8th Sep 2005 15:37
HMV Group PLC08 September 2005 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO ORFROM AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES 8 September 2005 CASH OFFER of 440 pence in cash for each Ottakar's Share to be made by UBS INVESTMENT BANK on behalf of HMV GROUP PLC (or a wholly owned subsidiary thereof) for OTTAKAR'S PLC Summary • The Board of HMV Group plc ("HMV Group") announces the terms of a cash offer, to be made by UBS Investment Bank on behalf of HMV Group (or a wholly owned subsidiary thereof), for the entire issued and to be issued share capital of Ottakar's plc ("Ottakar's" or the "Company") (the "Offer"). • The Offer of 440 pence in cash for each Ottakar's Share, valuing the entire issued share capital of Ottakar's at approximately £96.4 million and £100.2 million on a fully diluted basis, provides Ottakar's shareholders with an opportunity to realise value in cash at an attractive premium. A Loan Note Alternative will also be provided. • The Offer represents a premium of: (i) 56.6 per cent. to the closing price of Ottakar's Shares on 15 August 2005, being the last Business Day prior to the commencement of the offer period; (ii) 19.7 per cent. to the price of Ottakar's Shares on 25 August 2005, being the last business day prior to HMV Group's announcement of its possible offer for Ottakar's; and (iii) 10.0 per cent. to the revised offer made by Book Store Acquisitions Limited on 6 September 2005. • HMV Group has received undertakings to accept the offer in respect of a total of 6,572,830 Ottakar's shares, representing approximately 30.0 per cent. of the existing issued share capital of Ottakar's. • HMV Group intends to seek a recommendation for the Offer from the Independent Directors of Ottakar's. Alan Giles, Chief Executive of HMV Group, said: "The acquisition of Ottakar's is an exciting step forward for our Waterstone'sbusiness. The store portfolios of Ottakar's and Waterstone's are highlycomplementary and the combined group will be better positioned to providecustomers with a wider and more relevant choice of titles and an attractiveprogramme of promotional offers. The acquisition is well-timed as it is made ata point where Waterstone's is embarking on a new phase of growth. It is expectedto be earnings enhancing, pre exceptionals, from the first full year ofacquisition and to exceed our cost of capital by the end of the second fullyear." This statement should not be taken as implying that earnings per share for theyear ending 29 April 2006 will be higher than that for the year ended 30 April2005. This summary should be read in conjunction with, and is subject to, the fulltext of the attached announcement. The Offer will be subject to the Conditionsand to the full terms and conditions to be set out in the Offer Document andForm of Acceptance. ENQUIRIES HMV GroupAlan Giles Tel: + 44 (0) 1628 818 355Neil BrightPaul Barker UBS Investment Bank (financial adviser and joint broker to HMV Group)Aidan Clegg Tel: +44 (0) 20 7567 8000Clive BeattieScilla Grimble Citigroup (joint broker to HMV Group)Andrew Seaton Tel: +44 (0) 20 7986 4000 Brunswick (PR adviser to HMV Group)Susan Gilchrist Tel: + 44 (0) 20 7404 5959William CullumEilis Murphy This announcement does not constitute an offer to sell or the solicitation of anoffer to subscribe for or buy any security, nor is it a solicitation of any voteor approval in any jurisdiction, nor shall there be any sale, issuance ortransfer of the securities referred to in this announcement in any jurisdictionin contravention of applicable law. UBS Investment Bank is acting exclusively for HMV Group and no one else inconnection with the Offer and will not be responsible to anyone other than HMVGroup for providing the protections afforded to clients of UBS Investment Banknor for providing advice in relation to the Offer, the content of thisannouncement or any other matter referred to herein. Citigroup is acting exclusively for HMV Group and no one else in connection withthe Offer and will not be responsible to anyone other than HMV Group forproviding the protections afforded to clients of Citigroup nor for providingadvice in relation to the Offer, the content of this announcement or any othermatter referred to herein. The release, publication or distribution of this announcement in certainjurisdictions may be restricted by law and therefore persons in any suchjurisdictions into which this announcement is released, published or distributedshould inform themselves about and observe such restrictions. Copies of this announcement and any formal documentation relating to the Offerare not being, and must not be, directly or indirectly, mailed or otherwiseforwarded, distributed or sent in or into or from Australia, Canada, Japan orthe United States and will not be capable of acceptance by any such use,instrumentality or facility within Australia, Canada, Japan or the United Statesand persons seeking such documents (including custodians, nominees and trustees)must not mail or otherwise forward, distribute or send it in or into or fromAustralia, Canada, Japan or the United States. The Offer (unless otherwisedetermined by HMV Group and permitted by applicable law and regulation), willnot be made, directly or indirectly, in or into, or by the use of mails or anymeans or instrumentality (including, without limitation, telephonically orelectronically) of interstate or foreign commerce of, or any facility of anational, state or other securities exchange of Australia, Canada, Japan or theUnited States and the Offer will not be capable of acceptance by any such use,means, instrumentality or facilities. The ability of Ottakar's Shareholders who are not resident in the United Kingdomto accept the Offer may be affected by the laws of the relevant jurisdictions inwhich they are located. Persons who are not resident in the United Kingdomshould inform themselves of, and observe, any applicable requirements. