31st May 2006 07:03
HMV Group PLC31 May 2006 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN, INTO ORFROM AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES 31 May 2006 RECOMMENDED CASH OFFER of 285 pence in cash for each Ottakar's Share to be made by HMV GROUP PLC (or a wholly owned subsidiary thereof) for OTTAKAR'S PLC Summary • The Boards of HMV Group plc ("HMV Group") and Ottakar's plc ("Ottakar's" or the "Company") announce the terms of a recommended cash offer, tobe made by HMV Group (or a wholly owned subsidiary thereof), for the entireissued and to be issued share capital of Ottakar's (the "Offer"). • The Offer of 285 pence in cash for each Ottakar's Share, valuing theentire issued share capital of Ottakar's at approximately £62.8 million and£62.9 million on a fully diluted basis, provides Ottakar's shareholders with anopportunity to realise value in cash. A Loan Note Alternative will also beprovided on the terms set out below. • The Offer represents a: (i) 0.7 per cent. discount to the closing price of Ottakar'sShares on 30 May 2006, being the last Business Day prior to this announcement; (ii) 10.7 per cent. discount to the closing price of Ottakar'sShares on 11 May 2006, being the last Business Day prior to the commencement ofthe Offer Period; (iii) 1.4 per cent. premium to the price of Ottakar's Shares on 15August 2005, being the last Business Day prior to the announcement by the Boardof Ottakar's confirming that it had received an approach from a third party; and (iv) multiple of 61x Ottakar's reported basic earnings per share(before exceptional and one-off items) for the 52 week period ended 28 January2006. • The Ottakar's Directors, who have been so advised by Bridgewell,consider the terms of the Offer to be fair and reasonable and unanimously intendto recommend that, in the absence of a higher offer, Ottakar's Shareholdersaccept the Offer. • The Ottakar's Directors have provided irrevocable undertakings toaccept the Offer (or to procure its acceptance) in respect of all of their ownbeneficial shareholdings in Ottakar's Shares, with the exception of 140,700shares (0.64 per cent. of the existing issued share capital of Ottakar's) inwhich Philip Dunne is interested and 6,000 shares (0.03 per cent. of theexisting issued share capital of Ottakar's) in which Mark Fane is interested.The Ottakar's Directors have therefore provided irrevocable undertakings over,in aggregate, 3,344,231 Ottakar's Shares, representing approximately 15.2 percent. of the existing issued share capital of Ottakar's. These undertakings willcontinue to be binding even in the event of a higher offer. In addition, MichaelHitchcock has provided an irrevocable undertaking in respect of 100,000Ottakar's Shares for which he has an option to subscribe. • HMV Group has also received a letter of intent to accept the Offerfrom Morley Fund Management Limited in respect of 3,508,257 Ottakar's Sharesrepresenting approximately 15.9 per cent. of the existing issued share capitalof Ottakar's. Morley has reserved its right to withdraw its proposed acceptanceof the Offer in the event that an offer is made for the Ottakar's Shares wherethe value of the consideration per Ottakar's Share is greater than the value ofthe Offer. • Accordingly, HMV Group has received irrevocable undertakings orletters of intent to accept the Offer from the holders of 6,852,488 Ottakar'sShares representing, in aggregate, approximately 31.1 per cent. of Ottakar'sexisting issued share capital. Together with the 2,190,619 Ottakar's shares HMVGroup already owns, HMV Group therefore owns or has received irrevocableundertakings or letters of intent to accept the Offer in respect of, inaggregate, 9,043,107 Ottakar's shares representing in aggregate approximately41.0 per cent. of Ottakar's existing issued share capital. Commenting on the Offer, Alan Giles, Chief Executive of HMV Group, said: "The strategic rationale for the acquisition of Ottakar's is now stronger thanever. A combined Waterstone's and Ottakar's business will create an exciting,quality bookseller, able to respond better to the increasingly competitivepressures of the retail market. The Ottakar's store portfolio is highly complementary to that of Waterstone's,and will benefit from the introduction of Waterstone's proven, sophisticatedstock management systems, as part of a wider integration process to be led byWaterstone's Managing Director, Gerry Johnson, and his senior management team.This will enable Ottakar's to offer an even wider and more relevant range ofbooks, and to provide customers with an enhanced shopping experience. The acquisition is a value enhancing opportunity to all stakeholders, and isexpected to 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 is not intended to be a profit forecast and should not be takenas implying that earnings per share for the year ending 28 April 2007 will behigher than that for the year ended 29 April 2006. Philip Dunne, Chairman of Ottakar's, said: "Over the past year the book market has undergone a significant change with newlevels of competition from the supermarkets and on-line retailers impacting allspecialist booksellers and in particular those with insufficient scale tocompete on equal terms. Against this background, and given the costs and risksassociated with implementing the necessary restructuring programme to competelonger term, the Board of Ottakar's believes that the Offer is fair andreasonable. The Offer represents an opportunity for Ottakar's Shareholders torealise their investment for cash now. Accordingly the Directors intend torecommend it to all Ottakar's Shareholders, in the absence of a higher offer." 