Recommended Acquisition

22nd Apr 2008 07:11

Melrose PLC22 April 2008 The following announcement is an advertisement and not a prospectus andinvestors should not subscribe for any Melrose PLC shares except on the basis ofinformation in the prospectus which is proposed to be published by Melrose PLCin due course Not for release, publication or distribution, in whole or in part, in or intoany jurisdiction where to do so would constitute a violation of the relevantlaws of that jurisdiction For immediate release 22 April 2008 Melrose PLC ("Melrose") Recommended Acquisition of FKI plc ("FKI") Summary • The boards of Melrose and FKI are pleased to announce that they have reached agreement on the terms of a recommended proposal whereby Melrose will acquire the entire issued and to be issued ordinary share capital of FKI not already held by Melrose. • The Acquisition will be on the basis of 0.277 of a Consideration Share and 40 pence in cash for each FKI Share. • It is currently envisaged that the Acquisition will be implemented by way of a Court sanctioned scheme of arrangement of FKI. • Prior to the Scheme becoming Effective, FKI intends to declare a dividend of 3 pence per FKI Share in lieu of the final dividend that FKI Shareholders would have otherwise received in respect of the financial year ended 31 March 2008. • The Acquisition values the entire issued ordinary share capital of FKI at approximately £478 million and each FKI Share at 81.3 pence (based on the Closing Price of 149 pence per Melrose Share on 21 April 2008), representing a premium of approximately 62 per cent. to the Closing Price of 50.25 pence per FKI Share on 31 January 2008 (being the last Business Day prior to the commencement of the Offer Period). • In order to fund the cash element of the Acquisition, Melrose has arranged a placing and an open offer of approximately 200 million Melrose Shares at 145.0 pence per Melrose Share to raise up to approximately £291 million, which are being fully underwritten by JPMorgan Securities and Investec. • Melrose has arranged a £750 million facility to be used to refinance FKI's and Melrose's existing borrowing facilities, underwritten by Lloyds TSB Bank PLC, Barclays Bank plc, The Royal Bank of Scotland plc, J.P. Morgan PLC, HSBC Bank PLC and Commerzbank AG. In addition, Melrose has also recently had £65 million in committed bonding lines made available to it which are able to be drawn down from the Effective Date. • The Melrose Board believes that its proposed acquisition of FKI, and the continued development of the existing Melrose businesses, will provide shareholders in the Enlarged Group with an opportunity for substantial improvement in shareholder value from improving the performance of FKI businesses, refinancing the FKI Group and improving capital discipline. • Melrose's strategy in relation to FKI will be the same as for its acquisitions to date. It will continue to seek to create value for its shareholders and to return value to shareholders as appropriate in the form of capital and dividends. • The FKI Directors, who have been so advised by Rothschild, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the FKI Directors, Rothschild has taken into account the FKI Directors' commercial assessment of the Acquisition. Accordingly, the FKI Directors intend to recommend unanimously that FKI Shareholders vote in favour of the resolutions to be proposed at the FKI Extraordinary General Meeting and the Scheme Meeting, as the FKI Directors have irrevocably undertaken to do in respect of their own beneficial holdings in FKI representing approximately 0.072 per cent. of the issued share capital of FKI. • The Melrose Directors, who have been so advised by JPMorgan Cazenove and Dresdner Kleinwort, consider the terms of the Acquisition to be fair and reasonable. In providing advice to the Melrose Directors, JPMorgan Cazenove and Dresdner Kleinwort have taken into account the Melrose Directors' commercial assessment of the Acquisition. The Melrose Directors intend to recommend unanimously that Melrose Shareholders vote in favour of the resolutions to approve and implement the Acquisition, as the Melrose Directors intend to do in respect of their own beneficial holdings in Melrose representing approximately 5.9 per cent. of the issued share capital of Melrose. Christopher Miller, Chairman of Melrose, said: "We believe FKI presents us with an opportunity to create substantialshareholder value for the benefit of shareholders in the Enlarged Group. It is atribute to the robustness of our model that we are able to launch thisacquisition in such challenging financial markets." Gordon Page, Chairman of FKI, said: "The FKI Board believes that Melrose's offer delivers an attractive opportunityto FKI Shareholders through both the immediate offer premium and the ability toparticipate in the prospects of the enlarged business. In difficult markets, theprovision of a robust and flexible financing package significantly de-risksfunding requirements whilst providing enhanced prospects for growth." Enquiries: Melrose Christopher Miller +44 (0) 207766 7670 David Roper +44 (0) 207766 7670 Simon Peckham +44 (0) 207766 7670 Geoffrey Martin +44 (0) 207766 7670 JPMorgan Cazenove (joint financial advisor and joint corporate broker toMelrose) Mark Preston +44 (0) 207588 2828 Laurence Hollingworth +44 (0) 207588 2828 Dresdner Kleinwort (joint financial advisor to Melrose) David Smith +44 (0) 207623 8000 Investec (joint corporate broker to Melrose) Keith Anderson +44 (0) 207597 5970 M:Communications (PR advisor to Melrose) James Hill +44 (0) 207153 1559 Nick Miles +44 (0) 207153 1535 FKI Paul Heiden +44 (0) 207832 0000 Rothschild (financial advisor to FKI) Robert Leitao +44 (0) 207280 5000 Ravi Gupta +44 (0) 207280 5000 Hoare Govett (corporate broker to FKI) Sara Hale +44 (0) 207678 8000 Bob Pringle +44 (0) 207678 8000 Brunswick (PR advisor to FKI) Catherine Hicks +44 (0) 207404 5959 James Olley +44 (0) 207404 5959 This summary should be read in conjunction with the full text of the followingannouncement and the Appendices. The conditions to and certain further terms ofthe Acquisition are set out in Appendix 1. The bases and sources of certainfinancial information contained in the following announcement, and certainadditional financial and operational information, are set out in Appendix 4.Details of the irrevocable undertakings received by Melrose in relation to theAcquisition are set out in Appendix 5. Certain definitions and terms used in thefollowing announcement are set out in Appendix 6. JPMorgan Cazenove is acting for Melrose and no one else in connection with theAcquisition, the Placing and the Open Offer and will not be responsible toanyone other than Melrose for providing the protections afforded to clients ofJPMorgan Cazenove nor for giving advice in relation to the Acquisition, thePlacing and the Open Offer or any matter or arrangement referred to in thefollowing announcement. Dresdner Kleinwort is acting for Melrose and no one else in connection with theAcquisition and will not be responsible to anyone other than Melrose forproviding the protections afforded to clients of Dresdner Kleinwort nor forgiving advice in relation to the Acquisition or any matter or arrangementreferred to in the following announcement. Investec is acting for Melrose and no one else in connection with the Placingand the Open Offer and will not be responsible to anyone other than Melrose forproviding the protections afforded to clients of Investec nor for giving advicein relation to the Placing and the Open Offer or any matter or arrangementreferred to in the following announcement. Rothschild is acting as financial advisor for FKI in connection with theAcquisition and for no one else in connection with the Acquisition and will notbe responsible to anyone other than FKI for providing the protections affordedto clients of Rothschild nor for giving advice in relation to the Acquisition. Hoare Govett is acting as corporate broker for FKI in connection with theAcquisition and for no one else in connection with the Acquisition and will notbe responsible to anyone other than FKI for providing the protections affordedto clients of Hoare Govett nor for giving advice in relation to the Acquisition. Rothschild and Ernst & Young have each given and not withdrawn their consent tothe inclusion of their respective reports in this announcement. Overseas jurisdictions The release, publication or distribution of the following announcement injurisdictions other than the United Kingdom may be restricted by law and,therefore, any persons who are subject to the laws of any jurisdiction otherthan the United Kingdom should inform themselves about, and observe, anyapplicable requirements. The following announcement has been prepared inaccordance with English law, the City Code and the Disclosure and TransparencyRules and information disclosed may not be the same as that which would havebeen prepared in accordance with the laws of jurisdictions outside England. The following announcement is not intended to, and does not, constitute or formpart of any offer or invitation to purchase, otherwise acquire, subscribe for,sell or otherwise dispose of, any securities or the solicitation of any vote orapproval in any jurisdiction pursuant to the Acquisition or otherwise. TheAcquisition will be made solely through the Scheme Document, which will containthe full terms and conditions of the Acquisition, including details of how tovote in respect of the Acquisition. Any acceptance or other response to theAcquisition should be made only on the basis of the information in the SchemeDocument and the Prospectus. In particular, the following announcement is not an offer of securities for salein the United States and the New Melrose Shares, which will be issued inconnection with the Acquisition, have not been, and will not be, registeredunder the US Securities Act or under the securities law of any state, districtor other jurisdiction of the United States, Australia, Canada or Japan and noregulatory clearance in respect of the Consideration Shares has been, or willbe, applied for in any jurisdiction other than the UK. The New Melrose Sharesmay not be offered, sold, or, delivered, directly or indirectly, in, into orfrom the United States absent registration under the US Securities Act or anexemption from registration. The Consideration Shares may not be offered, sold,resold, delivered or distributed, directly or indirectly, in, into or fromCanada or Japan or to, or for the account or benefit of, any resident of Canadaor Japan absent an exemption from registration or an exemption under relevantsecurities law. It is expected that the New Melrose Shares will be issued inreliance upon the exemption from the registration requirements of the USSecurities Act provided by Section 3(a)(10) thereof. The Firm Placed Shares willbe offered within the United States to qualified institutional buyers as definedin, and in reliance on, Rule 144A of the US Securities Act or an exemption from,or a transaction not subject to, the registration requirements of the USSecurities Act. Under applicable US securities laws, persons (whether or not USPersons) who are or will be "affiliates" within the meaning of the US SecuritiesAct of FKI or Melrose prior to, or of Melrose after, the Effective Date will besubject to certain transfer restrictions relating to the Consideration Sharesreceived in connection with the Scheme. The New Melrose Shares are not being offered to the public by means of thefollowing announcement. Application will be made to the FSA and the London Stock Exchange for all theNew Melrose Shares to be admitted to listing on the Official List and to tradingon the London Stock Exchange respectively, subject to the Scheme becomingEffective. Notice to US investors in FKI: The Acquisition relates to the shares of a UKcompany and is proposed to be made by means of a scheme of arrangement providedfor under the laws of England and Wales. The Acquisition is subject to thedisclosure requirements and practices applicable in the United Kingdom toschemes of arrangement, which differ from the disclosure and other requirementsof US securities laws. Financial information included in the relevantdocumentation will have been prepared in accordance with accounting standardsapplicable in the United Kingdom that may not be comparable to the financialstatements of US companies. If the Acquisition is implemented by way of an Offer, it will be made inaccordance with the procedural and filing requirements of the US securitieslaws, to the extent applicable. If the Acquisition is implemented by way of anOffer, the Consideration Shares to be issued in connection with such Acquisitionwill not be registered under the US Securities Act or under the securities lawsof any state, district or other jurisdiction of the United States and may not beoffered, sold or delivered, directly or indirectly, in the United States exceptpursuant to an applicable exemption from, or in a transaction not subject to,the registration requirements of the US Securities Act or such other securitieslaws. Melrose does not intend to register any such Consideration Shares or partthereof in the United States or to conduct a public offering of theConsideration Shares in the United States. Forward looking statements The following announcement, including information included or incorporated byreference in this announcement, may contain "forward looking statements"concerning Melrose and FKI. Generally, the words "will", "may", "should","continue", "believes", "expects", "intends", "anticipates" or similarexpressions identify forward looking statements. The forward looking statementsinvolve risks and uncertainties that could cause actual results to differmaterially from those suggested by them. Many of these risks and uncertaintiesrelate to factors that are beyond the companies' abilities to control orestimate precisely, such