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the Code, any person who, alone or actingtogether with any other person(s) pursuant to an agreement or understanding(whether formal or informal) to acquire or control relevant securities ofOttakar's, owns or controls, or becomes the owner or controller, directly orindirectly, of one per cent. or more of any class of securities of Ottakar's isrequired to disclose, by not later than 12.00 noon (London time) on the Londonbusiness day following the date of the relevant transaction, dealings in suchsecurities of that company (or in any option in respect of, or derivativereferenced to, any such securities) during the period to the date on which theOffer becomes or is declared unconditional as to acceptances or lapses or isotherwise withdrawn. Under the provisions of Rule 8.1 of the City Code, all dealings in relevantsecurities of Ottakar's by HMV Group or Ottakar's, or by any of their respective'associates' (within the meaning of the City Code) must also be disclosed. If you are in any doubt as to the application of Rule 8 to you, please contactan independent financial adviser authorised under the Financial Services andMarkets Act 2000, consult the Panel's website at www.thetakeoverpanel.org.uk orcontact the Panel on telephone number +44 20 7638 0129; fax +44 20 7236 7013 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN INTO ORFROM AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES 8 September 2005 CASH OFFER of 440 pence in cash for each Ottakar's Share to made by UBS INVESTMENT BANK on behalf of HMV Group PLC (or a wholly owned subsidiary thereof) for OTTAKAR'S PLC 1. Introduction The Board of HMV Group announces the terms of a cash offer, to be made by UBSInvestment Bank on behalf of HMV Group (or a wholly owned subsidiary thereof),for the entire issued and to be issued share capital of Ottakar's. 2. The Offer Under the Offer, which will be subject to the Conditions and to the full termsand conditions to be set out in the Offer Document and Form of Acceptance,Ottakar's Shareholders will receive: 440 pence in cash for each Ottakar's Share The Offer represents a premium of: (i) 56.6 per cent. to the closing price of Ottakar's Shares on 15 August 2005, being the last Business Day prior to the commencement of the offer period; (ii) 19.7 per cent. to the price of Ottakar's Shares on 25 August 2005, being the last business day prior to HMV Group's announcement of its possible offer for Ottakar's; and (iii) 10.0 per cent. to the revised offer made by Book Store Acquisitions Limited on 6 September 2005. The Offer values the entire issued share capital of Ottakar's at approximately£96.4 million and £100.2 million on a fully diluted basis. A Loan NoteAlternative will also be provided. The Offer extends to all Ottakar's Shares unconditionally allotted or issuedwhile the Offer remains open for acceptance (or such earlier date as HMV Groupmay, subject to the Code, decide). The Ottakar's Shares will be acquiredpursuant to the Offer by, or on behalf of, HMV Group fully paid and free fromall liens, equities, mortgages, charges, encumbrances, rights of pre-emption andother third party rights and interests of any nature whatsoever and togetherwith all rights now and hereafter attaching thereto, including all voting rightsand the right to receive and retain all dividends and other distributionsannounced, declared, made or paid on or after the date of this announcementtogether with all interest accrued thereon. There are no agreements or arrangements to which HMV Group is a party whichrelate to the circumstances in which it may or may not invoke a condition of theOffer. 3. Background to and reasons for the Offer Waterstone's is a leading book retailer, synonymous with range authority,operational expertise and advice, which has been revitalised in recent years andis now embarking on a new phase of growth. However, the HMV Group Directorsbelieve trading conditions in the broader retail sector may remain challengingfor some time and furthermore that competition in the book retailing market willcontinue to intensify from the growth in supermarkets and online retailers. Ottakar's store portfolio is highly complementary to that of Waterstone's. HMVGroup believes that a combination of Ottakar's and Waterstone's would create anexciting, quality bookseller, providing customers with a better shoppingexperience and employees with enhanced career opportunities within the enlargedbusiness. On a proforma basis, the enlarged business would have traded from 325stores across 1.9 million square feet of trading space (aggregating the numbersfor Waterstone's as of 30 April 2005 and Ottakar's as of 29 January 2005).According to TNS data for the 52 weeks ending 1 May 2005, the aggregate marketshare by value of Waterstone's and Ottakar's of the UK consumer retail marketfor books was approximately 23.6 per cent. Additionally, HMV Group sees attractive opportunities to leverage its systemsand expertise within the Ottakar's business. HMV Group has shown that applyingits proven IT systems and operational practices (the "HMV Blueprint") toWaterstone's has helped to deliver a strong improvement in performance. The HMVGroup Directors consider that introducing this approach into Ottakar's willdrive cost efficiencies and margin and working capital benefits. This willenable the enlarged group better to respond to the competitive pressures of theretail market. HMV Group expects the acquisition to improve its financial performance, to beearnings enhancing from the first full year of acquisition and to exceed itscost of capital by the end of the second full year. This statement should not betaken as implying that earnings per share for the year ending 29 April 2006 willbe higher than that for the year ended 30 April 2005. 4. Information on Ottakar's Ottakar's is a book retailer which operated through 131 stores and from 0.6million square feet of trading space as at 29 January 2005, with a focus onmarket towns. For the 52 weeks ended 29 January 2005, the Company reportedturnover of £173.2 million (2004: £153.7 million), operating profit of £8.2million (2004: £6.9 million), profit before tax of £7.1 million (2004: £6.1million) and earnings per share of 20.8 pence (2004: 18.6 pence). As at 29 January 2005, the consolidated net assets of Ottakar's were £25.9million (2004: £22.7 million) and net debt was £20.9 million (2004: £14.7million). The average monthly number of employees for the year ended 29 January 2005 was2,023. 5. Information on HMV Group HMV Group is an entertainment and book retailer in the UK and Ireland, withinternational operations in Asia Pacific and Canada. HMV Group comprises twohighly recognised retail brands, HMV and Waterstone's, which are leaders intheir respective fields. The group operates from 595 stores in 9 differentcountries. In its full year results for the 53 weeks ended 30 April 2005, HMV Groupreported revenues of £1,885.6 million (2004: £1,793.5 million), pre exceptionaloperating profits of £144.4 million (2004: £131.5 million) and adjusted earningsper share of 24.0 pence (2004: 20.4 pence). As at 30 April 2005, theconsolidated net assets (liabilities) of HMV Group were £(4.6) million (2004: £(73.4) million) and closing net debt was £16.6 million (2004: £53.3 million). Waterstone's operated through 194 stores (including 30 campus stores) as at 30April 2005, and across 1.3 million square feet of selling space. In its fullyear results for the 53 weeks ended 30 April 2005, Waterstone's reported salesof £446.1 million (2004: £428.9 million, 52 weeks ended 30 April 2005 £440.0million) and operating profit of £28.4 million (2004: £26.0 million, 52 weeksended 30 April 2005 £26.1 million). The average monthly number of employees forWaterstone's for the year ended 30 April 2005 was 4,231. 