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 8000Scilla 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 Ottakar'sJames Heneage Tel: +44 (0) 7980 788 800Michael Hitchcock Tel: +44 (0) 7810 055 799 Bridgewell (financial adviser to Ottakar's)John Craven Tel: +44 (0) 20 7003 3000Stephen Cheung Teather & Greenwood (broker to Ottakar's)Jeff Keating Tel: +44 (0) 20 7426 9000James Maxwell Buchanan Communications (PR adviser to Ottakar's)Charles Ryland Tel: +44 (0) 20 7466 5000Isabel Podda 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. The Offer will be made solely by means ofthe Offer Document and the acceptance forms accompanying the Offer Document,which will contain the full terms and conditions of the Offer including detailsof how it may be accepted. UBS is acting exclusively for HMV Group and no one else in connection with theOffer and will not be responsible to anyone other than HMV Group for providingthe protections afforded to clients of UBS nor for providing advice in relationto the Offer, the content of this announcement or any other matter referred toherein. 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. Bridgewell, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Ottakar's and no oneelse in connection with the Offer and will not be responsible to anyone otherthan Ottakar's for providing the protections afforded to customers ofBridgewell, or for providing advice to any other person in relation to theOffer. Teather & Greenwood, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting exclusively for Ottakar's and no oneelse in connection with the Offer and will not be responsible to anyone otherthan Ottakar's for providing the protections afforded to customers of Teather &Greenwood, or for providing advice to any other person in relation to the Offer. 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 including the Loan NoteAlternative (unless otherwise determined by HMV Group and permitted byapplicable law and regulation), will not be made, directly or indirectly, in orinto, or by the use of mails or any means or instrumentality (including, withoutlimitation, telephonically or electronically) of interstate or foreign commerceof, or any facility of a national, state or other securities exchange ofAustralia, Canada, Japan or the United States and the Offer will not be capableof 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, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of Ottakar's, all "dealings" in any "relevant securities"of that company (including by means of an option in respect of, or a derivativereferenced to, any such "relevant securities") must be publicly disclosed by nolater than 3.30 pm (London time) on the 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" ofOttakar's, they will be deemed to be a single person for the purpose of Rule8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Ottakar's by HMV Group or Ottakar's, 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 relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the Code, which can also be found on thePanel's website. If you are in any doubt as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN INTO ORFROM AUSTRALIA, CANADA, JAPAN OR THE UNITED STATES 31 May 2006 RECOMMENDED CASH OFFER of 285 pence in cash for each Ottakar's Share to be made by HMV Group PLC (or a wholly owned subsidiary thereof) for OTTAKAR'S PLC 1. Introduction The Boards of HMV Group and Ottakar's announce the terms of a recommended cashoffer, to be made by HMV Group (or a wholly owned subsidiary thereof), for theentire issued and to be issued share capital of Ottakar's. 2. The Offer The Offer, which will be subject to the Conditions and to the full terms andconditions to be set out in the Offer Document and Form of Acceptance, will bemade on the following basis: 285 pence in cash for each Ottakar's Share The Offer represents a: (i) 0.7 per cent. discount to the closing price of Ottakar'sShares on 30 May 2006, being the last Business Day prior to this announcement; (ii) 10.7 per cent. discount to the closing price of Ottakar'sShares on 11 May 2006, being the last Business Day prior to the commencement ofthe Offer Period; (iii) 1.4 per cent. premium to the price of Ottakar's Shares on 15August 2005, being the last Business Day prior to the announcement by the Boardof Ottakar's confirming that it had received an approach from a third party; and (iv) multiple of 61x Ottakar's reported basic earnings per share(before exceptional and one-off items) for the 52 week period ended 28 January2006. The Offer values the entire issued share capital of Ottakar's at approximately£62.8 million and £62.9 million on a fully diluted basis. A Loan NoteAlternative will also be provided on the terms set out below. 