade debtors as the Group is trading up onthe back of improving markets. Included within the operating cash flows areexceptional cash outflows of £119,000, which will reduce significantly in thesecond half of the year. The Group continues to pay down hard-core debt withcapital repayments totalling £228,000 in the period. There are 16 loans, whichwill be finally paid off between now, and May 2007 which will improve net cashflows by over £500,000 a year. As part of the Board's strategy to maximise the full potential of the Group'sfreehold properties, the Board commissioned an independent valuation of allGroup freehold properties. The valuations have now been finalised and the Boardcan report that the market value of all Group freehold properties as at the 28thApril 2006 is £5,060,000. This valuation has been incorporated in the Balancesheet for the 2006 interims. The revaluation has significantly strengthened theGroup' Balance Sheet with net assets increasing by £2,016,000 (50%) fromSeptember 2005, before the effects of deferred tax provisions on the revaluationwhich have been imposed on us by IFRS. The net asset value per share is now 19.5pence and the Gearing has fallen from 120% to 85%. Operating Companies Carbides turnover for the period reduced marginally from the same period lastyear due to the loss of a major oil contract, but more notably saw an increaseof 5.4% to the second half of 2005. Export sales have recovered well and weanticipate this will continue. Investment in CNC equipment will lead toincreased capacity for product ranges, which can be grown. Titman saw a marginal increase in turnover from the same period last year but anincrease of 15.6% over the second half of 2005. Germany continues to performwell. Galtona did experience a decline in turnover from the same period last year butdid see a recovery from the second half of 2005 with turnover 4.6% up. The newmanagement structure is settling in well and the order book continues tostabilise. New opportunities in aerospace are being explored. NPE saw turnover increase marginally in the period. The Company has seen arecovery in business from customers in the Canning industry. The Board hasapproved an investment of up to £250,000 to modernise the Company's CNC turningand milling capabilities. The investment will be implemented on a piecemealbasis with one CNC mill and one CNC Lathe being installed in May of this year.The investment is being part funded by Grant aid of up to 47.5% of theinvestment cost from the Welsh Regional Assembly Government. People The Group headcount remained unchanged at 204 employees. I would like to thankall our dedicated employees for their hard work during this period. Outlook The Board are encouraged by the upturn in trading as seen in the second half ofthe period. With increased resources in sales and marketing and selectiveinvestment in capital equipment the Board remain confident that sales can begrown and with the reduced cost base the Group should start deliveringsustainable profits, provided that the manufacturing sector continues toimprove." 12. Financing arrangements Full acceptance of the Offer by Howle Shareholders (assuming the full exerciseof rights and entitlements under the Howle Share Schemes) will result in amaximum consideration payable by Elektron of approximately £1.445 million incash. Beaumont Cornish is satisfied that sufficient resources are currentlyavailable to Elektron to satisfy full acceptance of the Offer. 13. Inducement fees Elektron and Howle have entered into an inducement fee agreement (with theconsent of the Panel). Under this agreement, to enable Elektron to make theOffer, Howle has agreed to pay Elektron a fee equal to 1 per cent. of the valueof the Offer (including the net amount payable to holders of options andentitlements under the Howle Share Schemes), in the event that, inter alia, theHowle Directors withdraw their unanimous recommendation of the Offer. SimilarlyElektron has agreed to pay to Howle a fee of the same amount should it fail tomake an Offer substantially on the terms contained in this announcement. 14. Compulsory acquisition, de-listing and re-registration If Elektron receives acceptances under the Offer in respect of 90 per cent. ormore of the Howle Shares to which the Offer relates, Elektron intends toexercise its right pursuant to the provisions of Schedule 2 of the TakeoversDirective (Interim Implementation) Regulations 2006 to acquire compulsorily theremaining Howle Shares to which the Offer relates on the same terms as theOffer. As soon as it is appropriate and possible to do so, subject to the Offerbecoming or being declared unconditional in all respects and subject to anyapplicable requirements of the London Stock Exchange and UKLA (including therequirement that Elektron has acquired or agreed to acquire 75 per cent. of theordinary share capital of Howle), Elektron intends to procure that Howle appliesfor cancellation of the listing of Howle Shares on the Official List of theLondon Stock Exchange. It is anticipated that the cancellation of the listing ofthe Howle Shares will take effect no earlier than 20 Business Days following thedate upon which the Offer becomes or is declared unconditional in all respects. Cancellation of the trading of Howle Shares on the Official List of the LondonStock Exchange would significantly reduce the liquidity and marketability of anyHowle Shares which are not acquired by Elektron. Following the Offer becoming or being declared unconditional in all respects andthe cancellation of the trading of the Howle Shares, it is also the intention ofElektron to procure that a resolution is proposed to re-register Howle as aprivate company. 15. Overseas Shareholders The availability of the Offer to persons not resident in the United Kingdom maybe affected by the laws of the jurisdictions in which they are resident. Personswho are subject to the laws of any jurisdiction other than the United Kingdomshould inform themselves about, and observe any applicable legal and regulatoryrequirements. The Offer referred to in this announcement is not being made, directly orindirectly, in or into, or by use of the postal services or by any means orinstrumentality (including, without limitation, telephonically orelectronically) of interstate or foreign commerce of, or by any facilities of anational, state or other securities exchange of, the United States, Canada,Australia, Republic of Ireland, Republic of South Africa or Japan or any otherjurisdiction if to do so would constitute a violation of the relevant laws ofsuch jurisdiction, and the Offer cannot be accepted by any such use, means orinstrumentality or otherwise from or within the United States, Canada,Australia, Republic of Ireland, Republic of South Africa or Japan or any othersuch jurisdiction and doing so may render invalid any proposed acceptance of theOffer. 