as future market conditions and the behaviours of othermarket participants, and therefore undue reliance should not be placed on suchstatements which speak only as at the date of this announcement. Melrose and FKIassume no obligation and do not intend to update these forward lookingstatements, except as required pursuant to applicable law. Melrose reserves the right to elect (with the consent of the Panel) to implementthe Acquisition of FKI by way of an Offer. In such event, the Offer will beimplemented on substantially the same terms, subject to appropriate amendments,as those which would apply to the Scheme. Nothing in the following announcement (other than the Profit Estimate) isintended, or is to be construed, as a profit forecast or to be interpreted tomean that earnings per FKI Share or Melrose Share for the current or futurefinancial years, or those of the Enlarged Group, will necessarily match orexceed the historical published earnings per FKI Share or Melrose Share. Dealing disclosure requirements Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of Melrose or FKI, all "dealings" in any "relevantsecurities" of Melrose or FKI (including by means of an option in respect of, ora derivative referenced to, any such "relevant securities") must be publiclydisclosed by no later than 3.30 p.m. (London time) on the Business Day followingthe date of the relevant transaction. This requirement will continue until thedate on which the Scheme becomes Effective (or if implemented by way of anoffer, the offer becomes, or is declared, unconditional as to acceptances) orotherwise lapses or is otherwise withdrawn or on which the "offer period"otherwise ends. If two or more persons act together pursuant to an agreement orunderstanding, whether formal or informal, to acquire an "interest" in "relevantsecurities" of Melrose or FKI, they will be deemed to be a single person for thepurpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Melrose or FKI by Melrose or FKI, or by any of their respective"associates", must be disclosed by no later than 12.00 noon (London time) on theBusiness Day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel. This announcement is an advertisement and not a prospectus and investors shouldnot subscribe for any Melrose PLC shares except on the basis of information inthe prospectus which is proposed to be published by Melrose PLC in due course Not for release, publication or distribution, in whole or in part, in or intoany jurisdiction where to do so would constitute a violation of the relevantlaws of that jurisdiction For immediate release 22 April 2008 Melrose PLC Recommended Acquisition of FKI plc 1. Introduction The boards of Melrose and FKI are pleased to announce that they have reachedagreement on the terms of a recommended proposal whereby Melrose will acquirethe entire issued and to be issued ordinary share capital of FKI not alreadyheld by Melrose. It is currently envisaged that the Acquisition will be implemented by way of aCourt sanctioned scheme of arrangement of FKI. The conditions to the Acquisitionare set out in Appendix 1 to this announcement. 2. The Acquisition Pursuant to the Acquisition, which will be on the terms and subject to theconditions set out below and in Appendix 1, and to be set out in the SchemeDocument, FKI Shareholders will receive, subject to elections under the Mix andMatch Facility:For each FKI Share 40 pence in cash and 0.277 of a Consideration Share Prior to the Scheme becoming Effective, FKI intends to declare a dividend of 3pence per FKI Share (in lieu of the final dividend that FKI Shareholders wouldhave otherwise received in respect of the financial year ended 31 March 2008),payable to FKI Shareholders on the register of members of FKI at the FKIDividend Record Time. A Mix and Match Facility will be made available pursuant to which FKIShareholders (other than certain overseas shareholders) may elect, subject toavailability, to vary the proportions in which they receive Consideration Sharesand cash in respect of their holdings of FKI Shares. Further details of the Mixand Match Facility are set out in paragraph 6 below. The Acquisition values the entire issued ordinary share capital of FKI atapproximately £478 million and each FKI Share at 81.3 pence (based on theClosing Price of 149.0 pence per Melrose Share on 21 April 2008), representing apremium of approximately 62 per cent. to the Closing Price of 50.25 pence perFKI Share on 31 January 2008 (being the last Business Day prior to thecommencement of the Offer Period). Fractions of Consideration Shares will not be allotted or issued to FKIShareholders. Fractional entitlements to Consideration Shares will be aggregatedand sold in the market and the net proceeds of sale distributed pro rata to theScheme Shareholders entitled thereto. The FKI Shares will be acquired by Melrose, pursuant to the Acquisition, fullypaid and free from all liens, equities, charges, encumbrances, rights ofpre-emption and any other interests of any nature whatsoever and together withall the rights now or hereafter attaching thereto, including voting rights andthe right to receive and retain in full all dividends and other distributions(if any) declared, made or paid other than the FKI Dividend. The Consideration Shares will be issued credited as fully paid and will rankpari passu in all respects with the existing Melrose Shares, including the rightto receive in full all dividends and other distributions (if any) declared, madeor paid after, or by reference to a record date after, the Effective Date. The Acquisition will be conditional upon, inter alia, approval of the Resolutionby Melrose Shareholders at the Melrose EGM and the admission of the New MelroseShares to trading on the London Stock Exchange and to listing on the OfficialList. Further information on the Melrose EGM is provided in paragraph 18 below. If the Scheme becomes Effective, it would result in the issue of approximately163 million Consideration Shares to FKI Shareholders and approximately 200million New Melrose Shares pursuant to the Placing and the Open Offer. Thiswould result in FKI Shareholders holding approximately 33 per cent. of theEnlarged Share Capital. In addition, FKI Shareholders would have received cashof £235 million under the terms of the Acquisition. 3. FKI Board recommendation The FKI Directors, who have been so advised by Rothschild, consider the terms ofthe Acquisition to be fair and reasonable. In providing advice to the FKIDirectors, Rothschild has taken into account the FKI Directors' commercialassessment of the Acquisition. Accordingly, the FKI Directors intend torecommend unanimously that FKI Shareholders vote in favour of the resolutions tobe proposed at the FKI Extraordinary General Meeting and the Scheme Meeting, asthe FKI Directors have irrevocably undertaken to do in respect of their ownbeneficial holdings in FKI representing approximately 0.072 per cent. of theissued share capital of FKI. 4. Background to and reasons for the Acquisition Melrose is an acquisitive company which has a track record of acquiringbusinesses and making the necessary changes to maximise the value inherent inthose businesses to the benefit of shareholders. In May 2005 Melrose acquiredtwo specialist engineering businesses, Dynacast and McKechnie, for an enterprisevalue of £429 million. Since the acquisition, Melrose has significantly improvedthe operational performance of the businesses and in May 2007 completed the saleof a large part of McKechnie for £428 million (USD 850 million*). In addition,the buyer assumed £2.8 million (USD 5.6 million) of indebtedness. In August 2007Melrose Shareholders approved a return of capital of £220 million (which,together with dividends already paid, equalled approximately 95 per cent. of theoriginal capital raised from shareholders and the further capital raised to buyDynacast and McKechnie). Melrose is continuing to develop Dynacast and its otherbusinesses but is now looking to make further acquisitions. The Melrose Board believes that its proposed acquisition of FKI, and thecontinued development of the existing Melrose businesses, will provideshareholders in the Enlarged Group with an opportunity for substantialimprovement in shareholder value over the next few years. This is expected tocome from two key connected areas: Improve the performance of FKI's businesses • The Melrose Board believes that Lifting Products and Services and Energy Technology are excellent businesses which should enjoy good market conditions over the next few years. Melrose expects there to be opportunities to improve the performance of both of these businesses through investment in their existing facilities and new capacity and, where appropriate, Melrose will consider acquisitions and organic growth into new markets. • The Melrose Board believes that Truth is also an excellent business which is coping with difficult current market conditions in the US housing sector and will benefit from any recovery in that market. • The Melrose Board believes that FKI Logistex has not performed satisfactorily, having been created through the consolidation of a number of acquisitions at a total cost of approximately £500 million between 1999 and 2001. Despite management efforts to integrate these acquisitions and deal with the legacy contracts, further work remains to be done to improve this business. Melrose intends to accelerate the process of integration needed by this business and review a number of its product and business sectors. The Melrose Board notes FKI's classification of FKI Logistex as held for sale, which requires the carrying value of the business to be restated as appropriate. As described in paragraph 5 below, FKI is currently in negotiations and a due diligence process to dispose of FKI Logistex. There can be no certainty that such negotiations will ultimately be successful. FKI has undertaken to Melrose not to dispose of the FKI Logistex business prior to the Acquisition becoming Effective without the prior consent of Melrose. The Melrose Board also believes that it can add value to a number of the smaller businesses owned by FKI and, in a number of cases, realise value for shareholders of the Enlarged Group when appropriate. * Based on exchange rates at the date of completion of the relevant disposal. Refinance the FKI Group and improve capital discipline • The Acquisition will reduce the leverage ratios of the Enlarged Group to significantly below those of the current FKI Group and, for the first time in a number of years, give FKI's businesses greater financial freedom to pursue investment and acquisition opportunities. • Melrose's new £750 million bank facility (as described below) will secure a more flexible capital structure by, at Melrose's election, refinancing FKI's EUR 600 million Eurobond at its expiration or earlier (if appropriate). • The Acquisition will lead to a more conservative balance sheet. • Melrose intends to improve FKI's working capital ratios and to end the period end squeezes. This will give greater visibility of real underlying cash flow and therefore enable Melrose to improve working capital management whilst improving relationships with FKI's suppliers. Melrose's strategy in relation to FKI is the same as forits acquisitions to date. It will continue to seek tocreate value for its shareholders and to return value toshareholders as appropriate in the form of capital anddividends. The Melrose Board believes that FKI presentsit with an opportunity to execute its strategy for thebenefit of all shareholders in the Enlarged Group. 5. Background to and reasons for the FKI Board recommendation Following FKI's strategic review in 2004, the FKI Group'sstrategy has been to focus on market leading businessesserving attractive end-markets and on further improvementsin operational performance. Since then, the number of theFKI Group's business units has been reduced from 65 to 14through sales of businesses, consolidation of businesses andclosures. The announcement of FKI's results for the yearended 31 March 2007 stated that the FKI Group would furtherfocus its activities on energy related sectors through itsLifting Products and Services and Energy Technology groupsand seek the progressive separation of the FKI Logistex andHardware groups. In early 2007, FKI commenced executing the strategy withregard to both FKI Logistex and Hardware. The Hardwareprocess effectively came to a standstill with theannouncement during the summer of 2007 that FKI was inadvanced discussions in relation to a potential offer forFKI. However, the potential offeror withdrew from thediscussions due to the deterioration in the credit marketsand the resulting impact on the financing of the potentialoffer. By that stage, the worsening credit outlook and UShousing market had impacted the likely timing of theHardware group's separation. Significant progress has been made in relation to apotential strategic merger involving FKI Logistex.Discussions and due diligence are continuing with the aimbeing to sell FKI Logistex for a mixture of cash and aminority interest in the new business combination, whichwould enable FKI Shareholders to share in the potentialfuture upside from the combination. Given the Acquisition,whilst the discussions regarding the strategic merger arecontinuing, FKI will only commit to this strategic mergerwith Melrose's agreement. Cash raised from this transactionwould be used to repay debt, but would not remove the needfor a major refinancing by FKI. FKI has also continued to progress discussions on arefinancing package. The deterioration in the credit marketshas had an impact on these discussions in terms of levels ofavailability, cost and optimum level of debt. As a result,it is likely that a refinancing would involve a mixture ofdebt and equity. The profit estimate for the year ended 31 March 2008 isaffirmation of FKI's last interim management statement whichsaid "...that the Group remains on track to report strongtrading growth in full year 2008." In the absence ofunforeseen circumstances and on the bases and assumptionsset out in Appendix 2, the FKI Directors estimate that forthe year ended 31 March 2008 operating profit before specialitems from continuing operations will be not less than £110million and profit before taxation from continuingoperations will be not less than £63 million. Theseestimates exclude the results of FKI Logistex (which areestimated to be approximately £8 million in respect ofoperating profit before special items) and any costsincurred in relation to the Acquisition. The FKI Board viewsthe trading prospects of the FKI Group with confidence. The FKI Board believes that, although FKI has theopportunity to continue to develop further in the futureunder the present ownership structure, there is a financiallogic, and overall reduction in risk, behind a combinationof FKI with Melrose. The FKI Board believes Melrose's offerdelivers (i) an attractive opportunity to FKI Shareholdersthrough both the immediate offer premium and the ability toparticipate in the enlarged business; (ii) the resolution ofa future funding package; (iii) increased flexibility forthe business units of the FKI Group; (iv) a larger fundingfacility to support better those business units' growthplans; and (v) the ability to optimise timing on thedisposals of any of those business units. 