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. Recommendation The Ottakar's Directors, who have been so advised by Bridgewell, consider theterms of the Offer to be fair and reasonable. In providing advice to theOttakar's Directors, Bridgewell has taken into account the commercialassessments of the Ottakar's Directors. Accordingly, the Ottakar's Directors unanimously intend to recommend that, inthe absence of a higher offer, Ottakar's Shareholders accept the Offer, as theOttakar's Directors have irrevocably undertaken to do (or procure to be done) inrespect of all of their own beneficial shareholdings in Ottakar's Shares, withthe exception of 140,700 shares (0.64 per cent. of the existing issued sharecapital of Ottakar's) in which Philip Dunne is interested and 6,000 shares (0.03per cent. of the existing issued share capital of Ottakar's) in which Mark Faneis interested. The Ottakar's Directors have therefore provided irrevocableundertakings over, in aggregate, 3,344,231 Ottakar's Shares, representingapproximately 15.2 per cent. of the existing issued share capital of Ottakar's. 4. Background to, and reasons for, recommending the Offer On 19 September 2005, HMV Group made a recommended cash offer of 440 pence pershare for Ottakar's (the "Original Offer"). In view of the involvement of Philip Dunne (Non-Executive Chairman), JamesHeneage (Managing Director) and Michael Hitchcock (Finance Director) in anearlier competing MBO offer made by Book Store Acquisitions, the directors ofOttakar's as a whole determined that it was at that time appropriate that JohnThornton, David Adams and Mark Fane, as the independent non-executive directorsof Ottakar's should consider the terms of that offer and make a recommendationto Ottakar's Shareholders. The offer by Book Store Acquisitions subsequentlylapsed on 30 September 2005. On 6 December 2005, following a decision by the Office of Fair Trading to referthe Original Offer to the Competition Commission, the Original Offer lapsed. On 12 May 2006, the Competition Commission formally cleared HMV Group to make anoffer for Ottakar's, which the Code requires be announced by 2 June. During the second half of 2005, Ottakar's has witnessed a significant structuralchange in the book retailing sector with increased competition from thesupermarkets and on-line retailers. During this period, and since the lapsing ofthe Original Offer, Ottakar's has experienced challenging trading conditions.This has led to the Company issuing the following trading statements: - on 14 December 2005, the Company reported that trading conditions in thesecond half of 2005 remained challenging with like-for-like sales growth down6.7 per cent for the 19 week period to 10 December 2005. This decline wascaused by an unprecedented level of price discounting in the book retailingsector; - on 12 January 2006, the Company reported a disappointing performance duringthe key 2005 Christmas period and that, despite some uplift in the pre-Christmasweek, it continued to feel the effects of the heavy discounting strategiesadopted by its major competitors both on-line and off-line; - on 28 March 2006, when the Company released its preliminary results for the52 weeks ended 28 January 2006, the Company reported that there continued to besoftness on the High Street, with market growth being absorbed by bothsupermarkets and Internet channels. Consequently, like-for-like sales were down8.1 per cent. for the eight weeks to 25 March 2006; and - on 23 May 2006, the Company issued an AGM trading update reporting thatduring the sixteen weeks to 20 May 2006, like-for-like sales were down 8.0 percent. and that the position remained largely unchanged since its last tradingupdate, although recent figures suggested that the slow start to the year may beimproving. The Company also said, "The outcome for the full year will bedetermined by the key Christmas trading period. We are, however, on course tomeet market expectations in the current financial year." For the avoidance ofdoubt, this should be construed as sales for the current year being on course tofall within the range of market expectations, and the Company continues to holdthis belief. The Ottakar's Directors believe that trading conditions within the bookretailing sector will continue to be challenging for some time. To respond tothese challenges, Ottakar's has plans to implement a significant infrastructuredevelopment programme over the next two years. This will include introducingthe systems necessary to remove further cost and working capital from thebusiness to support its next phase of growth. The Ottakar's Directors believethat this implementation will increase the Company's risk profile for investorsover that period. Given the combination of disappointing current trading, a retail environmentthat remains challenging, a structural change in the book retailing sector andthe risks inherent in implementing the Company's infrastructure developmentprogramme, the Ottakar's Directors believe that the Offer is fair and reasonableand represents an opportunity for Ottakar's Shareholders to realise theirinvestment now for cash and, accordingly, the Ottakar's Directors intend torecommend that, in the absence of a higher offer, Ottakar's Shareholders acceptthe Offer. 