16. United Kingdom taxation The comments set out below are intended as a general guide only to the positionunder current United Kingdom law and HM Revenue and Customs practice (both ofwhich may change). They relate to the position of Howle Shareholders who areresident or ordinarily resident in the UK for tax purposes and who hold theirHowle Shares beneficially as an investment otherwise than under a personalequity plan or ISA. This section is not intended to be, and should not beconstrued to be, legal or taxation advice to any particular Howle Shareholder.The tax treatment of non-UK resident Howle Shareholders may differ from thatdescribed in the following paragraphs. In particular, non-UK resident HowleShareholders will generally not be liable to tax in the United Kingdom inrespect of any gain accruing to them as a result of accepting the Offer. AnyHowle Shareholders who are in any doubt as to their taxation position or are notresident in the UK or are subject to tax in any jurisdiction other than the UKshould consult an appropriate independent professional adviser without delay. (a) UK taxation of chargeable gains Liability to United Kingdom taxation on chargeable gains will depend upon theindividual circumstances of each Howle Shareholder. Share consideration Any Howle Shareholder who, alone or together with persons connected with him,does not hold more than 5 per cent of, or of any class of, shares in Howleshould not be treated as having made a disposal of Howle Shares for the purposesof United Kingdom tax on chargeable gains as a result of accepting the Offer tothe extent that he receives New Elektron Shares as consideration. Any gain orloss which would otherwise have arisen on a disposal of his Howle Shares inexchange for New Elektron Shares should be ''rolled over'' into the New ElektronShares and the New Elektron Shares should be treated as the same asset as thoseHowle Shares and as acquired at the same time as those Howle Shares. Any Howle Shareholder who, alone or together with persons connected with him,holds more than 5 per cent of, or of any class of, shares in Howle is advisedthat an application for clearance in respect of the Offer may be made to theInland Revenue under section 138 of the Taxation of Chargeable Gains Act 1992.If such clearance is granted, any such Shareholder should be treated in themanner described in the preceding paragraph. However Elektron does not currentlyintend to apply for such clearance and the Offer is not conditional on suchclearance being obtained. A subsequent disposal of all or any of the New Elektron Shares received underthe Offer may, depending on the particular circumstances of the Shareholder,give rise to a liability to tax on chargeable gains. Any chargeable gain orallowable loss on a disposal of New Elektron Shares should be calculated takinginto account the appropriate proportion of the allowable original cost to theholder of acquiring his Howle Shares, and (when calculating a chargeable gainbut not an allowable loss), for the purposes of corporation tax, indexationallowance will be calculated by reference to the date of disposal of the NewElektron Shares. For individual Shareholders, indexation allowance will beapplied until April 1998 (for Howle Shares acquired before that date) and taperrelief may apply to reduce the percentage of the gain chargeable to taxthereafter until disposal, depending on the number of complete years for whichthe shares have been held. Cash consideration To the extent that a Howle Shareholder who accepts the Offer receives cashconsideration, that Shareholder will be treated as making a disposal or partdisposal for the purposes of taxation of chargeable gains. This may, dependingon the Shareholder's personal circumstances, give rise to a chargeable gain oran allowable loss for tax purposes. For Howle Shareholders who are subject to corporation tax, indexation allowanceon the acquisition cost of the Howle Shares should be available until the dateof disposal of the Howle Shares. Indexation allowance increases the acquisitioncost of an asset for tax purposes in line with the rise in the retail pricesindex and thus reduces the amount of the chargeable gain on disposal of theasset. Indexation allowance cannot be used to create or increase a loss. Where an individual Howle Shareholder acquired his Howle Shares prior to April1998, indexation allowance on the acquisition of the Howle Shares will beavailable up to and including April 1998. For periods after April 1998, taperrelief may reduce the proportion of the gain chargeable to tax on a disposal ofHowle Shares in accordance with the number of complete years for which the HowleShareholder has owned the Howle Shares. Where an individual acquired his HowleShares on or after 6 April 1998, taper relief runs from the date of acquisition. The allowable original cost of an Howle Shareholder's original holding of HowleShares should, broadly, be apportioned between the New Elektron Shares and cashreceived by reference to the amount of cash received and the market value of theNew Elektron Shares at the time that Howle Shareholder accepts the Offer or atthe time that the Offer becomes unconditional in all respects (whichever is thelater). (b) Stamp duty and stamp duty reserve tax No stamp duty or stamp duty reserve tax will be payable by a Howle Shareholderas a result of accepting the Offer. (c) Taxation of dividends on New Elektron Shares Under current United Kingdom tax legislation, no amounts in respect of tax willbe withheld at source from dividends paid by Elektron. Where Elektron pays adividend, a holder of the New Elektron Shares who is an individual resident (fortax purposes) in the United Kingdom and who receives that dividend will beentitled to a tax credit equal to one-ninth of the dividend. The individual willbe taxed on the aggregate of the dividend and the related tax credit (the''gross dividend''), which will be regarded as the top slice of the individual'sincome. The tax credit will, however, be treated as discharging the individual'sliability to income tax in respect of the gross dividend, unless and except tothe extent that the gross dividend falls above the threshold for the higher rateof income tax. In that case, the individual will, to that extent, be liable topay tax on the gross dividend of an amount calculated as (currently) 32.5 percent of the gross dividend less the related tax credit. So, for example, adividend of £80 will carry a tax credit of £8.89 (one-ninth of £80) and to theextent that the aggregate of the dividend and the related tax credit falls abovethe threshold for the higher rate of income tax, the income tax payable on thedividend by an individual liable to income tax at the higher rate will be 32.5per cent of £88.89 (i.e. dividend of £80 plus tax credit of £8.89), namely£28.89, less the tax credit of £8.89, leaving a net charge of £20 (or 25 percent of the cash dividend). United Kingdom exempt approved pension funds and charities will not be liable toincome tax or corporation tax on dividends received by them from Elektron andwill not be entitled to claim a refund of all or part of the tax credits inrespect of those dividends. A corporate holder of New Elektron Shares that is resident for tax purposes inthe United Kingdom and that receives a dividend paid by Elektron will notgenerally be taxable on the receipt of the dividend. Persons who are not resident in the United Kingdom should consult their own taxadviser concerning their tax liabilities (in the United Kingdom and any othercountry or jurisdiction). For the avoidance of doubt, the foregoing comments should not be considered toconstitute advice and Shareholders are recommended to seek independentprofessional advice before taking any further action. 17. Listing Application will be made to the London Stock Exchange for the New ElektronShares to be admitted to trading on AIM. It is expected that Admission willbecome effective and that dealings on AIM (for normal settlement) will commenceshortly following the date on which the Offer becomes or is declaredunconditional in all respects (save for any condition relating to Admission). Noapplication is being made for the New Elektron Shares to be admitted to listingor to be dealt in on any other exchange. Temporary documents of title will notbe issued pending the dispatch, where applicable, by post of definitivecertificates for New Elektron Shares in accordance with the terms of the Offer.Pending the issue of definitive certificates for the New Elektron Shares,transfers will be certified against the register held by Capita. 