6. Mix and Match Facility FKI Shareholders (other than certain overseas shareholders) may elect, under the terms of the Acquisition, subject to availability, to vary the proportions in which they receive Consideration Shares and cash consideration under the Acquisition in respect of their holdings of FKI Shares. The total number of Consideration Shares to be issued and the maximum aggregate amount of cash to be paid under the Acquisition will not be varied as a result of elections made under the Mix and Match Facility. Accordingly, satisfaction of elections made by FKI Shareholders under the Mix and Match Facility will depend on the extent to which other FKI Shareholders make offsetting elections. To the extent that elections cannot be satisfied in full, they will be scaled down on a pro rata basis. As a result, FKI Shareholders who make an election under the Mix and Match Facility will not necessarily know the exact number of Consideration Shares or the amount of cash to which they will be entitled until settlement of the consideration under the Acquisition. Elections under the Mix and Match Facility will not affect the entitlements of those FKI Shareholders who do not make any such elections. An announcement will be made when the Scheme becomes Effective of the extent to which elections under the Mix and Match Facility have been satisfied. 7. Irrevocable commitments The irrevocable undertakings given by the FKI Directors (referred to in paragraph 3 above) will cease to be binding on the earlier of the following occurrences: • the Scheme Document is not posted to FKI Shareholders within 28 days (or such longer period as FKI and Melrose, with the consent of the Panel, may agree) after the date of this announcement; or • the Scheme lapses or is withdrawn in accordance with its terms and Melrose does not publicly confirm within 5 Business Days of such lapse or withdrawal that it intends to implement the Acquisition by way of an Offer; or • the Scheme has not become effective by 6.00 p.m. on 22 October 2008 (or such later time or date as agreed between Melrose and FKI, with the approval of the Court and/or the Panel if required). Further details on the irrevocable undertakings can be found in Appendix 5. 8. Financing of the Acquisition Placing and Open Offer It is intended that the cash consideration due under the Acquisition to FKI Shareholders will be financed by the proceeds of the Placing and the Open Offer, which are being fully underwritten by JPMorgan Securities and Investec. The Placing and the Open Offer will raise approximately £291 million before fees. The Placing and Open Offer are conditional upon, amongst other things, Admission and the Second Court Order having been granted by the Court. Further details of the Open Offer will be set out in the Prospectus. JPMorgan Cazenove and Investec, as agents for Melrose are making arrangements to conditionally place the Firm Placed Shares and, subject to clawback by Melrose Shareholders, the Open Offer Shares, with institutional investors at the Issue Price. The Open Offer is an opportunity for all Melrose Shareholders to subscribe for Open Offer Shares pro rata to their current holdings and is intended to allow Melrose Shareholders with relatively small holdings to participate in the fundraising. Under the Open Offer, all Qualifying Melrose Shareholders are being invited to apply for 3 Open Offer Shares for every 4 Melrose Shares held by them as at close of business at the Open Offer Record Date. Entitlements of Qualifying Melrose Shareholders will be rounded down to the nearest whole number of Open Offer Shares. Any resulting fractional entitlements of Qualifying Melrose Shareholders arising under the Open Offer will not be allocated pursuant to the Open Offer, but will be aggregated and placed for the benefit of Melrose as part of the Placing and Open Offer. The Issue Price represents a discount of approximately 2.7 per cent. to the Closing Price for Melrose Shares on 21 April 2008 (being the last Business Day prior to the date of this announcement). JPMorgan Cazenove and Dresdner Kleinwort are satisfied that sufficient resources are available to Melrose to satisfy in full the cash consideration payable to FKI Shareholders under the terms of the Acquisition. Under the terms of the Placing Agreement, Melrose has (i) agreed that if it becomes aware of any matter, fact or circumstance, which means that any of the Conditions may not be satisfied, it will not waive any such Condition (unless required by the Panel) without the prior written consent of JPMorgan Cazenove, JPMorgan Securities and Investec; and (ii) Melrose has undertaken that the Effective Date will not be extended beyond 18 September 2008 without the prior written consent of JPMorgan Cazenove, JPMorgan Securities and Investec. Debt Debt facilities are not being used to finance the Acquisition. However, following completion of the Acquisition, Melrose expects some or all of the current debt facilities of FKI to become re-payable in full as a result of the Acquisition and that FKI will seek to refinance certain of its other outstanding debt. In anticipation of this, Melrose has obtained a committed £750 million facility with a syndicate of banks to be used to refinance FKI's and Melrose's existing borrowing facilities, in respect of which companies of the Enlarged Group will be providing guarantees. Under the terms of the facilities agreement, Melrose has agreed that it will not waive or decide not to enforce a Condition which would, or is reasonably likely to, have a material adverse effect on the lenders without the consent of the lenders. In addition, Melrose has also recently had £65 million in committed bonding lines made available to it which are able to be drawn down from the Effective Date. 9. Financial effects of the Acquisition The Acquisition is expected to be earnings enhancing for Melrose Shareholders in the first full financial year following the Effective Date, including cost savings and excluding one-off costs.* * & *** ** Nothing in this announcement (other than the Profit Estimate) isintended, or is to be construed, as a profit forecast or to beinterpreted to mean that earnings per Melrose Share for the currentor future financial years, or those of the Enlarged Group, willnecessarily match or exceed the historical published earnings perMelrose Share. *** Before intangible amortisation, goodwill impairment and special items. 10. Melrose current trading, trends and prospects On 5 March 2008, Melrose published its audited results for the year ended 31 December 2007. Melrose reported revenue from continuing operations of £344.0 million (2006: £323.6 million) and headline operating profit of £24.5 million (2006: £19.2 million). A final dividend of 4.25 pence per Melrose Share was proposed (2006: 3.75 pence). In Dynacast, the management are continuing to look for suitable opportunities (including in Eastern Europe) and to invest heavily in the fast growing Far East markets, while maintaining their focus on achieving the highest levels of operating efficiency in the business. Dynacast benefits from a strong market share, well diversified geographic and product sector exposure and excellent cash generation qualities. The Melrose Directors are confident that Dynacast will deliver another strong set of results in 2008. In MPC, there has been a favourable start to 2008 and there remain further opportunities in the UK industry afforded by the demise of certain competitors. The Melrose Directors expect MPC to continue to build on its strong foundation and to deliver another good performance in 2008. In MVC, the operational improvement in 2007 has progressed. However, even allowing for MVC's good position in a niche market, conditions in the US automotive market are very difficult and this is currently off-setting good improvement in the operations of the business and pricing recovery from customers. With constant attention to the basics and the new plating line geared up to meet the projected demands of the new programmes coming on stream in the second half of 2008, the Melrose Directors expect a continuing improvement in a difficult market place. Overall, since the year end the Melrose Group has continued to trade in line with the Melrose Directors' expectations. 11. Dividend policy Melrose has proposed a final dividend of 4.25 pence per Melrose Share for theyear ended 31 December 2007 which is expected to be paid on 16 May 2008 toshareholders on the register on 14 March 2008. The table below shows the amountof dividend paid per Melrose Share for each of the financial years ended 31December 2007 and 2006. 2007 2006Dividend paid per Melrose Share 6.75 p 6.00 p It is the intention of the Melrose Board to maintain a progressive dividendpolicy going forward having regard to the availability of sufficientdistributable reserves and cash, taking into account the Melrose Group's workingcapital and investment requirements. 12. FKI current trading, trends and prospects Since 6 February 2008 (being the date of its latest interim managementstatement), the FKI Group has continued to trade in line with the FKI Directors'expectation and the FKI Board views the trading prospects of the FKI Group withconfidence. The Profit Estimate Announcements referred to the trading performance andprofitability of FKI's divisions and the likely level of unallocated centralcosts which, when combined, constitute a profit estimate for the year ended 31March 2008 for the purposes of the City Code. Since the release of the Profit Estimate Announcements, the businesses of FKILogistex have been classified as held for sale. In accordance with InternationalFinancial Reporting Standard No.5, this has resulted in the re-classification ofFKI Logistex's results, which includes the operating profit before special itemsand the profit before taxation from continuing operations, as a business heldfor sale in the current and prior years. In the absence of unforeseen circumstances and on the bases and assumptions setout in Appendix 2, the FKI Directors estimate that for the year ended 31 March2008 operating profit before special items from continuing operations will benot less than £110 million and profit before taxation from continuing operationswill be not less than £63 million. These estimates exclude the results of FKILogistex and any costs incurred in relation to the Acquisition. In addition, the operating profit before special items and profit before taxbefore write-down in carrying value for the FKI Logistex businesses for the yearended 31 March 2008 are estimated to be around £8 million and £6 millionrespectively. Given the current status of sale negotiations in relation to FKILogistex, the FKI Directors are unable to quantify at present the precisewrite-down in the carrying value of FKI Logistex, although the FKI Directorsestimate the write-down to be in the range of £275 million to £325 million. A report on the above profit estimate from each of Rothschild and Ernst & Youngis contained in Appendix 3 to this announcement. 13. Information relating to FKI FKI is an international engineering group that is divided (for managementpurposes) into four operating groups: Lifting Products and Services, EnergyTechnology, Hardware and FKI Logistex. The Lifting Products and Services group consists primarily of the businesses ofBridon and Crosby, serving oil and gas production, mining, petrochemical,alternative energy and general construction markets. The other major business inthe Lifting Products and Services group is Harris Waste Management, whichmanufactures and supplies recycling equipment for the ferrous, non-ferrous andpaper industries. FKI Generators is the major business within the Energy Technology group. Itincludes Brush Generators, HMA and SEM, supplying turbo-generators to major gasturbine producers. Marelli Motori and Harrington Generators InternationalLimited, part of FKI Generators, are specialist generator suppliers to a widerange of industries, including oil and gas, mining, defence andtelecommunications. Hardware is based in North America and is a manufacturer and distributor offunctional and decorative hardware products into the original equipmentmanufacturer, distribution and retail channels. Hardware's products are used ina wide range of commercial and consumer applications, including windows, doors(internal and external), furniture, cabinets, floor care, security and ergonomicsystems. Hardware is comprised of three business units: Truth HardwareCorporation, Hickory Hardware Inc. and Weber Knapp Company. FKI Logistex supplies integrated automated material handling systems to thewarehouse, retail, distribution, manufacturing, global airport baggage handlingand post and parcel sectors. FKI Logistex is sub-divided into three customerfacing divisions: Warehouse and Distribution, Manufacturing Systems and Airport,Postal and Parcel Systems. 