5. 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 broader retailbackground is currently challenging and the HMV Group Directors believe it mayremain so for some time. Furthermore, competition in the book retailing marketis expected to continue to intensify not least from the growth in supermarketsand on-line retailers. The HMV Group Directors believe that a combined Waterstone's and Ottakar's willbe able to compete more effectively in the marketplace and that the combinationwill be beneficial to both businesses, based on the following: • The Ottakar's store portfolio is highly complementary to that ofWaterstone's. A combination would create an exciting, quality bookseller,providing customers with a better shopping experience and employees withenhanced career opportunities. On a pro forma basis, the enlarged business wouldhave traded from 336 stores across 1.9 million square feet of trading space(aggregating the numbers for Waterstone's as of 29 April 2006 and Ottakar's asof 28 January 2006). • Ottakar's would benefit from the introduction of Waterstone's proven,sophisticated stock management systems and operating practices to enableOttakar's to offer an even wider and more relevant range of books to itscustomers. Introducing these systems and practices into Ottakar's would lead tocost efficiencies and margin and working capital benefits. • The combined business of Waterstone's and Ottakar's would be able togenerate economies of scale to enable it to compete more effectively in anincreasingly competitive retail 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 is notintended to be a profit forecast and should not be taken as implying thatearnings per share for the year ending 28 April 2007 will be higher than thatfor the year ended 29 April 2006. In summary, the HMV Group Directors believe that a combination of Ottakar's andWaterstone's would create a unique, quality bookseller and a value enhancingopportunity for all stakeholders. 6. Information on Ottakar's Ottakar's is a book retailer which operated through 141 stores and from 0.6million square feet of trading space as at 28 January 2006, with a focus onmarket towns. For the 52 weeks ended 28 January 2006, the Company reportedturnover of £176.5 million (2005: £173.2 million), operating profit/(loss) of £(3.2) million (2005: £8.0 million), profit/(loss) before tax of £(4.6) million(2005: £6.9 million) and basic earnings/(loss) per share of (23.4) pence (2005:20.0 pence). As at 28 January 2006, the consolidated net assets of Ottakar's were £18.4million (2005: £24.3 million) and net debt was £6.8 million (2005: £20.9million). 7. 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. As at 29 April 2006, the group operated from 593stores in 8 different countries. 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 195 stores (including 28 campus stores) as at 29April 2006, 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. 8. 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. The non-executive directors of Ottakar's intend toresign from the Ottakar's Board when the Offer becomes or is declared whollyunconditional. HMV Group's plans for Ottakar's do not include any materialchanges in the conditions of employment of Ottakar's employees. HMV Group highly values the skills, knowledge and expertise of Ottakar'smanagement and staff which have made the business the success it is today.However, as a result of the combination of the Waterstone's and Ottakar'sbusinesses a small number of locations will close and there are likely to be anumber of redundancies as a result of this and the integration of theadministrative and business support functions, which would be subject toconsultation obligations under relevant laws. 9. Undertakings and Letter of Intent HMV Group has received undertakings and a letter of intent to accept the Offerin respect of a total of 6,852,488 Ottakar's Shares, representing approximately31.1 per cent. of the existing issued share capital of Ottakar's as follows: • The Ottakar's Directors have undertaken to accept or procure theacceptance of the Offer by not later than 3:00 p.m. on the First Closing Date inrespect of 3,344,231 Ottakar's Shares, representing approximately 15.2 per cent.of Ottakar's entire issued share capital. In addition, Michael Hitchcock hasprovided an irrevocable undertaking in respect of 100,000 Ottakar's Shares forwhich he has an option to subscribe. • Morley Fund Management Limited ("Morley") has confirmed, in itscapacity as discretionary fund manager, that it is its intention to accept theOffer in respect of 3,508,257 Ottakar's Shares, representing approximately 15.9per cent. of Ottakar's entire issued share capital. Morley has reserved itsright to withdraw its proposed acceptance of the Offer in the event that anoffer is made for the Ottakar's Shares where the value of the consideration perOttakar's Share is greater than the value of the Offer. 10. 