18. Elektron and Howle issued share capital In accordance with Rule 2.10 of the City Code, Elektron confirms that it has78,308,602 Ordinary Shares in issue. The International Securities IdentificationNumber for Elektron ordinary shares is GB00B0C5RG72. Howle confirms that it has29,025,759 Howle Shares in issue. The International Securities IdentificationNumber for Howle Shares is GB0004413208. 19. General The Offer Document and Form of Acceptance will be posted to Howle Shareholdersas soon as reasonably practicable and in any event within 28 days of thisAnnouncement, other than to Howle Shareholders in a Restricted Jurisdiction. The Howle Directors accept responsibility for the information contained in thisannouncement relating to the Howle Group (other than statements expressed to beopinions of the Elektron Directors), the Howle Directors and members of theirimmediate families and related trusts and persons connected to them. To the bestof the knowledge and belief of the Howle Directors (who have taken allreasonable care to ensure that such is the case), such information containedherein for which they are responsible is in accordance with the facts and doesnot omit anything likely to affect the import of such information. The Elektron Directors accept responsibility for the information contained inthis announcement, other than the information for which the Howle Directorsaccept responsibility in accordance with the immediately preceding paragraph. Tothe best of the knowledge and belief of the Elektron Directors (who have takenall reasonable care to ensure that such is the case), such information is inaccordance with the facts and does not omit anything likely to affect the importof such information. The Offer will be subject to the applicable requirements of the Code and thePanel, the London Stock Exchange and the UK Listing Authority. 20. Appendices (a) Appendix I to this announcement contains the conditions and a summary of certain further terms of the Offer. (b) Appendix II to this announcement contains further details of the bases and sources of the financial and other information set out in this announcement. (c) Appendix III to this announcement contains definitions of certain expressions used in this announcement. Enquiries ElektronTel: 07966 116664Adrian Girling, Executive Chairman Beaumont Cornish (Financial advisor to Elektron)Tel: 020 7628 3396Roland Cornish HowleTel: 07808 320855Matthew Chaloner, Chief Executive of Howle City Financial Associates (Financial advisor to Howle)Tel: 0207 090 7800Ross Andrews This announcement does not constitute an offer or an invitation to purchase orsubscribe for any securities. The Offer will be made solely by the OfferDocument and (in respect of certificated Howle Shares) in the Form ofAcceptance, which will contain the full terms and conditions of the Offer,including details of how the Offer may be accepted. Beaumont Cornish Limited, which is authorised and regulated in the UnitedKingdom by the Financial Services Authority, is acting for Elektron and forno-one else in connection with the Offer and will not be responsible to anyoneother than Elektron for providing the protections afforded to customers ofBeaumont Cornish Limited, nor for providing advice in relation to the Offer orany matters referred to herein. City Financial Associates Limited, which is authorised and regulated in theUnited Kingdom by the Financial Services Authority, is acting for Howle and forno-one else in connection with the Offer and will not be responsible to anyoneother than Howle for providing the protections afforded to customers of CityFinancial Associates Limited, nor for providing advice in relation to thecontents of the Offer or any matters referred to herein. If you are in any doubt about the Offer or the action you should take, youshould consult an independent financial advisor authorised under the FinancialServices and Market Act 2000 if you are resident in the United Kingdom or, ifnot, from another appropriately authorised independent financial advisor, whospecialises in advising on the acquisition of shares and other securities. APPENDIX I Conditions and further terms of the Offer Part A: Conditions of the Offer The Offer, which is being made by Beaumont Cornish on behalf of Elektron, willcomply with applicable rules and regulations of the City Code. The Offer and anyacceptances under it will be governed by English law and subject to thejurisdiction of the courts of England and Wales and to the terms and conditionsin the Offer Document and Form of Acceptance. The Offer will be subject to thefollowing conditions: (a) valid acceptances being received (and not, where permitted,withdrawn) by not later than 1:00pm (London time) on the First Closing Date ofthe Offer (or such later time(s) and/or date(s) as Elektron may, subject to therules of the City Code or with the consent of the Panel, decide) in respect ofnot less than 90 per cent. (or such lower percentage as Elektron may decide) innominal value of the Howle Shares to which the Offer relates, provided that thiscondition will not be satisfied unless Elektron (together with any of itsassociates) shall have acquired or agreed to acquire, whether pursuant to theOffer or otherwise, Howle Shares carrying, in aggregate, more than 50 per cent.of the voting rights then exercisable at general meetings of Howle, includingfor this purpose (to the extent, if any, required by the Panel) any such votingrights attaching to any Howle Shares which are unconditionally allotted orissued before the Offer becomes or is declared unconditional as to acceptances,whether pursuant to the exercise of any outstanding conversion or subscriptionrights or otherwise and, for this purpose: (i) the expressions ''Howle Shares to which the Offerrelates'' and ''associates'' shall be construed in accordance with Schedule 2 ofthe Takeovers Directive (Interim Implementation) Regulations 2006; and (ii) Howle Shares which have been unconditionally allotted butnot issued shall be deemed to carry the voting rights which they will carry uponissue; and (iii) valid acceptances shall be treated as having been receivedin respect of any Howle Shares that Elektron shall, pursuant to Schedule 2 ofthe Takeovers Directive (Interim Implementation) Regulations 2006, be treated ashaving acquired or contracted to acquire by virtue of acceptances of the Offer; (b) the admission of the New Elektron Shares to trading on AIMbecoming effective in accordance with the AIM Rules or (if Elektron sodetermines and subject to the consent of the Panel) the London Stock Exchangeagreeing to admit such shares to trading on AIM subject only to the allotment ofsuch shares; (c) no Third Party having taken, instituted, implemented orthreatened in writing any action, proceedings, suit, investigation or enquiry,or made, proposed or enacted, any statute, regulation or order or taken anyother steps and there continuing not to be outstanding any statute, regulation,order or other matter which in each case would reasonably be expected to: (i) make the Offer, its implementation or the acquisition orproposed acquisition by Elektron of any or all shares or other securities in (orthe equivalent), or