6. Management and employees HMV Group will ensure that the existing employment rights, including accruedpension rights, of the employees of Ottakar's will be fully safeguarded upon thecompletion of the Offer. HMV Group has today announced the appointment of Gerry Johnson as ManagingDirector of Waterstone's. 7. Undertakings HMV Group has received undertakings to accept the Offer in respect of a total of6,572,830 Ottakar's Shares, representing approximately 30.0 per cent. of theexisting issued share capital of Ottakar's. Morley Fund Management Limited ("Morley") has undertaken, in its capacity asdiscretionary fund manager, conditional on Morley ceasing to be bound by itsobligations under the undertaking given by it to Book Store Acquisitions Limited("Book Store") and Hawkpoint Partners Limited dated 6 September 2005 (the "BookStore Undertaking"), to accept or procure the acceptance of the Offer by notlater than 3:00 p.m. on the First Closing Date or, if later, when Morley ceasesto be bound by the Book Store Undertaking, in respect of 3,591,515 Ottakar'sShares, representing approximately 16.4 per cent. of Ottakar's entire issuedshare capital. Morley's obligations under this undertaking will cease to bebinding if: (i) Book Store make a revised offer within 14 days after the postingof the Offer Document which exceeds the value of the Offer; or (ii) a thirdparty (other than Book Store) announces a firm intention to make an offer wherethe value of the consideration per Ottakar's Share is not less than 10 per cent.greater than the value of the Offer (a "Competing Offer") and HMV Group has notwithin 14 days of the date of posting of the Competing Offer announced a revisedoffer which exceeds the value of the Competing Offer. Framlington Investment Management Limited ("Framlington") has undertaken, in itscapacity as discretionary fund manager, to accept or procure the acceptance ofthe Offer by not later than 3:00 p.m. on the 14th day after the despatch of theOffer Document in respect of 2,981,315 Ottakar's Shares, representingapproximately 13.6 per cent. of Ottakar's entire issued share capital.Framlington's obligations to accept the Offer are conditional on posting of theOffer Document prior to the latest time by when Framlington is obliged to acceptthe offer announced by Book Store on 6 September 2005 under the undertakinggiven by Framlington to Book Store dated 5 September 2005. If the OfferDocument is not posted by such time, Framlington has undertaken to accept orprocure acceptance of the Offer if the offer by Book Store lapses or iswithdrawn. Framlington's obligations under the undertaking to HMV Group willcease to be binding if a third party announces a firm intention to make an offerwhere the value of the consideration represents an improvement of 5 per cent. ormore on the value of the consideration under the Offer. 8. Loan Note Alternative As an alternative to some or all of the cash consideration, which wouldotherwise be receivable under the Offer, Ottakar's Shareholders who validlyaccept the Offer (other than Ottakar's Shareholders in the United States or anyRestricted Jurisdiction) will be able to elect to receive Loan Notes to beissued by HMV Group on the following basis: for every £1 of cash consideration £1 nominal value of Loan Notes The Loan Notes, which will be governed by English law, will be unsecuredobligations of the HMV Group and will be guaranteed by HMV Group. The LoanNotes will be issued credited as fully paid, in amounts and integral multiplesof £1 nominal value; all fractional entitlements will be disregarded and will bepaid in cash. The Loan Notes will bear interest (from the date of issue of theLoan Notes) payable every six months in arrears on 30 June and 31 December ineach year (or, if not a Business Day in any year, on the following Business Day)at a rate of 0.85 per cent. below LIBOR determined on the first business day ofeach interest period. The first interest payment date will be 31 December 2005in respect of the period from the date of issue of the Loan Notes up to andexcluding that date. The Loan Notes will be redeemable at par for cash at theoption of the holders, in part or in whole, on interest payment dates,commencing on 30 June 2006. The Loan Notes will be redeemable at par for cashat the option of the HMV Group, in part or in whole, on interest payment dates,commencing on 31 December 2010. If at any time after 30 June 2006 the aggregatenominal amount of all Loan Notes outstanding is £50,000 or less, HMV Group shallhave the right to redeem all (but not some only) of the outstanding Loan Notesby payment of the nominal amount thereof together with accrued and unpaidinterest (subject to any requirement to deduct tax therefrom). Any Loan Notesoutstanding on 31 December 2012 will be redeemed at par (together with anyaccrued interest) on that date or, if not a Business Day, on the followingBusiness Day. The Loan Notes will not be transferable, and no application willbe made for them to be listed on, or dealt on, any stock exchange or othertrading facility. No election for the Loan Note Alternative will be valid if itwould result in an accepting Ottakar's Shareholder receiving less than £100nominal value of Loan Notes. Any elections which would result in an acceptingOttakar's Shareholder receiving less than £100 nominal value of Loan Notes willbe disregarded and the relevant accepting Ottakar's Shareholder will receivecash for all Ottakar's Shares in respect of which he has validly accepted theOffer. Subject to this, the Loan Note Alternative will remain open for 14 daysfollowing the Offer becoming or being declared unconditional in all respectsafter which it may be closed without prior notice. A maximum of £5 million in nominal value Loan Notes is available to be issuedunder the Loan Note Alternative. To the extent that valid elections for theLoan Note Alternative exceed the maximum amount of Loan Notes available, suchelections will be scaled back pro rata, as nearly as practicable, according tothe number of Ottakar's Shares for which a Loan Note election has been made. TheLoan Note Alternative will be conditional on the Offer becoming or beingdeclared unconditional in all respects. No Loan Notes will be issued unless, bythe time the Offer becomes or is declared unconditional in all respects, validelections under the Loan Note Alternative have been received for at least £1million in aggregate nominal value of Loan Notes. If insufficient elections arereceived, any Ottakar's Shareholder validly electing for the Loan NoteAlternative will instead receive cash in accordance with the terms of the Offer.The Loan Note Alternative is not being made available to Ottakar's Shareholdersin the United States or any Restricted Jurisdiction. Further details of the LoanNote Alternative will be contained in the Offer Document. 