14. Scheme of Arrangement It is intended that the Acquisition will be implemented by means of aCourt-sanctioned scheme of arrangement between FKI and its shareholders undersection 899 of the 2006 Act. The Scheme will involve an application by FKI tothe Court to sanction the Scheme. The Scheme will be subject to the Conditions and certain further terms referredto in Appendix 1 to this announcement and to be included in the Scheme Document. In particular, to become Effective, the Scheme requires the approval of SchemeShareholders by the passing of a resolution at the Scheme Meeting. Theresolution must be approved by a majority in number present and voting at theScheme Meeting, either in person or by proxy, representing not less than 75 percent. in value of the Scheme Shares which are voted at the Scheme Meeting (orany adjournment thereof). In addition, to become Effective, the Scheme also requires the passing at theFKI Extraordinary General Meeting of certain resolutions which are necessary toimplement the Scheme. These resolutions are in respect of, inter alia: • the reclassification and subsequent cancellation of any existing FKI Shares (other than any FKI Shares already held by Melrose) and the approval of the issue of new ordinary shares in FKI to Melrose (and/or its nominee (s)) in accordance with the Scheme; and • the amendment of the FKI articles of association to ensure that the FKI Shares issued under the FKI Share Schemes will be subject to the Scheme or, if issued following the Reorganisation Record Time, will be automatically transferred to Melrose on the same terms as under the Scheme. These resolutions require the approval of the FKI Shareholders representing at least 75 per cent. of the votes cast at the FKI Extraordinary General Meeting, which will be held immediately after the Scheme Meeting. Following the Scheme Meeting and the FKI Extraordinary General Meeting, the Scheme must be sanctioned and the Capital Reduction confirmed by the Court, and will only become effective on delivery to the Registrar of Companies of: • a copy of the First Court Order; and • a copy of the Second Court Order, and in the case of the Second Court Order, it being registered by the Registrar of Companies. Upon the Scheme becoming Effective, it will be binding on all FKI Shareholders, irrespective of whether or not they attended or voted at the Scheme Meeting or the FKI Extraordinary General Meeting. The Scheme will contain a provision for FKI to consent, on behalf of all persons concerned, to any modification of or addition to the Scheme or to any condition that the Court may approve or impose. FKI has been advised that it is unlikely that the Court would impose any condition to the Scheme that might be material to the interests of FKI Shareholders unless FKI Shareholders were informed in advance. The Scheme Document will include full details of the Scheme, together with notices of the Scheme Meeting and the FKI Extraordinary General Meeting and the expected timetable, and will specify the action to be taken by Scheme Shareholders. Melrose and FKI reserve the right to decide to implement the Acquisition by way of an Offer for the issued and to be issued share capital of FKI not already held by Melrose. The FKI Board has confirmed that, in the event that the Acquisition is implemented by way of an Offer, the FKI Board will recommend, on a unanimous and unqualified basis, that FKI Shareholders accept the offer except to the extent that the FKI Directors determine in good faith (having taken appropriate legal and financial advice) that such unanimous and unqualified recommendation should not be given or should be withdrawn or modified in compliance with their fiduciary duties or their duties under the City Code. 15. Implementation Agreement Melrose and FKI have entered into an Implementation Agreement inrelation to the Acquisition which contains provisions regarding theimplementation of the Acquisition and certain assurances andconfirmations between the parties (including terms regarding the conductof the businesses pending implementation of the Acquisition). Undertaking in relation to FKI Logistex FKI has undertaken to Melrose that it will not dispose of FKI Logistex priorto the Acquisition becoming Effective without the prior consent of Melrose. Non-solicitation arrangements FKI has undertaken, amongst other things, not to, and to procure that members ofthe FKI Group and their respective directors, management and professionaladvisors shall not, solicit, induce or initiate an Independent Competing Offer. FKI has also undertaken, unless it is restricted from doing so by the terms ofany legally binding confidentiality agreement entered into prior to 6 March2008, to notify Melrose immediately of any approach that is made to it or anyother member of the FKI Group or its directors, employees, advisors or agents inrelation to an Independent Competing Offer and the material terms of suchapproach and to keep Melrose informed as to the progress of such approach. Break fee arrangements FKI has agreed to pay Melrose a break fee of £4,824,000 if an IndependentCompeting Offer is announced before the Acquisition lapses or is withdrawn andsuch Independent Competing Offer subsequently becomes or is declared whollyunconditional or is otherwise completed. 16. Management, employees and locations Melrose attaches great importance to the skills and experience of the existingmanagement and employees of FKI. Melrose has given assurances to the FKI Boardthat, when the Acquisition becomes Effective, the existing employment rights,including pension rights, of all FKI Group employees will be observed at leastto the extent required by applicable law. Melrose's plans for FKI do not involveany material change in the conditions of employment of FKI Group employees.Following completion, the employee resource of the FKI Group will be consideredas part of Melrose's overall strategy for FKI and will be reviewed from time totime in light of the on-going requirements of the Enlarged Group. Melrose has nocurrent intention to change the location of the FKI Group's places of businessor to redeploy its fixed assets. 17. FKI Employee Share Schemes The Acquisition will extend to any FKI Shares unconditionally allotted or issuedprior to the date on which the Scheme becomes Effective, including shares issuedpursuant to the exercise of options granted under the FKI Share Schemes.Appropriate proposals will be made in due course to participants in the FKIShare Schemes. 18. Melrose Shareholder approval and Prospectus In view of the size of the Acquisition and in order to implement it, it will benecessary for the Melrose Shareholders to approve: the Acquisition, an increasein the share capital of Melrose and the allotment of the Firm Placed Shares, theOpen Offer Shares and the Consideration Shares. Pre-emption rights will alsoneed to be disapplied in respect of the allotment of the Firm Placed Shares andthe Open Offer Shares. An extraordinary general meeting will be convened forthis purpose. The Melrose Circular convening the extraordinary general meetingwill be sent to Melrose Shareholders in due course. The Melrose Directors, who have been so advised by JPMorgan Cazenove andDresdner Kleinwort, consider the terms of the Acquisition to be fair andreasonable. In providing advice to the Melrose Directors, JPMorgan Cazenove andDresdner Kleinwort have taken into account the Melrose Directors' commercialassessment of the Acquisition. The Melrose Directors intend to unanimouslyrecommend Melrose Shareholders to vote in favour of the Resolution, as theMelrose Directors intend to do in respect of their own beneficial holdings inMelrose representing approximately 5.9 per cent. of the issued share capital ofMelrose. Melrose will also be required to publish a prospectus in connection with theissue of the New Melrose Shares. The Prospectus will be published shortly andwill contain information on the Enlarged Group and the New Melrose Shares. 19. Interests As at the close of business on 21 April 2008, being the last practicable dateprior to the date of this announcement, Melrose, the Melrose Directors and anyparty acting in concert with Melrose, had the following interests in FKI Shares: Name Number of SharesMelrose 1,436,166Bear Stearns International Limited 18,917 Save as disclosed above, neither Melrose nor any Melrose Director, nor, so faras Melrose is aware, any party acting in concert with Melrose, owns or controlsany other FKI Shares or any securities convertible or exchangeable into, or anyrights to subscribe for or purchase, or any options (including traded options)to purchase or any short positions (whether conditional or absolute and whetherin the money or otherwise and including under a derivative), agreement to sell,delivery obligation or right to require another person to take delivery of orany derivative referenced to FKI Shares or any arrangement in relation to FKIShares ("arrangement" for these purposes includes any indemnity or optionarrangement, any agreement or understanding, formal or informal, of whatevernature, relating to FKI Shares which may be an inducement to deal or refrainfrom dealing in such FKI Shares) and, save as disclosed above, neither Melrosenor any Melrose Director, nor, so far as Melrose is aware, any party acting inconcert with Melrose, has borrowed or lent any relevant FKI securities, save forany borrowed shares which have been either on-lent or sold. 20. Delisting, cancellation of trading and re-registration It is intended that the London Stock Exchange and the UKLA will be requestedrespectively to cancel trading in FKI Shares on the London Stock Exchange's mainmarket for listed securities and the listing of the FKI Shares from the OfficialList on the Effective Date. It is intended that, shortly after the Scheme becomes Effective, FKI will bere-registered as a private limited company. If the Acquisition is effected by way of an Offer, it is anticipated that thecancellation of FKI's listing and admission to trading will take effect noearlier than 20 Business Days after the date on which the offer becomes or isdeclared unconditional in all respects. Delisting would significantly reduce theliquidity and marketability of any FKI Shares not assented to the offer at thattime. If the Acquisition is effected by way of an Offer and such offer becomes or isdeclared unconditional in all respects and sufficient acceptances are received,Melrose intends to exercise its rights to acquire compulsorily the remaining FKIShares in respect of which the offer has not been accepted. 21. Listings, dealings and settlement Application will be made to the UKLA for the New Melrose Shares to be admittedto the Official List and application will be made to the London Stock Exchangefor the New Melrose Shares to be admitted to the London Stock Exchange's mainmarket for listed securities. It is expected that Admission will becomeeffective and that dealings for normal settlement in the New Melrose Shares willcommence on the London Stock Exchange at 8.00 a.m. on the Effective Date(subject only to the condition contained in paragraph 3(a) of Appendix 1). 22. General and documentation The Acquisition will be on the terms and subject to the conditions set outherein and in Appendix 1, and to be set out in the Scheme Document. The formalScheme Document together with the Prospectus giving financial and otherinformation in relation to Melrose will be sent to FKI Shareholders (other thancertain overseas shareholders) shortly. At the same time or as nearly aspracticable at the same time as these documents are sent to FKI Shareholders,the Prospectus and the Melrose Circular convening the Melrose ExtraordinaryGeneral Meeting will be sent to Melrose Shareholders. Enquiries: Melrose Christopher Miller +44 (0) 207766 7670 David Roper +44 (0) 207766 7670 Simon Peckham +44 (0) 207766 7670 Geoffrey Martin +44 (0) 207766 7670 JPMorgan Cazenove (joint financial advisor and joint corporate broker toMelrose) Mark Preston +44 (0) 207588 2828 Laurence Hollingworth +44 (0) 207588 2828 Dresdner Kleinwort (joint financial advisor to Melrose) David Smith +44 (0) 207623 8000 Investec (joint corporate broker to Melrose) Keith Anderson +44 (0) 207597 5970 M:Communications (PR advisor to Melrose) James Hill +44 (0) 207153 1559 Nick Miles +44 (0) 207153 1535 FKI Paul Heiden +44 (0) 207832 0000 Rothschild (financial advisor to FKI) Robert Leitao +44 (0) 207280 5000 Ravi Gupta +44 (0) 207280 5000 Hoare Govett (corporate broker to FKI) Sara Hale +44 (0) 207678 8000 Bob Pringle +44 (0) 207678 8000 Brunswick (PR advisor to FKI) Catherine Hicks +44 (0) 207404 5959 James Olley +44 (0) 207404 5959 The conditions to and certain further terms of the Acquisition are set out inAppendix 1. The bases and sources of certain financial information contained inthis announcement, and certain additional financial and operational information,are set out in Appendix 4. Details of the irrevocable undertakings received byMelrose in relation to the Acquisition are set out in Appendix 5. Certaindefinitions and terms used in this announcement are set out in Appendix 6. JPMorgan Cazenove is acting for Melrose and no one else in connection with theAcquisition, the Placing and the Open Offer and will not be responsible toanyone other than Melrose for providing the protections afforded to clients ofJPMorgan Cazenove nor for giving advice in relation to the Acquisition, thePlacing and the Open Offer or any matter or arrangement referred to in thisannouncement. Dresdner Kleinwort is acting for Melrose and no one else in connection with theAcquisition and will