control or management of, Howle or any member of the HowleGroup void, illegal or unenforceable in or under the laws of any relevantjurisdiction, or otherwise directly or indirectly materially restrain, prevent,prohibit, materially restrict or materially delay the same or impose additionalmaterial conditions or obligations with respect to the Offer or suchacquisition, or otherwise materially impede, challenge or interfere with theOffer or such acquisition, or require material amendment to the terms of theOffer or the acquisition or proposed acquisition of any Howle Shares or theacquisition of control of Howle or the Wider Howle Group by Elektron; (ii) impose any material limitation or result in any materialdelay in the ability of any member of the Elektron Group or any member of theHowle Group to acquire or to hold or to exercise effectively, directly orindirectly, all or any rights of ownership in respect of shares or othersecurities (or the equivalent) in, or to exercise voting or management controlover, any member of the Howle Group or any member of the Elektron Group to anextent which is material in the context of the Offer; (iii) require, prevent or materially delay the divestiture oralter the terms envisaged for any proposed divestiture by any member of theElektron Group of any shares or other securities (or the equivalent) in Howle toan extent which is material in the context of the Offer; (iv) require, prevent or delay the divestiture or alter the termsenvisaged for any proposed divestiture by any member of the Elektron Group or byany member of the Howle Group of all or any material portion of their respectivebusinesses, assets or properties or limit the ability of any of them to conductany of their respective businesses or to own or control any of their respectiveassets or properties or any part thereof to an extent which is material in thecontext of the Wider Howle Group taken as a whole or the Elektron Group taken asa whole; (v) except pursuant to Part XIIIA of the Companies Act, requireany member of the Elektron Group or of the Howle Group to acquire, or to offerto acquire, any shares or other securities (or the equivalent) in any member ofeither group owned by any third party or to sell or offer to sell any shares orother securities (or the equivalent) in, or any asset or any member of the HowleGroup to an extent which is material in the context of the Wider Howle Grouptaken as a whole or the Elektron Group taken as a whole; (vi) impose any material limitation on the ability of any memberof the Elektron Group or of the Howle Group to conduct or integrate orcoordinate its business, or any material part of it, with the businesses or anypart of the businesses of any other member of the Elektron Group or of the HowleGroup to an extent which is material in the context of the Offer; (vii) result in any member of the Elektron Group or the Howle Groupceasing to be able to carry on business under any name under which it presentlydoes so to an extent which is material in the context of the Wider Howle Grouptaken as a whole or the Elektron Group taken as a whole; or (viii) otherwise adversely affect the business, assets, profits,financial or trading position of any member of the Howle Group or of theElektron Group to an extent which is material in the context of the Offer; and all applicable time periods during which any Third Party could decide totake, institute or threaten any such action, proceeding, suit, investigation,enquiry or reference or otherwise intervene under the laws or regulations of anyrelevant jurisdiction having expired, lapsed or been terminated; (d) insofar as the merger provisions of the Enterprise Act 2002may be applicable, the Office of Fair Trading indicating in terms satisfactoryto Elektron, that it does not intend to refer the proposed acquisition of Howleby Elektron, or any matter arising therefrom, to the Competition Commission, orthe statutory period for any such referral expiring without such referencehaving been made, or the Office of Fair Trading accepting undertakings fromElektron in terms satisfactory to Elektron, in lieu of referring the proposedacquisition by Elektron of Howle, or any matter arising therefrom, to theCompetition Commission; (e) all necessary notifications and filings having been made,all applicable time periods (including any extensions of such waiting and othertime periods) under any applicable legislation or regulation of any relevantjurisdiction having expired, lapsed or been terminated (as appropriate) and allstatutory or regulatory obligations in any relevant jurisdiction having beencomplied with in each case in connection with the Offer or the acquisition orproposed acquisition of any shares or other securities (or the equivalent) inHowle or control (directly or indirectly) of Howle or any other member of theHowle Group by any member of the Elektron Group or the carrying on by any memberof the Howle Group of its business, where the absence thereof would have amaterial adverse affect in the context of the Wider Howle Group taken as awhole; (f) all material and necessary Authorisations in anyjurisdiction for or in respect of the Offer or the acquisition or proposedacquisition of any shares or other securities in Howle or control (directly orindirectly) of Howle or any other member of the Howle Group by any member of theElektron Group or the carrying on by any member of the Howle Group of itsbusiness in any jurisdiction having been obtained, in terms and in a formsatisfactory to Elektron, from all appropriate Third Parties or from any personsor bodies with whom any member of the Howle Group has entered into contractualarrangements, in each case where the absence of such Authorisation would have amaterial adverse effect in the context of the Offer and all such Authorisationsremaining in full force and effect at the time at which the Offer becomesotherwise unconditional in all respects and there being no notice of anyintention to revoke, suspend, restrict, adversely modify or not to renew any ofthe same; (g) except as fairly disclosed to Elektron by or on behalf ofHowle, or as disclosed in the Annual Report and Accounts of Howle, or aspublicly announced by Howle (by the delivery of an announcement to a RegulatoryInformation Service), prior to the date of the Offer Announcement, there beingno provision of any arrangement, agreement, licence, permit, franchise or otherinstrument to which any member of the Howle Group is a party, or by or to whichany such member or any of its assets is or are or may be bound, entitled orsubject or any circumstance, which, in each case, as a consequence of the Offeror the acquisition or proposed acquisition of any shares or other securities in,or control of, Howle or any other member of the Howle Group by any member of theElektron Group or otherwise, could or might reasonably be expected to result in,(in any case to an extent which is or would be material in the context of theWider Howle Group taken as a whole): (i) any monies borrowed by or any other indebtedness orliabilities (actual or contingent) of, or any grant available to, any member ofthe Howle Group being or becoming repayable or capable of being declaredrepayable immediately or prior to its stated repayment date or the ability ofany member of the Howle Group to borrow monies or incur any indebtedness beingwithdrawn or inhibited or becoming capable of being withdrawn; (ii) the creation or enforcement of any mortgage, charge orother security interest over the whole or any material part of the