9. Ottakar's Share Option Schemes The Offer will extend to any Ottakar's Shares unconditionally allotted or issuedwhilst the Offer remains open for acceptance (or by such earlier date as HMVGroup may, subject to the City Code, decide) pursuant to the exercise of optionsunder the Ottakar's Share Option Schemes or otherwise. To the extent thatoptions under the Share Option Schemes are not so exercised, and if the Offerbecomes or is declared unconditional in all respects, appropriate proposals willbe made to holders of options under the Ottakar's Share Option Schemes in duecourse. Details of these proposals are expected to be sent to members of theOtttakar's Share Option Schemes in due course. 10. Financing of the offer The cash consideration payable to Ottakar's Shareholders under the terms of theOffer will be provided by HMV Group's existing bank facilities. 11. Regulatory HMV Group is today making a submission to the Office of Fair Trading supportingits belief that a combination of Waterstone's and Ottakar's will not give riseto any material competition issues. 12. Overseas shareholders The availability of the Offer to persons who are not resident in the UnitedKingdom may be affected by the laws of their relevant jurisdiction. Such personsshould inform themselves of, and observe, any applicable legal or regulatoryrequirements of their jurisdiction. Further details in relation to overseasshareholders will be contained in the Offer Document. 13. Compulsory acquisition, De-listing and Re-registration If HMV Group receives acceptances of the Offer in respect of, and/or otherwiseacquires, 90 per cent. or more of the Ottakar's Shares to which the Offerrelates and assuming all other conditions of the Offer have been satisfied orwaived (if they are capable of being waived), HMV Group intends to exercise itsrights pursuant to the provisions of the Sections 428 to 430F of the CompaniesAct to acquire the remaining Ottakar's Shares to which the Offer relates on thesame terms as the Offer. Assuming the Offer becomes or is declared unconditional in all respects andsubject to any applicable requirements of the Financial Services Authority, HMVGroup intends to procure the making of applications by Ottakar's to theFinancial Services Authority for the cancellation of the listing of Ottakar'sShares on the Official List and to the London Stock Exchange for thecancellation of admission to trading of Ottakar's Shares on its market forlisted securities. If this de-listing and cancellation occurs, it willsignificantly reduce the liquidity and marketability of any Ottakar's Shares notassented to the Offer. It is anticipated that the de-listing and cancellation ofadmission to trading will take effect no earlier than the expiry of 20 BusinessDays after the Offer becomes or is declared unconditional in all respects. It is also proposed that following the Offer becoming or being declaredunconditional in all respects and after the cancellation of the listing of theOttakar's Shares on the Official List and the cancellation of admission totrading of Ottakar's Shares on the London Stock Exchange's market for listedsecurities, Ottakar's will be re-registered as a private company under therelevant provisions of the Companies Act. 14. General The Offer will be made on the terms and subject to the Conditions set out hereinand in Appendix I, and to be set out in the Offer Document and the accompanyingForm of Acceptance. These will be posted to Ottakar's Shareholders and, forinformation only, to participants in the Ottakar's Share Option Schemes (otherthan to persons with addresses in Restricted Jurisdictions), as soon aspracticable and in any event within twenty-eight days of the date of thisannouncement unless agreed otherwise with the Panel. The Offer and acceptances thereof will be governed by English Law. The Offerwill be subject to the applicable requirements of the City Code, the Panel, theLondon Stock Exchange and the UK Listing Authority. Save as disclosed in paragraph 3 above, neither HMV Group, so far as HMV Groupis aware, any person acting in concert with HMV Group, owns or controls anyOttakar's Shares or any securities convertible or exchangeable into Ottakar'sShares or any rights to subscribe for or purchase the same, or holds any options(including traded options) in respect of, or has any option to acquire, anyOttakar's Shares or has entered into any derivatives referenced to Ottakar'sShares ("Relevant Ottakar's Securities") which remain outstanding, nor does anysuch person have any arrangement in relation to Relevant Ottakar's Securities.For these purposes, "arrangement" includes any indemnity or option arrangement,any agreement or understanding, formal or informal, of whatever nature, relatingto Relevant Ottakar's Securities which may be an inducement to deal or refrainfrom dealing in such securities. In the interests of secrecy prior to thisannouncement, HMV Group has not made any enquiries in this respect of certainparties who may be deemed by the Panel to be acting in concert with it for thepurposes of the Offer. Enquiries of such parties will be made as soon aspracticable following the date of this announcement and any material disclosurein respect of such parties will be included in the Offer Document. Appendix I to this announcement contains the Conditions and certain furtherterms of the Offer. Certain terms used in this announcement are defined inAppendix III. The Offer will be subject to the Conditions and to the full terms and conditionsto be set out in the Offer Document and Form of Acceptance. ENQUIRIES HMV GroupAlan Giles Tel: + 44 (0) 1628 818 355Neil BrightPaul Barker UBS Investment Bank (financial adviser and joint broker to HMV Group)Aidan Clegg Tel: +44 (0) 20 7567 8000Clive BeattieScilla Grimble Citigroup (joint broker to HMV Group)Andrew Seaton Tel: +44 (0) 20 7986 4000 Brunswick (PR adviser to HMV Group)Susan Gilchrist Tel: + 44 (0) 20 7404 5959William CullumEilis Murphy This announcement does not constitute an offer to sell or the solicitation of anoffer to subscribe for or buy any security, nor is it a solicitation of any voteor approval in any jurisdiction, nor shall there be any sale, issuance ortransfer of the securities referred to in this announcement in any jurisdictionin contravention of applicable law. UBS Investment Bank is acting exclusively for HMV Group in connection with theOffer and no-one else and will not be responsible to anyone other than HMV Groupfor providing the protections afforded to clients of UBS Investment Bank nor forproviding advice in relation to the Offer. Citigroup is acting exclusively for HMV Group and no one else in connection withthe Offer and will not be responsible to anyone other than HMV Group forproviding the protections afforded to clients of Citigroup nor for providingadvice in relation to the Offer, the content of this announcement or any othermatter referred to herein. The release, publication or distribution of this announcement in certainjurisdictions may be restricted by law and therefore persons in any suchjurisdictions into which this announcement is released, published or distributedshould inform themselves about and observe such restrictions. Copies of this announcement and any formal documentation relating to the Offerare not being, and must not be, directly or indirectly, mailed or otherwiseforwarded, distributed or sent in or into or from Australia, Canada, Japan orthe United States and will not be capable of acceptance by any such use,instrumentality or facility within Australia, Canada, Japan or the United Statesand persons seeking such documents (including custodians, nominees and trustees)must not mail or otherwise forward, distribute or send it in or into or fromAustralia, Canada, Japan or the United States. The Offer (unless otherwisedetermined by HMV Group and permitted by applicable law and regulation), willnot be made, directly or indirectly, in or into, or by the use of mails or anymeans or instrumentality (including, without limitation, telephonically orelectronically) of interstate or foreign commerce of, or any facility of anational, state or other securities exchange of Australia, Canada, Japan or theUnited States and the Offer will not be capable of acceptance by any such use,means, instrumentality or facilities. The ability of Ottakar's Shareholders who are not resident in the United Kingdomto accept the Offer may be affected by the laws of the relevant jurisdictions inwhich they are located. Persons who are not resident in the United Kingdomshould inform themselves of, and observe, any applicable requirements. Dealing Disclosure Requirements Under the provisions of Rule 8.3 of the City Code on Takeovers and Mergers (the'City Code'), any person who, alone or acting together with any other person(s)pursuant to an agreement or understanding (whether formal or informal) toacquire or control relevant securities of Ottakar's, owns or controls, orbecomes the owner or controller, directly or indirectly, of one per cent. ormore of any class of securities of Ottakar's is required to disclose, by notlater than 12.00 noon (London time) on the London business day following thedate of the relevant transaction, dealings in such securities of that company(or in any option in respect of, or derivative referenced to, any suchsecurities) during the period to the date on which the offer becomes or isdeclared unconditional as to acceptances or lapses or is otherwise withdrawn. Under the provisions of Rule 8.1 of the City Code, all dealings in relevantsecurities of Ottakar's by the HMV Group or Ottakar's, or by any of theirrespective 'associates' (within the meaning of the City Code) must also bedisclosed. If you are in any doubt as to the application of Rule 8 to you, please contactan independent financial adviser authorised under the Financial Services andMarkets Act 2000, consult the Panel's website at www.thetakeoverpanel.org.uk orcontact the Panel on telephone number +44 20 7638 0129; fax +44 20 7236 7013 APPENDIX I Conditions to the Offer 1. Conditions The Offer The Offer which in this Appendix is deemed to include, where relevant,references to the Loan Note Alternative will comply with the applicable rulesand regulations of the London Stock Exchange and the City Code, will be governedby English law and will be subject to the jurisdiction of the courts of Englandand to the terms and conditions set out below, in the Offer Document and in theForm of Acceptance. The Offer will be subject to the following conditions: (A) valid acceptances being received (and not, where permitted, withdrawn) by not later than 3:00 p.m. on the First Closing Date (or such later time(s) and/or date(s) as HMV Group may, subject to the rules of the City Code, decide) in respect of not less than 90 per cent. (or such lesser percentage as HMV Group may decide) in nominal value of Ottakar's Shares to which the Offer relates, provided that this condition will not be satisfied unless HMV Group (and/or any of its wholly-owned subsidiaries) shall have acquired, or agreed to acquire, whether pursuant to the Offer or otherwise, and whether directly or indirectly, Ottakar's Shares carrying, in aggregate, more than 50 per cent. of the voting rights then normally exercisable at general meetings of Ottakar's. For the purposes of this condition: (i) Ottakar's Shares which have been unconditionally allotted shall be deemed to carry the voting rights they will carry upon being entered in the register of members of Ottakar's; and (ii) the expression "Ottakar's Shares to which the Offer relates" means (i) Ottakar's Shares unconditionally allotted or issued on or before the date the Offer is made and (ii) Ottakar's Shares unconditionally allotted or issued after that date but before the time at which the Offer ceases to be open for acceptance (or such earlier date, not being earlier than the date on which the Offer becomes unconditional as to acceptances or, if later, the first closing date of the Offer, as HMV Group may, subject to the City Code, decide) but excluding any Ottakar's Shares which, on the date the Offer is made, are held or (otherwise than under such a contract as is described in s.428(5) Companies Act 1985) contracted to be acquired by HMV Group and/or its associates (within the meaning of s.430E Companies Act 1985); (B) to the extent that the acquisition of all the Ottakar's