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 (or a wholly-owned subsidiary thereof) on the followingbasis: for every £1 of cash consideration under the Offer £1 nominal value of Loan Notes The Loan Notes, which will be governed by English law, will be unsecuredobligations of the HMV Group (or a wholly-owned subsidiary thereof and will beguaranteed by HMV Group). The Loan Notes will be issued credited as fully paid,in amounts and integral multiples of £1 nominal value; all fractionalentitlements will be disregarded and will be paid in cash. The Loan Notes willbear interest (from the date of issue of the Loan Notes) payable every sixmonths in arrears on 30 June and 31 December in each year (or, if not a BusinessDay in any year, on the following Business Day) at a rate of 0.85 per cent.below LIBOR determined on the first business day of each interest period. Thefirst interest payment date will be 31 December 2006 in respect of the periodfrom the date of issue of the Loan Notes up to and excluding that date. TheLoan Notes will be redeemable at par (together with accrued interest) for cashat the option of the holders, in part or in whole, on interest payment dates,commencing on 30 June 2007. The Loan Notes will be redeemable at par (togetherwith accrued interest) for cash at the option of the HMV Group, in part or inwhole, on interest payment dates, commencing on 31 December 2011. If at anytime after 30 June 2007 the aggregate nominal amount of all Loan Notesoutstanding is £50,000 or less, HMV Group shall have the right to redeem all(but not some only) of the outstanding Loan Notes by payment of the nominalamount thereof together with accrued and unpaid interest (subject to anyrequirement to deduct tax therefrom). Any Loan Notes outstanding on 31 December2013 will be redeemed at par (together with any accrued interest) on that dateor, if not a Business Day, on the following Business Day. The Loan Notes willnot be transferable, and no application will be made for them to be listed on,or dealt on, any stock exchange or other trading facility. No election for theLoan Note Alternative will be valid if it would result in an accepting Ottakar'sShareholder receiving less than £100 nominal value of Loan Notes. Any electionswhich would result in an accepting Ottakar's Shareholder receiving less than£100 nominal value of Loan Notes will be disregarded and the relevant acceptingOttakar's Shareholder will receive cash for all Ottakar's Shares in respect ofwhich he has validly accepted the Offer. Subject to this, the Loan NoteAlternative will remain open for 14 days following the Offer becoming or beingdeclared unconditional in all respects after which it may be closed withoutprior 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. 11. 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 theOttakar's Share Option Schemes in due course. 12. Financing of the Offer The cash consideration payable to Ottakar's Shareholders under the terms of theOffer will be funded from HMV Group's existing bank facilities. UBS confirms that it is satisfied that resources are available to HMV Groupsufficient to satisfy full acceptance of the Offer. 13. Regulatory On 12 May 2006, the Competition Commission formally cleared the anticipatedacquisition of Ottakar's by HMV Group after concluding in its final report thatthe merger would not lead to a substantial lessening of competition in anymarket. 14. Break fee Ottakar's and the HMV Group have entered into an agreement under which Ottakar'shas agreed (subject to, and therefore conditional upon, the receipt of a waiverfrom the UK Listing Authority that HMV Group and Ottakar's are not to be treatedas related parties for the purposes of Rule 11.1.4 of the Listing Rules) to paya break fee to the HMV Group of approximately £0.6 million in the event that acompeting proposal is announced prior to the Offer lapsing or being withdrawnand such competing proposal subsequently becomes or is declared whollyunconditional. 15. 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. 16. 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 in the case where the shares to which the Offer relates are votingshares, not less than 90 per cent. of the voting rights carried by those shares)and assuming all other conditions of the Offer have been satisfied or waived (ifthey are capable of being waived), HMV Group intends to exercise its rightspursuant to the provisions of Schedule 2 to the Takeovers Directive (InterimImplementation) Regulations 2006 to acquire the remaining Ottakar's Shares towhich the Offer relates on the same 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. 17. Disclosure of interests in Ottakar's As at the close of business on 30 May 2006, being the last practicable dateprior to the date of this announcement, HMV Group owned or controlled thefollowing shares in the capital of Ottakar's: Holder Ordinary Shares HMV Group plc 2,190,619 As at the close of business on 30 May 2006, being the last practicable dateprior to the date of this announcement, and save as described herein, neitherHMV Group nor so far as HMV Group is aware, any person acting in concert withHMV Group, had an interest in or right to subscribe for relevant securities ofOttakar's or had any short position in relation to relevant securities ofOttakar's (whether conditional or absolute and whether in the money orotherwise), including any short position under a derivative, any agreement tosell or any delivery obligation or right to require another person to purchaseor take delivery of any relevant securities of Ottakar's. 18. 