business,property, assets or interests of any member of the Howle Group or any suchmortgage, charge or other security interest (wherever created, arising or havingarisen) becoming enforceable; (iii) any such arrangement, agreement, licence, permit,franchise or instrument, or the rights, liabilities, obligations or interests ofany member of the Howle Group thereunder, being, or becoming capable of being,terminated or adversely modified or affected or any adverse action being takenor any onerous obligation or liability arising thereunder; (iv) any asset or interest of any member of the Howle Groupbeing or falling to be disposed of or ceasing to be available to any member ofthe Howle Group or any right arising under which any such asset or interestcould be required to be disposed of or could cease to be available to any memberof the Howle Group, in each case, otherwise than in the ordinary course ofbusiness; (v) any member of the Howle Group ceasing to be able to carryon business under any name under which it presently does so; (vi) the creation of any material liabilities (actual orcontingent) by any member of the Howle Group, otherwise than in the ordinarycourse of business; (vii) the rights, liabilities, obligations or interests of anymember of the Howle Group under any such arrangement, agreement, licence,permit, franchise or other instrument or the interests or business of any suchmember in or with any other person, firm, company or body (or any arrangement orarrangements relating to any such interests or business) being terminated oradversely modified or affected; or (viii) the financial or trading position of any member of the HowleGroup being prejudiced or adversely affected; and no event having occurred which, under any provision of any such arrangement,agreement, licence, permit or other instrument, could result in any of theevents or circumstances which are referred to in paragraphs (i) to (viii) ofthis condition (g) in any case to an extent which is or would be material in thecontext of the Wider Howle Group taken as a whole; (h) since 31 March 2006 and except as disclosed in the unauditedInterim Results of Howle for the six month period ended on that date, or asotherwise publicly announced by Howle (by the delivery of an announcement to aRegulatory Information Service), or as otherwise fairly disclosed to Elektron byor on behalf of Howle prior to the date of the Offer Announcement, no member ofthe Howle Group having: (i) issued or agreed to issue, or authorised or proposed theissue of, additional shares or securities of any class, or securitiesconvertible into or exchangeable for, or rights, warrants or options tosubscribe for or acquire, any such shares, securities or convertible securitiesother than as between Howle and wholly owned subsidiaries of Howle and otherthan any options granted as disclosed to Elektron prior to the date of the OfferAnnouncement and any shares issued upon the exercise of any such options; (ii) purchased or redeemed or repaid any of its own shares orother securities or reduced or made any other change to any part of its sharecapital (other than with respect to any wholly owned subsidiary of Howle) whichin either case would be material in the context of the Wider Howle Group takenas a whole; (iii) recommended, declared, issued, paid or made or proposed torecommend declare, pay, issue or make any bonus, dividend or other distributionwhether payable in cash or otherwise (other than to Howle or a wholly ownedsubsidiary of Howle); (iv) made, committed to make, authorised, proposed or announced anintention to propose any material change in its share or loan capital; (v) merged with, demerged or acquired any body corporate,partnership or business, or (other than a transaction between Howle and a whollyowned subsidiary of Howle) other than in the ordinary course of business,acquired or disposed of or transferred, mortgaged or charged or created anysecurity interest over any assets or any right, title or interest in any assets(including shares in any undertaking and trade investments) or authorised thesame (which is material in the context of the Wider Howle Group taken as awhole); (vi) issued, authorised or proposed the issue of, or authorisationof or made any change in or to any debentures or (except in the ordinary courseof business) incurred or increased any indebtedness or liability (actual orcontingent), including pursuant to any agreements or arrangements existing priorto the date of the Offer Announcement, which in any case is material in thecontext of the Wider Howle Group taken as a whole; (vii) entered into, varied, or authorised any agreement,transaction, arrangement or commitment (whether in respect of capitalexpenditure or otherwise), and which in any case is reasonably likely to bematerial in the context of the Wider Howle Group taken as a whole or theElektron Group taken as a whole, as the case may be, which: (A) is of a long term, onerous or unusual nature or magnitude orwhich is reasonably likely to involve an obligation of such nature or magnitude;or (B) which is reasonably likely to restrict the business of anymember of the Howle Group or any member of the Elektron Group; or (C) is other than in the ordinary course of business; (viii) entered into or varied or made any offer to enter into or varythe terms of, any material contract, agreement or arrangement with any of theDirectors of Howle; (ix) (other than in respect of any member which is or was at thistime dormant) taken or proposed any corporate action or had any legalproceedings instituted or threatened in writing against it or petition presentedor order made for its winding-up (voluntarily or otherwise), dissolution orreorganisation or for the appointment of a receiver, administrator,administrative receiver, trustee or similar officer of all or any part of itsassets and revenues or any analogous proceedings in any jurisdiction orappointed any analogous person in any jurisdiction which in any case is materialin the context of the Wider Howle Group taken as a whole; (x) been unable, or admitted in writing that it is unable, topay its debts as they fall due or having stopped or suspended (or threatened tostop or suspend) payment of its debts generally or ceased or threatened to ceasecarrying on all or a substantial part of its business which in any case ismaterial in the context of the Wider Howle Group taken as a whole; (xi) waived or compromised or settled any claim in a manner whichis material in the context of the Wider Howle Group taken as a whole; (xii) made any alteration to its memorandum or articles ofassociation that is material in the context of the Offer; (xiii) implemented, effected or authorised, or proposed or announcedits intention to implement, effect, authorise or propose any reconstruction,amalgamation, commitment, merger, scheme or other transaction or arrangementexcept (in the case of members of the Howle Group other than Howle) to an extentwhich is not material in the context of the Wider Howle Group taken as a whole; (xiv) amended the terms (including the terms relating to accelerationor vesting) of any Howle Share Scheme in a manner that is material in thecontext of the Wider Howle Group taken as a whole; and (xv) entered into any agreement, commitment or arrangement or passedany resolution or made any offer (which remains open for acceptance) or proposedor announced any intention with respect to any of the transactions, matters orevents referred to in this condition (h); (i) since 31 March 2006 and except as disclosed in