not be responsible to anyone other than Melrose forproviding the protections afforded to clients of Dresdner Kleinwort nor forgiving advice in relation to the Acquisition or any matter or arrangementreferred to in this announcement. Investec is acting for Melrose and no one else in connection with the Placingand the Open Offer and will not be responsible to anyone other than Melrose forproviding the protections afforded to clients of Investec nor for giving advicein relation to the Placing and the Open Offer or any matter or arrangementreferred to in this announcement. Rothschild is acting as financial advisor for FKI in connection with theAcquisition and for no one else in connection with the Acquisition and will notbe responsible to anyone other than FKI for providing the protections affordedto clients of Rothschild nor for giving advice in relation to the Acquisition. Hoare Govett is acting as corporate broker for FKI in connection with theAcquisition and for no one else in connection with the Acquisition and will notbe responsible to anyone other than FKI for providing the protections affordedto clients of Hoare Govett nor for giving advice in relation to the Acquisition. Rothschild and Ernst & Young have each given and not withdrawn their consent tothe inclusion of their respective reports in this announcement. Overseas jurisdictions The release, publication or distribution of this announcement in jurisdictionsother than the United Kingdom may be restricted by law and, therefore, anypersons who are subject to the laws of any jurisdiction other than the UnitedKingdom should inform themselves about, and observe, any applicablerequirements. This announcement has been prepared in accordance with Englishlaw, the City Code and the Disclosure and Transparency Rules and informationdisclosed may not be the same as that which would have been prepared inaccordance with the laws of jurisdictions outside England. This announcement is not intended to, and does not, constitute or form part ofany offer or invitation to purchase, otherwise acquire, subscribe for, sell orotherwise dispose of, any securities or the solicitation of any vote or approvalin any jurisdiction pursuant to the Acquisition or otherwise. The Acquisitionwill be made solely through the Scheme Document, which will contain the fullterms and conditions of the Acquisition, including details of how to vote inrespect of the Acquisition. Any acceptance or other response to the Acquisitionshould be made only on the basis of the information in the Scheme Document andthe Prospectus. In particular, this announcement is not an offer of securities for sale in theUnited States and the New Melrose Shares, which will be issued in connectionwith the Acquisition, have not been, and will not be, registered under the USSecurities Act or under the securities law of any state, district or otherjurisdiction of the United States, Australia, Canada or Japan and no regulatoryclearance in respect of the Consideration Shares has been, or will be, appliedfor in any jurisdiction other than the UK. The New Melrose Shares may not beoffered, sold, or, delivered, directly or indirectly, in, into or from theUnited States absent registration under the US Securities Act or an exemptionfrom registration. The Consideration Shares may not be offered, sold, resold,delivered or distributed, directly or indirectly, in, into or from Canada orJapan or to, or for the account or benefit of, any resident of Canada or Japanabsent an exemption from registration or an exemption under relevant securitieslaw. It is expected that the New Melrose Shares will be issued in reliance uponthe exemption from the registration requirements of the US Securities Actprovided by Section 3(a)(10) thereof. The Firm Placed Shares will be offeredwithin the United States to qualified institutional buyers as defined in, and inreliance on, Rule 144A of the US Securities Act or an exemption from, or atransaction not subject to, the registration requirements of the US SecuritiesAct. Under applicable US securities laws, persons (whether or not US Persons)who are or will be "affiliates" within the meaning of the US Securities Act ofFKI or Melrose prior to, or of Melrose after, the Effective Date will be subjectto certain transfer restrictions relating to the Consideration Shares receivedin connection with the Scheme. The New Melrose Shares are not being offered to the public by means of thisannouncement. Application will be made to the FSA and the London Stock Exchange for all theNew Melrose Shares to be admitted to listing on the Official List and to tradingon the London Stock Exchange respectively, subject to the Scheme becomingEffective. Notice to US investors in FKI: The Acquisition relates to the shares of a UKcompany and is proposed to be made by means of a scheme of arrangement providedfor under the laws of England and Wales. The Acquisition is subject to thedisclosure requirements and practices applicable in the United Kingdom toschemes of arrangement, which differ from the disclosure and other requirementsof US securities laws. Financial information included in the relevantdocumentation will have been prepared in accordance with accounting standardsapplicable in the United Kingdom that may not be comparable to the financialstatements of US companies. If the Acquisition is implemented by way of an Offer, it will be made inaccordance with the procedural and filing requirements of the US securitieslaws, to the extent applicable. If the Acquisition is implemented by way of anOffer, the Consideration Shares to be issued in connection with such offer willnot be registered under the US Securities Act or under the securities laws ofany state, district or other jurisdiction of the United States and may not beoffered, sold or delivered, directly or indirectly, in the United States exceptpursuant to an applicable exemption from, or in a transaction not subject to,the registration requirements of the US Securities Act or such other securitieslaws. Melrose does not intend to register any such Consideration Shares or partthereof in the United States or to conduct a public offering of theConsideration Shares in the United States. Forward looking statements This announcement, including information included or incorporated by referencein this announcement, may contain "forward looking statements" concerningMelrose and FKI. Generally, the words "will", "may", "should", "continue","believes", "expects", "intends", "anticipates" or similar expressions identifyforward looking statements. The forward looking statements involve risks anduncertainties that could cause actual results to differ materially from thosesuggested by them. Many of these risks and uncertainties relate to factors thatare beyond the companies' abilities to control or estimate precisely, such asfuture market conditions and the behaviours of other market participants, andtherefore undue reliance should not be placed on such statements which speakonly as at the date of this announcement. Melrose and FKI assume no obligationand do not intend to update these forward looking statements, except as requiredpursuant to applicable law. Melrose reserves the right to elect (with the consent of the Panel) to implementthe Acquisition of FKI by way of an Offer. In such event, the Offer will beimplemented on substantially the same terms, subject to appropriate amendments,as those which would apply to the Scheme. Nothing in this announcement (other than the Profit Estimate) is intended, or isto be construed, as a profit forecast or to be interpreted to mean that earningsper FKI Share or Melrose Share for the current or future financial years, orthose of the Enlarged Group, will necessarily match or exceed the historicalpublished earnings per FKI Share or Melrose Share. Dealing disclosure requirements Under the provisions of Rule 8.3 of the City Code, if any person is, or becomes,"interested" (directly or indirectly) in 1 per cent. or more of any class of"relevant securities" of Melrose or FKI, all "dealings" in any "relevantsecurities" of Melrose or FKI (including by means of an option in respect of, ora derivative referenced to, any such "relevant securities") must be publiclydisclosed by no later than 3.30 p.m. (London time) on the Business Day followingthe date of the relevant transaction. This requirement will continue until thedate on which the Scheme becomes Effective (or if implemented by way of anoffer, the offer becomes, or is declared, unconditional as to acceptances) orotherwise lapses or is otherwise withdrawn or on which the "offer period"otherwise ends. If two or more persons act together pursuant to an agreement orunderstanding, whether formal or informal, to acquire an "interest" in "relevantsecurities" of Melrose or FKI, they will be deemed to be a single person for thepurpose of Rule 8.3. Under the provisions of Rule 8.1 of the City Code, all "dealings" in "relevantsecurities" of Melrose or FKI by Melrose or FKI, or by any of their respective"associates", must be disclosed by no later than 12.00 noon (London time) on theBusiness Day following the date of the relevant transaction. A disclosure table, giving details of the companies in whose "relevantsecurities" "dealings" should be disclosed, and the number of such securities inissue, can be found on the Panel's website at www.thetakeoverpanel.org.uk. "Interests in securities" arise, in summary, when a person has long economicexposure, whether conditional or absolute, to changes in the price ofsecurities. In particular, a person will be treated as having an "interest" byvirtue of the ownership or control of securities, or by virtue of any option inrespect of, or derivative referenced to, securities. Terms in quotation marks are defined in the City Code, which can also be foundon the Panel's website. If you are in any doubt as to whether or not you arerequired to disclose a "dealing" under Rule 8, you should consult the Panel. APPENDIX 1 CONDITIONS AND FURTHER TERMS OF THE ACQUISITION The Acquisition will comply with the applicable rules and regulations of theFSA, the London Stock Exchange and the City Code, will be governed by Englishlaw and will be subject to the jurisdiction of the courts of England. Inaddition it will be subject to the terms and conditions set out in the SchemeDocument. The Acquisition will be conditional upon the Scheme becoming Effective by 18September 2008 or such later date imposed by the Court and/or agreed by Melroseand FKI. PART A Conditions to the Acquisition 1. The Scheme will be subject to the following conditions: (a) its approval by a majority in number representing not lessthan three-fourths in value of the holders of Scheme Shares who are on theregister of members of FKI at the Scheme Voting Record Time, present and voting,whether in person or by proxy, at the Scheme Meeting (or any adjournmentthereof); (b) the resolution required to implement the Scheme beingpassed at the FKI Extraordinary General Meeting (or any adjournment thereof);and (c) the sanction of the Scheme and the confirmation of theCapital Reduction by the Court (in either case with or without modification (butsubject to such modification being acceptable to Melrose and FKI)), officecopies of the Court Orders and of the minute of reduction being delivered to theRegistrar of Companies of England and Wales and registration of the Second CourtOrder confirming the Capital Reduction with the Registrar of Companies ofEngland and Wales. 2. The Acquisition will be conditional upon the passing at theMelrose Extraordinary General Meeting (or at any adjournment thereof) of allresolutions as are necessary to approve, effect and implement the Acquisitionand the acquisition of any shares in FKI pursuant to the Acquisition orotherwise, to increase the authorised share capital of Melrose and to conferauthorities for the creation and allotment of the New Melrose Shares (as suchresolutions may be set out in the Melrose Circular). 