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 Code, the Panel, theLondon Stock Exchange and the UK Listing Authority. Save as disclosed in paragraph 17 above, neither HMV Group nor, so far as HMVGroup is aware, any person acting in concert with HMV Group, owns or controlsany Ottakar's Shares or any securities convertible or exchangeable intoOttakar's Shares or any rights to subscribe for or purchase the same, or holdsany options (including traded options) in respect of, or has any option toacquire, any Ottakar's Shares or has entered into any derivatives referenced toOttakar's Shares ("Relevant Ottakar's Securities") which remain outstanding, nordoes any such person have any arrangement in relation to Relevant Ottakar'sSecurities. For these purposes, "arrangement" includes any indemnity or optionarrangement, any agreement or understanding, formal or informal, of whatevernature, relating to Relevant Ottakar's Securities which may be an inducement todeal or refrain from dealing in such securities. In the interests of secrecyprior to this announcement, HMV Group has not made any enquiries in this respectof certain parties who may be deemed by the Panel to be acting in concert withit for the purposes of the Offer. Enquiries of such parties will be made as soonas practicable following the date of this announcement and any materialdisclosure in 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 8000Scilla 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 Ottakar'sJames Heneage Tel: +44 (0) 7980 788 800Michael Hitchcock Tel: +44 (0) 7810 055 799 Bridgewell (financial adviser to Ottakar's)John Craven Tel: +44 (0) 20 7003 3000Stephen Cheung Teather & Greenwood (broker to Ottakar's)Jeff Keating Tel: +44 (0) 20 7426 9000James Maxwell Buchanan Communications (PR adviser to Ottakar's)Charles Ryland Tel: +44 (0) 20 7466 5000Isabel Podda 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. The Offer will be made solely by means ofthe Offer Document and the acceptance forms accompanying the Offer Document,which will contain the full terms and conditions of the Offer including detailsof how it may be accepted. UBS is acting exclusively for HMV Group and no one else in connection with theOffer and will not be responsible to anyone other than HMV Group for providingthe protections afforded to clients of UBS nor for providing advice in relationto the Offer, the content of this announcement or any other matter referred toherein. 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. Bridgewell, which is authorised and regulated in the United Kingdom by theFinancial Services Authority, is acting exclusively for Ottakar's and no oneelse in connection with the Offer and will not be responsible to anyone otherthan Ottakar's for providing the protections afforded to customers ofBridgewell, or for providing advice to any other person in relation to theOffer. Teather & Greenwood, which is authorised and regulated in the United Kingdom bythe Financial Services Authority, is acting exclusively for Ottakar's and no oneelse in connection with the Offer and will not be responsible to anyone otherthan Ottakar's for providing the protections afforded to customers of Teather &Greenwood, or for providing advice to any other person in relation to the Offer. 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 (including the LoanNote Alternative) (unless otherwise determined by HMV Group and permitted byapplicable law and regulation), will not be made, directly or indirectly, in orinto, or by the use of mails or any means or instrumentality (including, withoutlimitation, telephonically or electronically) of interstate or foreign commerceof, or any facility of a national, state or other securities exchange ofAustralia, Canada, Japan or the United States and the Offer will not be capableof 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, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of Ottakar's all "dealings" in any "relevant securities"of that company (including by means of an option in respect of, or a derivativereferenced to, any such "relevant securities") must be publicly disclosed by nolater than 3.30 pm (London time) on the 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" ofOttakar's, they will be deemed to be a single person for the purpose of Rule8.3. Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevantsecurities" of Ottakar's by HMV Group or Ottakar's, 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 relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Takeover Panel's website atwww.