theunaudited Interim Results of Howle for the six month period ended on that date,or as otherwise publicly announced by Howle (by the delivery of an announcementto a Regulatory Information Service) or as otherwise fairly disclosed toElektron by or on behalf of Howle prior to the date of the Offer Announcement: (i) there having been no adverse change or deterioration inthe business, assets, financial or trading position or profit or prospects ofany member of the Howle Group which in any case is material in the context ofthe Wider Howle Group taken as a whole; (ii) no contingent or other liability of any member of the HowleGroup having arisen or become apparent or increased which in any case ismaterial in the context of the Wider Howle Group taken as a whole; (iii) no material litigation, arbitration proceedings,prosecution or other legal proceedings to which any member of the Howle Group isor is reasonably likely to become a party (whether as plaintiff, defendant orotherwise) having been threatened, announced, implemented or instituted by oragainst or remaining outstanding against or in respect of any member of theHowle Group which in any case is material in the context of the Wider HowleGroup taken as a whole; and (iv) Elektron not having discovered that any member of the HowleGroup or any partnership, company or other entity in which any member of theWider Howle Group has a significant economic interest and which is not asubsidiary undertaking of Howle is subject to any liability (actual orcontingent) which is not disclosed in the Annual Report and Accounts of Howleand which in any case is material in the context of the Wider Howle Group takenas a whole; (j) except as disclosed in the Annual Report and Accounts ofHowle, or as otherwise publicly announced by Howle (by the delivery of anannouncement to a Regulatory Information Service) or as otherwise fairlydisclosed to Elektron by or on behalf of Howle prior to the date of the OfferAnnouncement, Elektron not having discovered that any financial or business orother information concerning the Howle Group disclosed at any time by or onbehalf of any member of the Howle Group, to any member of the Elektron Group,whether publicly or otherwise, is materially misleading or contains any materialmisrepresentation of fact or omits to state a fact necessary to make anyinformation contained therein not misleading and which was not subsequentlycorrected before the date of the Offer Announcement by disclosure eitherpublicly or otherwise to Elektron to an extent which in any case is material inthe context of the Wider Howle Group taken as a whole; and (k) except as disclosed in the Annual Report and Accounts ofHowle, or as otherwise publicly announced by Howle (by the delivery of anannouncement to a Regulatory Information Service) or as otherwise fairlydisclosed to Elektron by or on behalf of Howle prior to the date of the OfferAnnouncement, Elektron not having discovered that: (i) any past or present member of the Howle Group has notcomplied with any applicable legislation or regulations of any relevantjurisdiction with regard to the use, treatment, handling, storage, transport,release, disposal, discharge, spillage, leak or emission of any waste orhazardous substance or any substance likely to impair the environment or harmhuman health, or otherwise relating to environmental matters or the health andsafety of any person, or that there has otherwise been any such use, treatment,handling, storage, transport, release, disposal, discharge, spillage, leak oremission (whether or not this constituted a non-compliance by any person withany legislation or regulations and wherever the same may have taken place)which, in any case, would be reasonably likely to give rise to any liability(whether actual or contingent) or cost on the part of any member of the HowleGroup which in any case is material in the context of the Wider Howle Grouptaken as a whole; (ii) there is, or is reasonably likely to be, any liability,whether actual or contingent, or requirement to improve or install new plant orequipment or to make good, repair, reinstate or clean up any property now orpreviously owned, occupied or made use of by any past or present member of theHowle Group or any other property or any controlled waters under anyenvironmental legislation, regulation, notice, circular, order or other lawfulrequirement of any relevant authority or third party or otherwise which in anycase is material in the context of the Wider Howle Group taken as a whole; or (iii) circumstances exist whereby a person or class of personswould be reasonably likely to have a claim in respect of any product or processof manufacture or materials used therein now or previously manufactured, sold orcarried out (including without limitation with respect to ownership orinfringement of intellectual property) by any member of the Howle Group which isor would be material in the context of the Wider Howle Group taken as a whole. For the purpose of these conditions: (a) ''Third Party'' means any government, government departmentor governmental, quasigovernmental, supranational, statutory, regulatory,administrative or investigative body, authority (including any nationalantitrust, competition or merger control authorities or similar authorities),court, trade agency, association, institution or professional or environmentalbody in any relevant and applicable jurisdiction; (b) a Third Party shall be regarded as having ''intervened'' ifit has decided to take, institute, implement or threaten any action, proceeding,suit, investigation, enquiry or reference or made, proposed or enacted anystatute, regulation, decision or order or taken any measures or other steps orrequired any action to be taken or information to be provided or otherwisehaving done anything and ''intervene'' shall be construed accordingly; (c) ''Elektron Group'' means Elektron and its subsidiaryundertakings; (d) ''Authorisations'' means authorisations, orders,recognitions, determinations, certificates, consents, permissions, licenses,clearances, and approvals other than those the need for which has been fairlydisclosed prior to the date of this announcement; (e) ''Howle Group'' means Howle and its subsidiary undertakings;and (f) ''Wider Howle Group'' means the Howle Group and associatedundertakings and any other body corporate, partnership joint venture or personin which the Howle Group and such undertakings (aggregating their interests)have an interest of more than 20 per cent. of the voting or equity capital orthe equivalent. Subject to the requirements of the Panel, Elektron reserves the right to waiveall or any of the above conditions, in whole or in part, except condition (a). Conditions (b) to (k) (inclusive) must be fulfilled, be determined by Elektronto be or remain satisfied or (if capable of waiver) waived within 21 days afterthe later of the First Closing Date of the Offer and the date on which condition(a) is fulfilled (or in each case such later date as the Panel may agree)failing which the Offer will lapse. Elektron will not invoke conditions (b) to(k) (inclusive) so as to cause the Offer to lapse or be withdrawn unless thecircumstances which give rise to the right to invoke the relevant condition areof material significance to Elektron in the context of the Offer. Elektron shallbe under no obligation to waive, to determine to be or to remain satisfied or totreat as fulfilled any of conditions (b) to (k) inclusive by a date earlier thanthe date specified above for the fulfilment thereof notwithstanding