3. Subject to the provisions of paragraph 4 of this Part A andthe requirements of the Panel in accordance with the City Code, the Acquisitionwill also be conditional upon, and accordingly the necessary actions toimplement the Acquisition will only be taken on, the satisfaction or, whererelevant, waiver of the following Conditions: (a) the admission to the Official List of the New MelroseShares becoming effective in accordance with the Listing Rules and the admissionof such shares to the London Stock Exchange's market for listed securitiesbecoming effective in accordance with the LSE Admission Standards or (if Melroseso determines and subject to the consent of the Panel) the UKLA agreeing orconfirming its decision to admit such shares to the Official List and the LondonStock Exchange agreeing to admit such shares to trading subject only to (i)allotment of such shares and/or (ii) the Scheme becoming Effective; (b) all necessary notifications and filings having been madeand all applicable waiting periods (including any extensions thereof) under theUnited States Hart-Scott-Rodino Antitrust Improvements Act of 1976 (as amended)and the regulations made thereunder having expired, lapsed or been terminated asappropriate in each case in respect of the Acquisition (including, withoutlimitation, to its implementation and financing) and the acquisition or theproposed acquisition of any shares or other securities in, or control of, FKI byany member of the Wider Melrose Group; (c) the prohibition on implementing the Acquisition containedin section 41(1) of the German Act against Restraints of Competition (Gesetzgegen Wettbewerbsbeschraenkungen) being lifted as a result of the German FederalCartel Office: (i) failing to inform the parties notifying the Acquisition withinone month of receipt of a complete notification under section 40(1) of theGerman Act against Restraints of Competition that it intends to initiate anin-depth investigation of the Acquisition under section 40(2) of the German Actagainst Restraints of Competition; or (ii) after receipt of a complete notification under section 40(1) ofthe German Act against Restraints of Competition, approving the Acquisition byinforming Melrose and FKI in writing that the pre-conditions for prohibition insection 36(1) of the German Act against Restraints of Competition are not metand that it therefore does not intend to initiate an in-depth investigation ofthe Acquisition under section 40(2) of the German Act against Restraints ofCompetition; or (iii) after having initiated an in-depth investigation, failing to servea decision upon the notifying parties within four months, or any additional timeperiod for investigation the notifying parties have consented to, of receipt ofa complete notification under Section 40(1) of the German Act against Restraintsof Competition; or (iv) after having initiated an in-depth investigation, after receipt ofa complete notification under section 40(1) of the German Act against Restraintsof Competition, approving the Acquisition by serving a clearance decision, interms and in a form reasonably satisfactory to Melrose, upon the notifyingparties; (d) no government or governmental, quasi-governmental,supranational, statutory, regulatory, environmental, administrative, fiscal orinvestigative body, court, trade agency, association, institution or any otherbody or person whatsoever in any jurisdiction (each a "Third Party") havingdecided to take, institute, implement or threaten any action, proceeding, suit,investigation, enquiry or reference, or having required any action to be takenor otherwise having done anything or having enacted, made or proposed anystatute, regulation, decision, order and there not continuing to be outstandingany statute, regulation, decision or order which would or might: (i) make the Acquisition, its implementation or the acquisition orproposed acquisition of any shares or other securities in, or control of, FKI byany member of the Wider Melrose Group void, illegal and/or unenforceable underthe laws of any jurisdiction, or otherwise directly or indirectly prohibit, ormaterially restrain, restrict, delay or otherwise interfere with theimplementation of, or impose material additional conditions or obligations withrespect to, or otherwise materially challenge or require material amendment ofthe Acquisition; (ii) require, prevent or materially delay the divestiture ormaterially alter the terms envisaged for such divestiture by any member of theWider Melrose Group or by any member of the Wider FKI Group of all or any partof its businesses, assets or property or impose any limitation on the ability ofany of them to conduct their respective businesses (or any part thereof) or toown any of their assets or properties (or any part thereof) in either such caseto an extent which is material in the context of the FKI Group taken as a wholeor the Melrose Group taken as a whole (as the case may be); (iii) impose any material limitation on, or result in a material delayin, the ability of any member of the Wider Melrose Group directly or indirectlyto acquire or hold or to exercise effectively all or any rights of ownership inrespect of shares or other securities in FKI or on the ability of any member ofthe Wider FKI Group or any member of the Wider Melrose Group directly orindirectly to hold or exercise effectively any rights of ownership in respect ofshares or other securities (or the equivalent) in, or to exercise managementcontrol over, any member of the Wider FKI Group; (iv) require any member of the Wider Melrose Group or the Wider FKIGroup to acquire or offer to acquire any shares, other securities (or theequivalent) or interest in any member of the Wider FKI Group owned by any thirdparty (other than in the implementation of the Acquisition) to an extent whichis material in context of the FKI Group taken as a whole or the Melrose Grouptaken as a whole (as the case may be); (v) require, prevent or materially delay a divestiture by any memberof the Wider Melrose Group of any shares or other securities (or the equivalent)in FKI; (vi) result in any member of the Wider FKI Group ceasing to be able tocarry on business under any name under which it presently carries on business toan extent which is material in the context of the FKI Group taken as a whole; (vii) impose any material limitation on the ability of any member of theWider Melrose Group or any member of the Wider FKI Group to integrate orco-ordinate all or any part of its business with all or any part of the businessof any other member of the Wider Melrose Group and/or the Wider FKI Group; or (viii) otherwise affect the business, assets, profits or prospects of anymember of the Wider FKI Group or any member of the Wider Melrose Group in amanner which is adverse to and material in the context of the FKI Group taken asa whole or of the obligations of any members of the Melrose Group taken as awhole in connection with the Acquisition, and all applicable waiting and other time periods during which any such ThirdParty could decide to take, institute, implement or threaten any such action,proceeding, suit, investigation, enquiry or reference or take any other stepunder the laws of any jurisdiction in respect of the Acquisition or theacquisition or proposed acquisition of any FKI Shares or otherwise intervenehaving expired, lapsed, or been terminated; (e) all necessary or appropriate notifications, filings orapplications having been made in connection with the Acquisition and allnecessary waiting periods (including any extensions thereof) under anyapplicable legislation or regulation of any jurisdiction having expired, lapsedor been terminated (as appropriate) and all statutory and regulatory obligationsin any jurisdiction having been complied with in connection with the Acquisitionand all Authorisations necessary or appropriate in any jurisdiction for or inrespect of the Acquisition and the acquisition or the proposed acquisition ofany shares or other securities in, or control of, FKI by any member of the WiderMelrose Group having been obtained in terms and in a form reasonablysatisfactory to Melrose from all appropriate Third Parties or (without prejudiceto the generality of the foregoing) from any person or bodies with whom anymember of the Wider FKI Group or the Wider Melrose Group has entered intocontractual arrangements and all such Authorisations necessary or appropriate tocarry on the business of any member of the Wider FKI Group in any jurisdictionhaving been obtained in each case where the direct consequence of a failure tomake such notification or filing or to wait for the expiry, lapse or terminationof any such waiting period or to comply with such obligation or obtain suchAuthorisation would have a material adverse effect on the FKI Group taken as awhole, any member of the Melrose Group taken as a whole or the ability ofMelrose to implement the Acquisition and all such Authorisations remaining infull force and effect at the time at which the Acquisition becomes otherwiseunconditional and there being no notice of an intention to revoke, suspend,restrict, modify or not to renew such Authorisations; (f) except as fairly disclosed in the annual report andaccounts of FKI for the year ended 31 March 2007 or the interim results of FKIfor the half year ended 30 September 2007 or as publicly announced to aRegulatory Information Service by or on behalf of FKI or as fairly disclosed inwriting by FKI to Melrose prior to the date of this announcement, there being noprovision of any arrangement, agreement, licence, permit, lease or otherinstrument to which any member of the Wider FKI Group is a party or by or towhich any such member or any of its assets is or may be bound or be subjectwhich, or any event or circumstance having occurred which, under anyarrangement, agreement, licence, permit, lease or other instrument to which anymember of the Wider FKI Group is a party or by or to which any such member orany of its assets is or may be bound or be subject, would result in, as aconsequence of the Acquisition or the acquisition or the proposed acquisition byany member of the Wider Melrose Group of any shares or other securities in FKIor because of a change in the control or management of any member of the WiderFKI Group or otherwise, could or might reasonably be expected to result in, ineach case to an extent which is material in the context of the FKI Group takenas a whole or to the obligations of any member of the Melrose Group inconnection with the Acquisition: (i) any monies borrowed by, or any other indebtedness, actual orcontingent, of any member of the Wider FKI Group being or becoming repayable, orcapable of being declared repayable, immediately or prior to its or their statedmaturity date or repayment date, or the ability of any such member to borrowmonies or incur any indebtedness being withdrawn or inhibited or being capableof becoming or being withdrawn or inhibited; (ii) the rights, liabilities, obligations, interests or business ofany member of the Wider FKI Group or any member of the Wider Melrose Group underany such arrangement, agreement, licence, permit, lease or instrument or theinterests or business of any member of the Wider FKI Group or any member of theWider Melrose Group in or with any other firm or company or body or person (orany agreement or arrangement relating to any such business or interests) beingterminated or adversely modified or affected or any onerous obligation orliability arising or any adverse action being taken thereunder; (iii) any member of the Wider FKI Group ceasing to be able to carry onbusiness under any name under which it presently carries on business to anextent which is material in the context of the FKI Group taken as a whole; (iv) any assets or interests of, or any asset the use of which isenjoyed by, any member of the Wider FKI Group being or falling to be disposed ofor charged or any right arising under which any such asset or interest could berequired to be disposed of or charged or could cease to be available to anymember of the Wider FKI Group otherwise than in the ordinary course of business; (v) the creation or enforcement of any mortgage, charge or othersecurity interest over the whole or any part of the business, property or assetsof any member of the Wider FKI Group; (vi) the value of, or the financial or trading position or prospects of,any member of the Wider FKI Group being prejudiced or adversely affected; (vii) the creation of any liability (actual or contingent) by any memberof the Wider FKI Group; or (viii) any liability of any member of the Wider FKI Group to make anyseverance, termination, bonus or other payment to any of its directors or otherofficers; (g) except as fairly disclosed in the annual report andaccounts of FKI for the year ended 31 March 2007 or the interim results of FKIfor the half year ended 30 September 2007 or as publicly announced to aRegulatory Information Service by or on behalf of FKI or as fairly disclosed inwriting by or on behalf of FKI to Melrose prior to the date of thisannouncement, no member of the Wider FKI Group (or in the case of paragraph (ix)the Wider FKI Group or the trustee of the relevant pension scheme) having since31 March 2007: (i) issued or agreed to issue or authorised the issue of additionalshares of any class, or securities or securities convertible into, orexchangeable for, or rights, warrants or options to subscribe for or acquire,any such shares or convertible securities (save, where relevant, as between FKIand wholly-owned subsidiaries of FKI and save for the issue of FKI Shares on theexercise of options granted before the date of this announcement in the ordinarycourse); (ii) save for the FKI Dividend, recommended, declared, paid or made orproposed to recommend, declare, pay or make any bonus, dividend or otherdistribution (whether payable in cash or otherwise) other than to FKI or one ofits wholly-owned subsidiaries; (iii) merged with (by statutory merger or otherwise) or demerged from oracquired any body corporate, partnership or business or acquired or disposed of,or, transferred, mortgaged or charged or created any security interest over, anyassets or any right, title or interest in any asset (including shares and tradeinvestments) or authorised, proposed or announced any intention to do so, ineach case, other than in the ordinary course of business and save fortransactions between FKI and its wholly-owned subsidiaries or between suchwholly-owned subsidiaries; (iv) save as between FKI and its wholly-owned subsidiaries or betweensuch wholly owned subsidiaries, made or announced an intention to propose anychange in its loan capital; (v) issued, authorised or proposed the issue of any debentures or(save in the ordinary course of business and save as between FKI and itswholly-owned subsidiaries or between such wholly owned subsidiaries,) incurredor increased any indebtedness or become subject to any contingent liability toan extent which is material in the context of the FKI Group taken as a whole; (vi) entered into or varied or authorised or announced its intention toenter into or vary any contract, transaction, arrangement or commitment (whetherin respect of capital expenditure or otherwise) (otherwise than in the ordinarycourse of business) which is of a long term, unusual or onerous nature, or whichinvolves or could involve an obligation of a nature or magnitude which is, inany such case, material in the context of the FKI Group taken as a whole orwhich is or is likely to be restrictive on the business of any member of theWider FKI Group taken as a whole or the Wider Melrose Group taken as a whole; (vii) entered into or materially varied the terms of any serviceagreement with any director or senior executive of the Wider FKI Group; (viii) proposed, agreed to provide or modified in any material respect theterms of any share option scheme, incentive scheme, or other benefit relating tothe