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the Code, which can also be found on thePanel's website. If you are in any doubt as to whether or not you are requiredto disclose a "dealing" under Rule 8, you should consult the Panel. APPENDIX I Conditions and certain further terms 1. Conditions of the Offer The Offer The Offer, which in this Appendix I is deemed to include, where relevant,references to the Loan Note Alternative (and any acceptances and electionsthereunder), will comply with the applicable rules and regulations of the LondonStock Exchange and the Code, will be governed by English law and will be subjectto the jurisdiction of the courts of England and to the terms and conditions setout below, in the Offer Document and in the Form 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 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 and that represent not less than 90 per cent. (or such lower percentage as HMV Group may decide) of the voting rights carried by the 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 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 paragraph 10 of Schedule 2 to the Takeovers Directive (Interim Implementation) Regulations 2006) contracted to be acquired by HMV Group and/or its associates (within the meaning of paragraph 8 of Schedule 2 to the Takeovers Directive (Interim Implementation) Regulations 2006); (B) 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; (C) 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; (D) 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; or (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, 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 (D). (E) no member of the Wider Ottakar's Group having since 28 January 2006 (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 30 May 2006 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 (E); (xv) save as between its wholly owned subsidiaries, granted any lease or third party rights (which is material 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 (E). (F) save as publicly announced prior to 31 May 2006, since 28 January 2006 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; (G) 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 28 January 2006, 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 (H) 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 have 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 is material in the context of the Wider Ottakar's Group, taken as a whole. HMV Group reserves the right to waive, in whole or in part, all or any of conditions (B) to (H) inclusive. If HMV Group is required by the Panel to make an offer for Ottakar's Shares under the provisions of Rule 9 of the Code, HMV Group may make such alterations to the above conditions, including condition (A), as are necessary to comply with the provisions of that Rule. The Offer will lapse if the proposed acquisition of Ottakar's by HMV Group, or any matter arising therefrom, is referred to the Competition Commission before 3.00 pm on the first closing date of the Offer or the time and date when the Offer becomes or is declared unconditional as to acceptances, whichever is the later. 2. Certain further terms of the Offer Except with the consent of the Panel, the Offer will lapse unless conditions (B)to (H) inclusive of the Offer set out above are fulfilled or, if capable ofwaiver, waived or, where appropriate, have been determined by HMV Group in itsopinion to be or to remain satisfied by midnight on whichever is the later ofthe date which is 21 days after the First Closing Date and the date on whichcondition (A) is satisfied. If the Offer lapses, the Offer will cease to be capable of further acceptanceand HMV Group and holders of Ottakar's Shares shall thereupon cease to be boundby prior acceptances. HMV Group shall be under no obligation to waive or treatas fulfilled or satisfied any of conditions (B) to (H) inclusive by a dateearlier than the latest date specified above for the fulfilment or satisfactionthereof notwithstanding that the other conditions of the Offer may at suchearlier date have been waived or fulfilled or satisfied and that there are atsuch earlier date no circumstances indicating that any such conditions may notbe capable of fulfilment or satisfaction. The Offer, and, where relevant, the Loan Note Alternative, will be on the termsand will be subject, inter alia, to the conditions which are set out in Part 1of Appendix I and those terms which will be set out in the formal Offer Documentand such further terms as may be required to comply with the Listing Rules ofthe UK Listing Authority and the provisions of the Code. The attention of the holders of Ottakar's Shares not resident in the UnitedKingdom is drawn to the relevant provisions of the formal Offer Document whichwill be despatched on behalf of HMV Group. The Loan Notes have not been and will not be registered under the United StatesSecurities Act 1933, as amended or under the securities laws of any othercountry. Therefore, the Loan Notes may not be offered, sold or delivered,directly or indirectly, in the United States. Holders of Ottakar's Shares in theUnited States, Canada, Australia or Japan or any other overseas jurisdiction inrespect of which the issue of Loan Notes to them would be unlawful will not beentitled to elect to receive Loan Notes. APPENDIX II Bases Of Calculation And Sources Of Information 1. Historic share prices are sourced from the Daily Official List of the London Stock Exchange and represent closing middle market prices for Ottakar's Shares on the relevant dates. 