Shares would constitute a relevant merger situation within the meaning of section 23 of the Enterprise Act 2002 (the "Enterprise Act"): (i) the Office of Fair Trading having indicated in terms satisfactory to HMV Group that it does not intend in the exercise of its powers under the Enterprise Act to refer such acquisition or any aspect of it to the Competition Commission; or (ii) where a Merger Notice pursuant to section 96 of the Enterprise Act has been submitted pursuant to the Enterprise Act (Merger Pre-notification) Regulations 2003, the period for consideration of the Merger Notice and any extension thereof having expired without the Merger Notice having been rejected or withdrawn or the Office of Fair Trading having issued a notice pursuant to section 97(7) of the Enterprise Act, or the matters covered by such Merger Notice or any of them having been referred to the Competition Commission by the Office of Fair Trading and in either such case, the period during which an application to the Competition Appeal Tribunal under section 120 of the Enterprise Act for review of any decision (within the meaning of that section) by the Office of Fair Trading in connection with a reference or possible reference of the acquisition or any aspect of it to the Competition Commission having expired without an application for review having been made; (C) no government or governmental or quasi-governmental authority (whether supranational, national, regional, local or otherwise) or statutory or regulatory or investigative body or other authority (including any anti-trust or merger control authority), court, trade agency, association, institution or professional or environmental body or (without prejudice to the generality of all the foregoing) any other person or body in any jurisdiction (each a "Relevant Authority") having decided to take, institute, implement or threaten any action, proceedings, suit, investigation, enquiry or reference, or made, proposed or enacted any statute, regulation, order or decision, or taken any other steps which would or might: (i) make the Offer, or its implementation, or the proposed acquisition of any Ottakar's Shares by HMV Group or any of its subsidiaries or subsidiary undertakings or any joint venture, partnership, firm or company in which any of them has a substantial interest (together, the "Wider HMV Group") or the subscription by or allotment to any member of the Wider HMV Group of Ottakar's Shares or any matter arising therefrom or relating thereto, void, illegal or unenforceable under the laws of any relevant jurisdiction or otherwise, directly or indirectly, restrain, prohibit, restrict or delay the Offer, its implementation or such proposed acquisition by any member of the Wider HMV Group or any matter arising therefrom or relating thereto or impose additional conditions or obligations with respect thereto, or otherwise challenge or interfere therewith in any such case to a materially adverse extent; (ii) result in a material delay in the ability of any member of the Wider HMV Group, or render any member of the Wider HMV Group unable, to acquire all or some of the Ottakar's Shares or other securities in Ottakar's or require, prevent or delay a divestiture by any member of the Wider HMV Group of any such shares or securities; (iii) require, prevent or delay the divestiture by HMV Group or any member of the Wider HMV Group or by Ottakar's or any of its respective subsidiaries or subsidiary undertakings or any joint venture, partnership, firm or company in which any of them has a substantial interest (together, the "Wider Ottakar's Group") of all or any material portion of their respective businesses, assets or properties or impose any material limitation on the ability of any of them to conduct all or any material portion of their respective businesses or own all or any material portion of their respective assets or properties; (iv) impose any material limitation on the ability of HMV Group or any other member of the Wider HMV Group or of the Wider Ottakar's Group to acquire, or to hold or exercise effectively, directly or indirectly, any rights of ownership in respect of shares or other securities (or the equivalent) in any member of the Wider Ottakar's Group or to exercise management control over Ottakar's or any other member of the Wider Ottakar's Group; (v) otherwise adversely affect the business, profits or prospects of any member of the Wider HMV Group or of the Wider Ottakar's Group to a material extent in the context of the Wider HMV Group, taken as a whole, or the Wider Ottakar's Group, taken as a whole, (as the case may be); (vi) require any member of the Wider HMV Group or any member of the Wider Ottakar's Group to acquire or offer to acquire any Ottakar's Shares or other securities (or the equivalent) in any member of the Wider Ottakar's Group owned by any third party; (vii) to an extent which is material in the context of the Wider Ottakar's Group result in any member of the Wider Ottakar's Group ceasing to be able to carry on business under the name which it presently does so; (viii) result in any member of the Wider HMV Group having to dispose of any shares or other securities (or the equivalent) in any member of the Wider Ottakar's Group or the Wider HMV Group; or (ix) impose any material limitation on the ability of any member of the Wider HMV Group and/or the Wider Ottakar's Group to integrate or co-ordinate its business, or any material part of it, with the business of any member of the Wider Ottakar's Group or any member of the Wider HMV Group respectively and all applicable waiting and other time periods during which any Relevant Authority could decide to take, institute, implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or otherwise intervene having expired, lapsed or been terminated; (D) all necessary filings and applications in connection with the Offer or its implementation having been made, all appropriate waiting periods (including extensions thereof) in respect of the Offer or its implementation under any applicable legislation or regulations of any jurisdiction having expired, lapsed or been terminated and all authorisations, orders, recognition's, grants, consents, licences, confirmations, clearances, permissions and approvals ("Authorisations") deemed necessary or appropriate for or in respect of the Offer and the proposed acquisition of any Ottakar's Shares or other securities in, or control of, Ottakar's by the Wider HMV Group, or which are necessary for any member of the Wider Ottakar's Group to carry on its business, having been