employment or termination of employment of any employee of the Wider FKIGroup which, taken as a whole, are material in the context of the FKI Grouptaken as a whole; (ix) subject to any such act being material in the context of the FKIGroup as a whole, having, except as required by law, made or agreed or consentedto any significant change to the terms of the trust deeds constituting thepensions schemes established for its directors, employees or their dependants orthe benefits which accrue, or to the pensions which are payable, thereunder, orto the basis on which qualification for, or accrual or entitlement to, suchbenefits or pensions are calculated or determined or, as set out in any schemespecific funding valuation (under Part 3 of the Pensions Act 2004) of the schemeor schedule of contributions or other agreement between FKI and the trustee, thebasis on which the liabilities (including pensions) of such pension schemes arefunded or valued, or agreed or consented to any change to the trustees ortrustee directors (except a simple replacement of a trustee or trustee directorwho has resigned), or agreed or entered into any significant change in themanner in which the assets of any such pension scheme are invested or to enterinto one or more specific significant bulk annuity contracts in relation to anysuch pension scheme or carried out any act which would lead to the commencementof the winding up of the scheme or which would give rise directly or indirectlyto a significant liability arising out of the operation of sections 38 to 56inclusive of the Pensions Act 2004 in relation to the scheme; (x) implemented or effected, or authorised or announced its intentionto implement or effect, any composition, assignment, reconstruction,amalgamation, commitment, scheme or other transaction or arrangement (other thanthe Acquisition) otherwise than in the ordinary course of business; (xi) other than by a wholly-owned subsidiary of FKI, purchased,redeemed or repaid or announced any proposal to purchase, redeem or repay any ofits own shares or other securities or reduced or, save in respect of the mattersmentioned in sub-paragraph (i) above, made any other change to any part of itsshare capital to an extent which (other than in the case of FKI) is material inthe context of the FKI Group; (xii) waived or compromised any claim otherwise than in the ordinarycourse of business which is material in the context of the FKI Group taken as awhole; (xiii) made any material alteration to its memorandum or articles ofassociation or other incorporation documents; (xiv) other than in respect of a body corporate which was dormant andsolvent at the relevant time, taken or proposed any corporate action or had anylegal proceedings instituted or threatened in writing against it for its windingup (voluntary or otherwise), dissolution, reorganisation or for the appointmentof any administrator, receiver, manager, administrative receiver, trustee orsimilar officer of all or any of its assets or revenues or any analogousproceedings in any jurisdiction or appointed any analogous person in anyjurisdiction or had any such person appointed; (xv) been unable, or admitted in writing that it is unable, to pay itsdebts or commenced negotiations with one or more of its creditors with a view torescheduling or restructuring any of its indebtedness, or having stopped orsuspended (or threatened to stop or suspend) payment of its debts generally orceased or threatened to cease carrying on all or a substantial part of itsbusiness; or (xvi) entered into any contract, commitment, agreement or arrangementotherwise than in the ordinary course of business or passed any resolution ormade any offer (which remains open for acceptance) with respect to, or announcedan intention to, effect any of the transactions, matters or events referred toin this condition; (h) except as fairly disclosed in the annual report andaccounts of FKI for the year ended 31 March 2007 or the interim results of FKIfor the half year ended 30 September 2007 or as publicly announced to aRegulatory Information Service by or on behalf of FKI or as fairly disclosed inwriting by or on behalf of FKI to Melrose prior to the date of this announcementor as disclosed in paragraph 12 of this announcement, since 31 March 2007: (i) there having been no adverse change in the business, assets,financial or trading position or profits or prospects or operational performanceof any member of the Wider FKI Group to an extent which is material to the FKIGroup taken as a whole or of the obligations of any member of the Melrose Groupin connection with the Acquisition; (ii) no litigation, arbitration proceedings, prosecution or otherlegal proceedings having been threatened, announced or instituted by or againstor remaining outstanding against any member of the Wider FKI Group or to whichany member of the Wider FKI Group is or may become a party (whether as claimantor defendant or otherwise) and no enquiry or investigation by, or complaint orreference to, any Third Party against or in respect of any member of the WiderFKI Group having been threatened, announced or instituted by or against, orremaining outstanding in respect of, any member of the Wider FKI Group which, inany such case, might reasonably be expected materially and adversely to affectthe FKI Group taken as a whole; (iii) no contingent or other liability having arisen or become known toMelrose which would or would reasonably be expected to adversely affect thebusiness, assets, financial or trading position or profits or prospects of anymember of the Wider FKI Group to an extent which is material to the FKI Grouptaken as a whole; and (iv) no steps having been taken and no omissions having been made whichare likely to result in the withdrawal, cancellation, termination ormodification of any licence held by any member of the Wider FKI Group, which isnecessary for the proper carrying on of its business and the withdrawal,cancellation, termination or modification of which is material and likelyadversely to affect the FKI Group taken as a whole; (i) except as fairly disclosed in the annual report andaccounts of FKI for the year ended 31 March 2007 or the interim results of FKIfor the half year ended 30 September 2007 or as publicly announced to aRegulatory Information Service by or on behalf of FKI or as fairly disclosed inwriting by or on behalf of FKI to Melrose prior to the date of thisannouncement, Melrose not having discovered: (i) that any financial, business or other information concerning theWider FKI Group publicly disclosed or disclosed to any member of the WiderMelrose Group at any time by or on behalf of any member of the Wider FKI Groupwhich is material in the context of the acquisition of FKI by any member of theMelrose Group is misleading to a material extent, contains a materialmisrepresentation of fact or omits to state a fact necessary to make thatinformation not misleading to a material extent; (ii) that any member of the Wider FKI Group is subject to anyliability, contingent or otherwise, which is not disclosed in the annual reportand accounts of FKI for the year ended 31 March 2007 or the interim results ofFKI for the half year ended 30 September 2007, and which is material in thecontext of the FKI Group taken as a whole; or (iii) any information which affects the import of any informationdisclosed to Melrose at any time before the date of this announcement by or onbehalf of any member of the Wider FKI Group which is material in the context ofthe FKI Group taken as a whole; (j) except as fairly disclosed in the annual report andaccounts of FKI for the year ended 31 March 2007 or the interim results of FKIfor the half year ended 30 September 2007 or as publicly announced to aRegulatory Information Service by or on behalf of FKI or as fairly disclosed inwriting by or on behalf of FKI to Melrose before the date of this announcement,in relation to any release, emission, accumulation, discharge, disposal or otherfact or circumstance which has impaired or is likely to impair the environment(including property) or harmed or is likely to harm human health, no past orpresent member of the Wider FKI Group, in a manner or to an extent which ismaterial in the context of the FKI Group taken as a whole, (i) having committedany violation of any applicable laws, statutes, regulations, notices or otherrequirements of any Third Party and/or (ii) having incurred any liability(whether actual or contingent) to any Third Party; and/or (iii) being likely toincur any liability (whether actual or contingent), or being required, to makegood, remediate, repair, re instate or clean up the environment (including anyproperty). 4. Melrose reserves the right to waive in whole or in part allor any of conditions 3 (e-j) inclusive. Conditions 2 and 3 (b-j) inclusive mustbe satisfied as at, or waived (where possible) on or before the date on whichcondition 1 (c) is fulfilled. Melrose shall be under no obligation to waive ordetermine to be, or treat as, fulfilled, any of conditions 3 (e-j) inclusive bya date earlier than the date specified above for the fulfilment thereofnotwithstanding that the other conditions of the Acquisition may at such earlierdate have been waived or fulfilled and that there are at such earlier date nocircumstances indicating that any of such conditions may not be capable offulfilment. 5. If Melrose is required by the Panel to make an offer for FKIShares under the provisions of Rule 9 of the City Code, Melrose may make suchalterations to the terms and conditions of the Acquisition as are necessary tocomply with the provisions of that Rule. PART B Further Terms of the Acquisition 1. Subject to the consent of the Panel, Melrose may decide toimplement the Acquisition by way of an Offer. In such event, the Acquisitionwill be implemented on the same terms (subject to appropriate amendmentsincluding (without limitation) an acceptance condition set at 90 per cent. ofthe shares to which the Acquisition relates or such other percentage as may berequired by the Panel and subject to availability of an exemption from theregistration requirements of the US Securities Act and such amendments thatMelrose deems necessary or appropriate in respect of US Securities laws), so faras applicable, as those which would apply to the implementation of theAcquisition by means of the Scheme. 2. The Acquisition will not proceed if, after the date of thisannouncement and before the FKI Extraordinary General Meeting, the Acquisitionis referred to the Competition Commission. 3. The Acquisition will be governed by English law and besubject to the jurisdiction of the English courts, and to the Conditions set outin this announcement and in the formal Scheme Document. APPENDIX 2 Profit Estimate Introduction The Profit Estimate Announcements referred to the trading performance andprofitability of FKI's divisions and the likely level of unallocated centralcosts which, when combined, constitute a profit estimate for the year ended 31March 2008 for the purposes of the City Code. Since the release of the Profit Estimate Announcements, the businesses of FKILogistex have been classified as held for sale. In accordance with InternationalFinancial Reporting Standard No.5, this has resulted in the re-classification ofFKI Logistex's results, which includes the operating profit before special itemsand the profit before taxation from continuing operations, as a business heldfor sale in the current and prior years. Profit Estimate In the absence of unforeseen circumstances and on the bases and assumptions setout below, the FKI Directors estimate that for the year ended 31 March 2008operating profit before special items will be not less than £110 million andthat profit before taxation from continuing operations will be not less than £63million. These estimates exclude any costs incurred in relation to theAcquisition. In addition, the operating profit before special items and profit before taxbefore write-down in carrying value for the FKI Logistex businesses for the yearended 31 March 2008 are estimated to be around £8 million and £6 millionrespectively. Given the current status of sale negotiations in relation to FKILogistex, the FKI Directors are unable to quantify at present the precisewrite-down in the carrying value of FKI Logistex, although the FKI Directorsestimate the write-down to be in the range of £275 million to £325 million. A report on the above profit estimate from each of Rothschild and Ernst & Youngis contained in Appendix 3. Bases of preparation and principal assumptions The Profit Estimate is based on the unaudited half year financial statements forthe six months ended 30 September 2007, the unaudited management accounts forthe five months ended 29 February 2008 and an estimate for the month of March2008. The Profit Estimate has been prepared on a basis consistent with the accountingpolicies of the FKI Group which are based on International Financial ReportingStandards (IFRS) as adopted by the European Union and which will be applicablefor the year ended 31 March 2008. No account has been taken of any costs incurred in relation to the Acquisition. The principal assumption upon which the profit estimate is based is set outbelow: •there will be no major disruption to the businesses of FKI, its suppliers or customers by reason of industrial disruption, civil disturbance, government action or natural disasters. APPENDIX 3 The DirectorsFKI plc86 Fetter LaneLondon, EC4A 1EN 22 April 2008 Our ref FDM Dear Sirs We refer to the profit estimate of FKI plc ("FKI") and its subsidiaries for theyear ended 31 March 2008, for which you as directors are solely responsible,which is set out in Appendix 2 of the announcement in relation to therecommended acquisition by Melrose PLC of all of FKI's shares to be effected bymeans of a scheme of arrangement or, should Melrose PLC elect, by means of anoffer. We have discussed the profit estimate, together with the bases and