2. The value of the entire issued and to be issued share capital of Ottakar's is based upon the sum of: (i) 22,049,829 Ottakar's Shares in issue, as published on 12 May 2006 (representing the entire issued share capital of Ottakar's); and (ii) 57,961 options granted under the Ottakar's Share Option Schemes which would be exercisable if the Offer becomes or is declared unconditional in all respects and have an exercise price which is lower than the Offer Price and which would therefore be expected to be exercised in connection with the Offer (representing the to be issued share capital of Ottakar's). 3. Unless otherwise stated, the financial information relating to Ottakar's contained in this announcement is extracted from the audited published consolidated accounts of Ottakar's for the 52 week periods ended 29 January 2005 and 28 January 2006. 4. Unless otherwise stated, the financial information relating to HMV Group contained in this announcement is extracted from the audited published consolidated accounts of HMV Group for the 53 week period ended 30 April 2005 and the 52 week period ended 24 April 2004. APPENDIX III Definitions The following definitions apply throughout this document, unless the contextrequires otherwise: "Bridgewell" Bridgewell Securities Limited "Business Day" a day (other than a Saturday or Sunday) on which banks are generally open for business in the City of London "Citigroup" Citigroup Global Markets Limited "Companies Act" the Companies Act 1985, as amended "Code" The City Code on Takeovers and Mergers "Conditions" the conditions set out at Part I of Appendix I of this announcement "First Closing Date" the date which is 21 days after the posting of the Offer Document "Form of Acceptance" the form of acceptance, authority and election for use in connection with the Offer which will accompany the Offer Document "HMV Group" or "Offeror" HMV Group plc (or a wholly owned subsidiary thereof) "HMV Group Directors" Neil Irvine Bright, Roy Drysdale Brown, Alan James Giles, David John Kappler, Stephen John Knott, Lesley Mary Samuel Knox, Mark McCafferty, Brian Finbar McLaughlin and Carl George Symon "LIBOR" the London Inter-Bank Offered Rate for Sterling deposits of six months (as to be further detailed in the Offer Document) "Loan Notes" the guaranteed unsecured loan notes to be issued by HMV Group (or a wholly owned subsidiary thereof) pursuant to the Loan Note Alternative "Loan Note Alternative" the alternative under which eligible holders of Ottakar's Shares who validly accept the Offer may, while the loan note alternative remains open for acceptance, elect to receive Loan Notes in lieu of all or some of the cash consideration to which they would otherwise have been entitled under the Offer "London Stock Exchange" London Stock Exchange plc "Offer" the proposed recommended cash offer (including the Loan Note Alternative) to be made by HMV Group on the terms and subject to the Conditions and to the full terms and conditions to be set out in the Offer Document and in the Form of Acceptance, to acquire the Ottakar's Shares and, where the context admits, any subsequent revision, variation, extension or renewal thereof "Offer Document" the document proposed to be sent to holders of Ottakar's Shares containing, inter alia, details of the Offer "Offer Period" the period commencing on (and including) 12 May 2006 and ending on the First Closing Date or, if later, on the date on which the Offer becomes or is declared unconditional as to acceptances or lapses "Official List" the official list of the UK Listing Authority "Ottakar's" or the "Company" Ottakar's plc "Ottakar's Directors" David Alexander Robertson Adams, Philip Martin Dunne, Mark William Fane, James Arthur Heneage, Michael Paul Hitchcock and Christopher John Thornton "Ottakar's Shareholders" the holders of Ottakar's Shares "Ottakar's Share Option Schemes" Ottakar's Approved Executive Share Option Scheme, Ottakar's Unapproved Executive Share Option Scheme No. 2 and Ottakar's Savings-Related Share Option Scheme "Ottakar's Share" or "Shares" the existing unconditionally allotted or issued fully paid ordinary shares of 5p each in Ottakar's and any such further ordinary shares of 5p each in Ottakar's which are unconditionally allotted or issued after the date hereof and before the date on which the Offer closes (or such earlier date or dates as HMV Group may, subject to the Code, decide) or pursuant to the exercise of options under the Ottakar's Share Option Schemes "Overseas Shareholders" holders of Ottakar's Shares resident in or nationals or citizens 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 "Regulatory Information Service" any of the services set out in Schedule 12 to the Listing Rules published by the Financial Services Authority "Restricted Jurisdictions" jurisdictions in which the release, publication or distribution of this announcement may be restricted "subsidiary" and "subsidiary undertaking" have the meanings given in the Companies Act "Teather & Greenwood" Teather & Greenwood Limited "UBS Investment Bank" or "UBS" UBS Limited, a wholly-owned subsidiary of UBS AG "UK Listing Authority" the Financial Services Authority acting as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000 "United Kingdom" or "UK" the United Kingdom of Great Britain and Northern Ireland "United States" or "US" the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Hmv Group