obtained in terms and in a form satisfactory to HMV Group from all appropriate Relevant Authorities or other bodies with whom any member of the Wider HMV Group or the Wider Ottakar's Group has entered into contractual arrangements and all such Authorisations remaining in full force and effect at the time at which the Offer becomes otherwise unconditional and all appropriate waiting periods (including extensions thereof) under any applicable legislation and regulations of any jurisdiction having expired, lapsed or been terminated and no intimation or notice of an intention to revoke or not to renew any of the same having been received, in each case as may be necessary in connection with the Offer under the laws or regulations of any jurisdiction and all necessary statutory or regulatory obligations in connection with the Offer and its implementation in any relevant jurisdiction having been complied with; (E) there being no provision of any arrangement, agreement, licence, permit, franchise or other instrument to which any member of the Wider Ottakar's Group is a party or by or to which any such member or any of their assets is or are or may be bound, entitled or subject or any circumstance which, as a consequence of the making of the Offer or the acquisition or proposed acquisition by any member of the Wider HMV Group of some or all of the share capital or other securities in Ottakar's or because of a change in control or management of Ottakar's or otherwise, could or might reasonably result in, to an extent which is material in the context of the Wider Ottakar's Group taken as a whole: (i) any monies borrowed by or other indebtedness (actual or contingent) of any member of the Wider Ottakar's Group which is not already repayable on demand being or becoming repayable or being capable of being declared repayable immediately or prior to the stated maturity date or repayment date or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited; (ii) the creation of any mortgage, charge or other security interest over the whole or any material part of the business, property or assets of any member of the Wider Ottakar's Group or any such security (whenever created, arising or having arisen) becoming enforceable; (iii) any such arrangement, agreement, licence, permit, franchise or other instrument, or the rights, liabilities, obligations or interests or business of any member of the Wider Ottakar's Group under any such arrangement, agreement, licence, permit franchise or other instrument, being terminated or adversely modified or adversely affected or any material action being taken or any material obligation arising thereunder; (iv) otherwise than in the ordinary course of business, any assets or interest of any member of the Wider Ottakar's Group being or falling to be disposed of or charged or ceasing to be available to any member of the Wider Ottakar's Group or any right arising under which any such asset or interest could be required to be disposed of or charged or to cease to be so available; (v) the interest or business of any member of the Wider HMV Group or the Wider Ottakar's Group in or with any person, firm, company or body (or any arrangements relating to such interest or business) being terminated or adversely modified or affected; (vi) any member of the Wider Ottakar's Group ceasing to be able to carry on business under any name under which it presently does so; (vii) the value of or the financial or trading position or prospects of any member of the Wider Ottakar's Group being prejudiced or adversely affected; (vii) any change in or effect on the ownership or of any intellectual property rights owned or used by any member of the Wider Ottakar's Group; or (ix) and no event having occurred which under any provision of any such arrangement, agreement, licence or other instrument, might reasonably be expected to result in any of the events referred to in this condition (E). (F) no member of the Wider Ottakar's Group having since 29 January 2005 (except as disclosed in the annual report and accounts of Ottakar's for the year then ended) and unless publicly announced by delivery to a Regulatory Information Service on or before 7 September 2005 by Ottakar's (such information being "publicly announced"): (i) issued, agreed or authorised or proposed the issue of additional shares of any class, or securities convertible into, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities (save as between Ottakar's and its wholly owned subsidiaries and save for shares issued or options or other subscription rights granted under Ottakar's Share Option Schemes); (ii) recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution other than to Ottakar's or a wholly owned Subsidiary of Ottakar's; (iii) to an extent which is material in the context of the Wider Ottakar's Group taken as a whole merged with any body corporate or acquired or disposed of, or transferred, mortgaged or charged or created any security interest over, any assets or any right, title or interest in any asset (including shares and trade investments), or authorised, proposed or announced any intention to propose any merger, demerger, acquisition, disposal, transfer, mortgage, charge or security interest (other than in the ordinary course of business); (iv) issued, authorised or proposed the issue of any debentures or incurred or increased any indebtedness or contingent liability in any case to an extent which is material in the context of the Wider Ottakar's Group, taken as a whole; (v) purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or redeemed or reduced or made any other change to any part of its share capital in any case to an extent which is material in the context of the Wider Ottakar's Group taken as a whole; (vi) entered into, or varied, or authorised, proposed or announced its intention to enter into or vary any contract, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise) which is of a long-term, onerous or unusual nature or magnitude, or which involves or could involve an obligation of a nature or magnitude which, in any case, is material in the context of the Wider Ottakar's Group, taken as a whole; (vii) implemented, authorised, proposed or announced its intention to implement or enter into any reconstruction, amalgamation, commitment, scheme or other transaction or arrangement otherwise than in the ordinary course of business; (viii) entered into or made an offer (which remains open for acceptance) to enter into or vary the terms of any service agreement or any other agreement or arrangement with any directors or senior executives