that theother conditions of the Offer may at such earlier date have been fulfilled andthat there are as at such earlier date no circumstances indicating that any ofsuch conditions may not be capable of fulfilment. The conditions are inserted for the benefit of Elektron and no Howle Shareholdershall be entitled to waive any of the conditions without the prior consent ofElektron. Elektron reserves the right, subject to the consent of the Panel, to extend thetime allowed under the rules of the City Code for satisfaction of condition (a)above and accordingly for the satisfaction, fulfilment or, where permitted,waiver of other conditions, and thus, to extend the duration of the initialOffer Period. If Elektron is required by the Panel to make an offer for Howle Shares under theprovisions of Rule 9 of the City Code, Elektron may make such alterations to theconditions, including the acceptance condition in paragraph (a) above, as arenecessary to comply with the provisions of that Rule. The Offer will lapse (unless otherwise agreed by the Panel) if the acquisitionof Howle is referred to the UK Competition Commission before the First ClosingDate of the Offer, or the date on which the Offer becomes or is declaredunconditional as to acceptances, whichever is the later. If the Offer lapses itwill cease to be capable of further acceptance. Howle Shareholders who haveaccepted the Offer and Elektron shall then cease to be bound by acceptancesdelivered on or before the date on which the Offer lapses. The Offer will be on the terms and will be subject, inter alia, to theconditions which are set out in this Appendix and the other terms set out inthis announcement, the Document and the Form of Acceptance and such furtherterms as may be required to comply with the provisions of the City Code. TheOffer and any acceptances thereunder will be governed by English law and subjectto the jurisdiction of the English courts. APPENDIX II Sources and Bases of Information In this announcement: (a) financial information relating to Elektron for the two years ended 31January 2006 has been extracted from the audited report and accounts of Elektronfor the year ended 31 January 2006. Financial information relating to Elektronfor the year ended 31 January 2004 has been extracted from the audited accountsof Elektron for the year ended 31 January 2005. The notes to the financialinformation of Elektron have been extracted from the notes to the audited reportand accounts of Elektron for the years ended 31 January 2006, 31 January 2005and 31 January 2004; (b) the financial information relating to Elektron for the six months ended31 July 2006 has been extracted from the announcement of the interim resultsmade by Elektron to the London Stock Exchange on 18 September 2006; (c) financial information relating to Howle for the two years ended 30September 2005 has been extracted from the audited report and accounts of Howlefor the year ended 30 September 2005. Financial information relating to Howlefor the year ended 30 September 2003 has been extracted from the auditedaccounts of Howle for the year ended 30 September 2004, (d) the financial information relating to Howle for the six months ended 31March 2006 has been extracted from the announcement of the interim results madeby Howle to the London Stock Exchange on 15 May 2006; (e) the value of the existing issued share capital of Howle at the OfferPrice is based upon 29,025,759 Howle Shares in issue on 27 September 2006 (beingthe last Business Day prior to the publication of this announcement) and thefull exercise of all rights to subscribe for Howle Shares under the Howle ShareSchemes for a further 1,834,768 Howle Shares and the Closing Price of anElektron Share as at 27 September 2006 (being the last Business Day prior to thepublication of this announcement) of 18.25 pence; (f) the amount of cash payment in respect of full acceptance of the Offeris calculated based on the number of Howle Shares in issue (as described inparagraph (e) above) resulting in a cash payment of approximately £1.445million; and (g) all prices quoted for Elektron Shares and Howle Shares are ClosingPrices. APPENDIX III Definitions The following definitions apply throughout this announcement, unless the contextrequires otherwise: "Acquisition" the proposed acquisition of the entire issued and to be issued share capital of Howle under the Offer "Admission" the admission of the New Elektron Shares to the AIM market of the London Stock Exchange in accordance with the AIM Rules "Alternative TTE a Transfer to Escrow instruction (as described in the CRESTInstruction" Manual issued by CRESTCo) in relation to Howle Shares in uncertificated form "Acting in as defined in the City Codeconcert" "AIM" AIM, the market of that name operated by the London Stock Exchange "AIM Rules" the rules governing the admission to, and operation of, AIM as set out in the AIM Rules for companies published by the London Stock Exchange from time to time "Australia" the Commonwealth of Australia, its states, possessions and territories and all areas subject to its jurisdiction and any political sub-division thereof "Beaumont Beaumont Cornish Limited, which is authorised and regulated inCornish" the United Kingdom by the Financial Services Authority and has its registered address Lewis House, 12 Smith Street, Rochdale, Lancashire OL16 1TX "Business Day" any day other than a Saturday or a Sunday when banks are open in London for general banking business "Canada" Canada, its possessions, provinces and territories and all areas subject to its jurisdiction and any political sub-division thereof "Capita" or Capita Registrars (a trading division of Capita IRG Plc), The"Capita Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU,Registrars" Elektron's receiving agent for the purposes of the Offer and a trading division of Capita IRG Plc "Certificated" a share or other security which is not in uncertificated formor "in (that is, not in CREST)certificatedform" "City Code" or The City Code on Takeovers and Mergers"Code" "City Financial City Financial Associates Limited which is authorised andAssociates" regulated in the United Kingdom by the Financial Services Authority and has its registered address at Pountney Hill House, 6 Laurence Pountney Hill, London EC4R 0BL. "Closing Price" the closing middle market quotation of a Howle Share or of an Elektron Share as the case may be as derived from the the Daily Official List or its AIM Appendix "Companies Act" the Companies Act 1985 (as amended)or "the Act" "CREST" the relevant system (as defined in the Regulations) in respect of which CRESTCo is the Operator (as defined in the Regulations) "CRESTCo" CRESTCo Limited, the operator of CREST "CREST Manual" the reference manual issued by CRESTCo from time to time "CREST member" a person who has been admitted by CRESTCo as a system-member (as defined in the Regulations) "CREST a person who is, in relation to CREST, a system-participant (asparticipant" defined in the Regulations) "CREST sponsor" a CREST participant admitted to CREST as a CREST sponsor "CREST sponsored a CREST member admitted to CREST as a sponsored membermember" "Daily Official The Daily Official List of the London Stock ExchangeList" "Document" or the document proposed to be sent to Howle Shareholders"Offer Document" containing, inter alia, the details of the Offer ''Electronic the inputting and settling of a TTE Instruction whichAcceptance'' constitutes or is deemed to constitute an acceptance of the Offer on the terms set out in this Document "Elektron" or Elektron Plc, incorporated under the Companies Act with companythe "Company" number 00448274 and having its registered office at Alfred's Way, Barking Essex IG11 0AZ "Elektron the directors of ElektronDirectors" or"Elektron Board" "Elektron Group" Elektron and its subsidiaries and subsidiary undertakings "Enlarged Group" the combined business of the Elektron Group and the Howle Group following the Offer becoming or being declared unconditional in all respects "Elektron ordinary shares of 5 pence each in the capital of ElektronShares" or"ElektronOrdinary Shares" "ESA an Escrow Adjustment Instruction (AESN), transaction type "ESA"Instruction" (as defined in the CREST Manual) "Escrow Agent" Capita in its capacity as escrow agent (as defined by the CREST Manual) for the purposes of the Offer "First Closing the first closing date of the Offer, being 1.00 p.m. 19 OctoberDate" 2006 "Form of the form of acceptance and authority for use in connection withAcceptance" or the Offer in respect of certificated Howle Shares accompanying"Form" this Document "Howle Carbides" Howle Carbides Limited, a wholly-owned subsidiary of Howle Holdings Plc "Howle" Howle Holdings Plc incorporated under the Companies Act with company number 1310502 and having its registered office at Cromwell Works, Boraston Lane, Tenbury Wells, Worcestershire WR15 8LF "Howle Board" the directors of Howleor "HowleDirectors" "Howle Deferred the existing unconditionally allotted or issued and fully paidShares" deferred shares of 20p each in the capital of Howle. "Howle Executive the executive bonus scheme operated by Howle in which theBonus Scheme" participants are Matthew Chaloner (Chief Executive of Howle) and John Gibson (Executive Director of Howle) "Howle Group" Howle and its subsidiaries and subsidiary undertakings "Howle SAYE the Howle savings related share option scheme approved by HowleShare Scheme" Shareholders at its Annual General Meeting held 14 April 2005 "Howle Share the options granted over Howle Shares under the Howle ShareOptions" Option Scheme "Howle Share the approved executive share option scheme of Howle dated 1 MayOption Scheme" 1997 "Howle Share the Howle Share Option Scheme and the Howle SAYE Share SchemeSchemes" "Howle holder(s) of Howle SharesShareholder(s)"or "Shareholder(s)" "Howle Ordinary the existing unconditionally allotted or issued and fully paidShares", "Howle ordinary shares of 5p pence each in the capital of Howle andShares" or any further such ordinary shares which are unconditionally"Shares" allotted and/or issued and fully paid (including pursuant to the exercise of the Howle Share Schemes) before the Offer closes or before such earlier date as the Elektron Directors may (subject to the City Code) decide, not being earlier than the date on which the Offer becomes or is declared unconditional as to acceptances or, if later, the First Closing Date. "Japan" Japan, its cities and prefectures, territories and possessions and all other areas subject to its jurisdiction and any political sub-division thereof "Listing Rules" the listing rules and regulations of the UKLA as amended from time to time, and contained in the UKLA's publication of the same name "London Stock London Stock Exchange plcExchange" "Member account the identification code or number attached to any memberID" account in CREST "New Elektron the new Elektron Shares proposed to be issued and credited asShares" fully paid up pursuant to the Offer "NPE-Innotek" NPE-Innotek Limited, a wholly owned subsidiary of Howle Holdings Plc "Offer" the recommended offer to be made by Beaumont Cornish on behalf of Elektron, on the terms and subject to the conditions set out in the Document and the Form of Acceptance (in respect of certificated Howle Shares) to acquire all of the Howle Shares, (including, where the context so requires, any subsequent revision, variation, extension or renewal thereof) "Offer Period" the period commencing on 28 September 2006 and ending on whichever of the following shall be the latest: (i) the First Closing Date; (ii) the time and date on which the Offer becomes or is declared unconditional as to acceptances; and (iii) the time and date on which the Offer lapses "Overseas holders of Howle Shares resident in, or nationals or citizensShareholders" of, jurisdictions outside the UK or who are nominees of, or custodians, trustees or guardians for, citizens or nationals of other countries "Panel" The Panel on Takeovers and Mergers "Participant ID" the identification code or membership number used in CREST to identify a particular CREST member or their CREST participant "Recognised any investment exchange operating in the United KingdomInvestment recognised by the Financial Services Authority as a RecognisedExchange" Investment Exchange "Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time "Republic of the Republic of Ireland and all other areas subject to itsIreland" jurisdictions and any political sub-divisions thereof "Republic of the Republic of South Africa and all other areas subject to itsSouth Africa" jurisdictions and any political sub-divisions thereof "Restricted Australia, Canada, Japan, Republic of Ireland, Republic ofJurisdiction" South Africa or the United States of America or any other jurisdiction where the release, publication or distribution of this Document would constitute a violation of the relevant laws of such jurisdiction "RIS" Regulatory Information Service, The Announcements Office and/or RNS and/or any other channel recognised from time to time as a channel for the dissemination of regulatory information by listed and AIM companies under the Listing Rules and the AIM Rules "Richard Lloyd" Richard Lloyd Limited, a wholly owned subsidiary of Howle Holdings Plc "SDRT" Stamp Duty Reserve Tax "TFE a transfer from escrow instruction (as defined in the CRESTInstruction" Manual) "TTE a transfer to escrow instruction (as defined in the CRESTInstruction" Manual) "Titman Tip Titman Tip Tools Limited, a wholly owned subsidiary of HowleTools" Holdings Plc "UKLA" the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 "uncertificated" a share or security which is for the time being recorded on theor "in relevant register of the share or security concerned as beinguncertificated held in uncertificated form in CREST, and title to which, byform" virtue of the Regulations, may be transferred by means of CREST "United Kingdom" the United Kingdom of Great Britain and Northern Irelandor "UK" "United States the United States of America, its territories and possessions,of America" or any state of the United States of America and the District of"United States" Columbia, and all other areas subject to its jurisdictions and any political sub-divisions thereof "US Person" a US person as defined in Regulation S of the United States Securities Act 1933 as amended Throughout this announcement and where the context so requires, the masculinegender shall include the feminine and the singular shall include the plural andvice versa and all times shall be construed as references to London time. Savewhere otherwise stated, for the purposes of this Document the terms"subsidiary", "subsidiary undertaking", "associated undertaking" and"undertaking" shall have the respective meanings given by the Companies Act.Terms defined in the CREST Manual shall, unless the context requires otherwise,bear the same meanings where used in this Document. This information is provided by RNS The company news service from the London Stock Exchange

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