or any connected person of any such person (within the meaning of s.346 Companies Act 1985); (ix) waived or compromised any claim other than in the ordinary course of business; (x) been unable, or admitted in writing that it is unable, to pay its debts or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally, proposed any voluntary winding up or ceased or threatened to cease carrying on all or a substantial part of its business; (xi) made or authorised or proposed or announced an intention to propose any change in its share or loan capital to an extent which is material in the context of the Wider Ottakar's Group, taken as a whole; (xii) entered into any contract, transaction or arrangement which is or is likely to be restrictive in a material respect on the business of any member of the Wider HMV Group or the Wider Ottakar's Group; (xiii) made any material alteration to its Memorandum or Articles of Association or other incorporation documents; (xiv) entered into or made an offer (which remains open for acceptance) to enter into an agreement or commitment or passed any resolution or announced or made any proposal with respect to any of the transactions or events referred to in this sub-paragraph (F); (xv) save as between its wholly owned subsidiaries, granted any lease or material third party rights (in the context of the Offer as a whole) in respect of any leasehold or freehold property owned or occupied by it or transferred or otherwise disposed or any other property; or (xvi) agreed to enter into or entered into an agreement or legally binding arrangement or commitment or passed any resolution or announced any intention with respect to any of the transactions, matters or events referred to in this condition (F). (G) save as publicly announced prior to 8 September 2005, since 29 January 2005 and prior to the date when the Offer would otherwise become unconditional: (i) there having been no adverse change, and no other circumstance having arisen which would or might be likely to result in any adverse change, in the business, assets, financial or trading position or profits or prospects of any member of the Wider Ottakar's Group to an extent which is material in the context of the Wider Ottakar's Group taken as a whole; (ii) there not having been instituted or remaining outstanding any litigation, arbitration proceedings, prosecution or other legal proceedings to which any member of the Wider Ottakar's Group is a party (whether as claimant or defendant or otherwise) and no such proceedings having been announced or threatened in writing against any such member and no investigation by any government or governmental, quasi-governmental, supranational, statutory, regulatory or investigative body, authority or court (including any anti-trust or merger control authority) against or in respect of any such member or the business carried on by any such member having been threatened in writing, announced, instituted or remaining outstanding by, against or in respect of any such member and the effect of which is or is likely to be material in the context of the Wider Ottakar's Group, taken as a whole; (iii) there having been no receiver, administrative receiver or other encumbrancer appointed over any of the assets of any member of the Wider Ottakar's Group or any analogous proceedings or steps having taken place under the laws of any jurisdiction and there having been no petition presented or resolution passed for the administration of any member of the Wider Ottakar's Group or any analogous proceedings or steps taken place under the laws of any jurisdiction; and (iv) no contingent or other liability having arisen, become apparent or having been incurred which would or might reasonably be expected adversely to affect any member of the Wider Ottakar's Group to an extent which is material in the context of the Wider Ottakar's Group, taken as a whole; (H) HMV Group not having discovered prior to the date when the Offer would otherwise become unconditional that: (i) any financial, business or other information concerning Ottakar's or the Wider Ottakar's Group publicly disclosed at any time is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make the information contained therein not misleading to an extent which is material in the context of the acquisition of Ottakar's by HMV Group; or (ii) any member of the Wider Ottakar's Group is subject to any liability, contingent or otherwise, existing at 29 January 2005, which is not disclosed or reflected in the audited accounts of Ottakar's for the financial year ended on that date and which is material in the context of the Wider Ottakar's Group, taken as a whole; and (I) HMV Group not having discovered prior to the date when the Offer would otherwise become unconditional that: (i) any member of the Wider Ottakar's Group has not complied with all material applicable legislation and regulations of any jurisdiction, with regard to the disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to impair the environment or harm human health or otherwise relating to environmental matters, or that there has otherwise been any such disposal, discharge, spillage, leak, or emission (whether or not the same constituted a non-compliance by any person with any such legislation or regulations and wherever the same may have taken place) from any land or other asset now or previously owned, occupied or made use of by any past or present member of the Wider Ottakar's Group which would be likely to give rise to any material liability (whether actual or contingent) on the part of any member of the Wider Ottakar's Group and which is material in the context of the Wider Ottakar's Group, taken as a whole; (ii) there is, or is reasonably expected to be, any liability (whether actual or contingent) which is material in the context of the Wider Ottakar's Group, taken as a whole to make good, repair, reinstate or clean up any property now or previously owned, occupied or made use of by any past or present member of the Wider Ottakar's Group or in which any such member may now or previously had an interest under any environmental legislation, regulation, notice, circular or order of any Relevant Authority or third party or otherwise; or (iii) circumstances exist whereby a person or class of persons would be likely to have any claim or claims in respect of any product now or previously, sold by any member of the Wider Ottakar's Group which claim or claims would be likely materially and adversely to affect any member of the Wider Ottakar's Group to an extent which isRelated Shares:
Hmv Group