assumptionsupon which it has been prepared, with you as directors of FKI. We have alsodiscussed the accounting policies and calculations for the profit estimate withErnst & Young LLP, FKI's auditors, and we have considered their letter oftoday's date addressed to you and us on this matter. On the basis of the foregoing, we consider that the profit estimate referred toabove, has been made with due care and consideration. This letter is provided to you solely in connection with Rule 28.3(b) and Rule28.4 of the City Code on Takeovers and Mergers and for no other purpose. Yours truly, Rothschild The DirectorsFKI plcFalcon WorksMeadow LaneLoughboroughLE11 1ZF N M Rothschild & Sons LimitedNew CourtSt Swithin's LaneLondonEC4P 4DU 22 April 2008 Dear Sirs We report on the profit estimate comprising operating profit before specialitems and profit before taxation from continuing operations, operating profitbefore special items and profit before tax before write down in carrying valueof Logistex, and the write down in carrying value of Logistex, in respect of FKIplc (the "Company") and its subsidiaries (together the "Group") for the yearended 31 March 2008 (the "Profit Estimate"). The Profit Estimate, and the material assumption upon which it is based, are setout in Appendix 2 of the announcement pursuant to Rule 2.5 of the Takeover Codein respect of the acquisition by Melrose PLC of the Company (the"Announcement"). This report is required by Rule 28.3(b) of The City Code onTakeovers and Mergers (the "Takeover Code") and is given for the purpose ofcomplying with that rule and for no other purpose. Accordingly we assume noresponsibility in respect of this report to Melrose PLC (the "Offeror") or anyperson connected to, or acting in concert with, the Offeror or to any otherperson who is seeking or may in future seek to acquire control of the Company(an "Alternative Offeror") or to any other person connected to, or acting inconcert with, an Alternative Offeror. Responsibilities It is the responsibility of the directors of the Company (the "Directors") toprepare the Profit Estimate in accordance with the requirements of the TakeoverCode. It is our responsibility to form an opinion as required by the Takeover Code asto the proper compilation of the Profit Estimate and to report that opinion toyou. Basis of preparation of the Profit Estimate The Profit Estimate has been prepared on the basis stated in Appendix 2 of theAnnouncement and is based on the unaudited interim financial results for the sixmonths ended 30 September 2007, the unaudited management accounts for the fivemonths ended 29 February 2008 and an estimate to 31 March 2008. The ProfitEstimate is required to be presented on a basis consistent with the accountingpolicies of the Group. Basis of opinion We conducted our work in accordance with Standards for Investment Reportingissued by the Auditing Practices Board in the United Kingdom. Our work includedevaluating the basis on which the historical financial information for the yearended 31 March 2008 included in the Profit Estimate has been prepared andconsidering whether the Profit Estimate has been accurately computed based uponthe disclosed assumption and the accounting policies of the Group. Whilst theassumptions upon which the Profit Estimate are based are solely theresponsibility of the Directors, we considered whether anything came to ourattention to indicate that any of the assumptions adopted by the Directorswhich, in our opinion, are necessary for a proper understanding of the ProfitEstimate have not been disclosed or if any material assumption made by theDirectors appears to us to be unrealistic. We planned and performed our work so as to obtain the information andexplanations we considered necessary in order to provide us with reasonableassurance that the Profit Estimate has been properly compiled on the basisstated. However, the Profit Estimate and the assumption on which it is based have notbeen audited. The actual results reported, therefore, may be affected byrevisions to accounting estimates due to changes in circumstances, the impact ofunforeseen events, and the correction of errors in the management accounts.Consequently we can express no opinion as to whether the actual results achievedwill correspond to those shown in the Profit Estimate and the difference may bematerial. Our work has not been carried out in accordance with auditing or other standardsand practices generally accepted in the United States of America and accordinglyshould not be relied upon as if it had been carried out in accordance with thosestandards and practices. Opinion In our opinion, the Profit Estimate has been properly compiled on the basis ofthe assumption made by the Directors and the basis of accounting used isconsistent with the accounting policies of the Group. Yours faithfully Ernst & Young LLP APPENDIX 4 SOURCES AND BASES OF CALCULATION AND ADDITIONAL FINANCIAL AND OPERATIONAL INFORMATION SOURCES AND BASES OF CALCULATION Save as otherwise stated, the following constitute the sources and bases ofcertain information referred to in this announcement: 1. Financial information relating to Melrose has been extractedor provided (without material adjustment) from the audited annual report andaccounts for Melrose for the year ended 31 December 2007 reported under IFRS. 2. Financial information relating to FKI has been extracted orprovided (without material adjustment) from the audited annual report andaccounts for FKI for the year ended 31 March 2007 reported under IFRS, theunaudited interim financial statements of FKI for the half year ended 30September 2007, the unaudited management accounts for the five months ended 29February 2008 and an estimate for the month of March 2008. 3. The terms of the Acquisition value the entire issued ordinaryshare capital of FKI at £478 million, based on the Closing Price of 149.0 penceper Melrose Share on 21 April 2008, the last practicable date prior to thisannouncement, and the number of FKI shares in issue on 21 April 2008, the lastpracticable date prior to this announcement. 4. The percentage of shares expected to be held by FKIShareholders in the Enlarged Group is based on approximately 363 million NewMelrose Shares being issued pursuant to the Acquisition, the Placing and theOpen Offer and 133,665,029 Melrose Shares currently in issue. 5. As at 21 April 2008 133,665,029 Melrose ordinary shares arein issue. The number of Consideration Shares to be issued pursuant to theAcquisition is based on 588,307,895 FKI Shares currently in issue. ADDITIONAL FINANCIAL AND OPERATIONAL INFORMATION AND FURTHER BASES AND SOURCES 1. From 31 January 2005 to 31 January 2008, Total ShareholderReturns have been: (i) 41.6 per cent. for Melrose; (ii) (53.5) per cent. forFKI; and (iii) 31.3 per cent. for the industrial engineering sector of the FTSE350 index. For these purposes, "Total Shareholder Returns" means the theoreticalgrowth in value of a shareholding over a period of time assuming that dividendsare reinvested to purchase additional shares in the relevant company. (Source:Datastream) For the purposes of paragraphs 2, 6, 7, 10 and 16, FKI's continuing operationsinclude FKI Logistex, which has subsequently been classified as held for sale. 2. Set out below are key financial data for FKI's continuingoperations: 2005 2006 2007 2008 ------- ------- ------- -------Sales 1,118.8 1,273.4 1,330.9 1,363.0EBITDA before special items 125.3 130.1 126.5 143.9Margin 11.2% 10.2% 9.5% 10.6%Operating profit before special items 91.6 100 100.6 118.0Margin 8.2% 7.9% 7.6% 8.7% The figures for 2005, 2006 and 2007 are extracted or derived from the FKI annualreports and accounts for the years ended 31 March 2006 and 2007. 2008 operatingprofit before special items has been sourced from the FKI profit estimate as setout in Appendix 2 to this announcement and includes FKI Logistex (which has beenclassified as held for sale). 2008 EBITDA is based on operating profit beforespecial items as set out above and assumes that depreciation and amortisation in2008 will be equal to depreciation and amortisation in 2007. 2008 sales are aMelrose estimate. 3. The gross assets of FKI at 31 March 2007 (before thereclassification of Logistex as held for sale) were £1,359.9 million. 4. Melrose considers FKI to fit well with the Melrose businessmodel as it operates in industries familiar to Melrose management, has asignificant presence in the UK and the United States and has diverse businessesthat require attention. Melrose considers that FKI is currently constrained byits capital structure and underlying net debt of £472 million (based on figuresextracted from FKI's annual report and accounts for the year ended 31 March 2007and interim financial statements for the six months ended 30 September 2006,normalised to remove the effects of period end squeezes by disregardingSeptember 2006 and March 2007, plus the FKI Board's estimated costs of theAcquisition (approximately £10 million) and the cost of the FKI Dividend of 3pence per FKI Share (approximately £18 million)). Melrose also considers thatFKI has businesses with potential in growing markets which accounted forapproximately 80 per cent. of FKI's profits in the first half of 2008. 5. FKI considers that Lifting Products and Services has leadingproduct positions with approximately 50 per cent. of its sales to the energy andmining sectors. Energy Technology is a market leader for the production of smalland medium sized turbo generators for gas turbines in the power generationmarket. FKI also considers that it has good businesses in markets that aredifficult due to competitiveness and cyclical exposure. Truth HardwareCorporation is a market leader in the manufacturing of window components servingthe US housing market. FKI Logistex and Hickory Hardware Inc. are alsobusinesses in difficult markets. 6. For the year ended 31 March 2007, FKI's turnover fromcontinuing operations was £1,330.9 million, to which Lifting Products andServices contributed 32 per cent., Energy Technology contributed 26 per cent.,FKI Logistex contributed 28 per cent. and Hardware contributed 14 per cent.FKI's turnover from continuing operations in the six months to 30 September 2007was £655.5 million. Lifting Products and Services contributed 34 per cent.,Energy Technology contributed 29 per cent., FKI Logistex contributed 23 percent. and Hardware contributed 14 per cent. 7. For the year ended 31 March 2007, FKI's operating profitbefore special items from continuing operations was £100.6 million. LiftingProducts and Services contributed 51 per cent., Energy Technology contributed 21per cent., FKI Logistex contributed 13 per cent. and Hardware contributed 15 percent to 2007 operating profit before special items from continuing operationsand excluding unallocated central costs. In the six months to 30 September 2007,FKI's operating profit from continuing operations before special items was £55.0million. Lifting Products and Services contributed 50 per cent., EnergyTechnology contributed 31 per cent., FKI Logistex contributed 7 per cent. andHardware contributed 12 per cent. to operating profit before special items fromcontinuing operations and excluding unallocated central costs in the six monthsto 30 September 2007. FKI's profit estimate (as set out in Appendix 2 to thisannouncement) shows that FKI's operating profit before special items fromcontinuing operations for the year ended 31 March 2008 is expected to be notless than £118 million. 8. The terms of the acquisition imply that FKI has an enterprisevalue of approximately £950 million, consisting of £478 million of equity (basedon 588.3 million FKI Shares in issue at a see through offer price of 81.3 penceper FKI Share (calculated as 40 pence in cash and 0.277 of a Melrose Share basedon the Closing Price of 149.0 pence per Melrose Share as at 21 April 2008)) and£472 million of underlying net debt (calculated as set out in paragraph 4above). The value of the issued Melrose Shares as at 21 April 2008 is £199million (based on 133.7 million Melrose Shares in issue at the Closing Price ofMelrose Shares of 149.0 pence, in each case as at 21 April 2008), representing27 per cent. of the implied market capitalisation of the Enlarged Group. Thetotal value of the Consideration Shares as at 21 April 2008 is £243 million,based on 588.3 million FKI Shares in issue multiplied by 0.277, being theproportion of a Consideration Share being offered for each FKI Share under theterms of the Acquisition, and valued at the Closing Price of a Melrose Share of149.0 pence on 21 April 2008. This figure represents 33 per cent. of the impliedmarket capitalisation of the Enlarged Group. 9. The implied market capitalisation of the Enlarged Group afterthe Acquisition is £733 million, based on the figures referred to in paragraph 8above of £199 million for the value of existing Melrose Shares, £291 million forthe proceeds (before expenses) of the Firm Placed Shares and Open Offer Sharesand £243 million for the value of the Consideration Shares. 10. The proposed terms of the Acquisition imply the followingvaluations of FKI:Exit multiples 2008----------------------------- ----------EV/Sales 0.7EV/EBITDA 6.6EV/EBIT 8.1 The above exit multiples are based on the following calculations: (i) EV/Sales = enterprise value (EV) divided by total salesfor the year; (ii) EV/EBITDA = EV divided by earnings before interest, tax,depreciation and amortisation (EBITDA); and (iii) EV/EBIT = EV divided by earnings before interest and tax(EBIT). The figures for 2008 are based on the following: (a) EBIT, EBITDA and sales have been derived as set out inparagraph 2 above; and (b) The FKI EV is based on the calculation described inparagraph 8 above. 11. Melrose acquired the McKechnie Aerospace division as part ofits acquisition of Dynacast and McKechnie in May 2005. In May 2007 Melrose soldMcKechnie Aerospace having substantially increased operating margins by 6 percent. during the period of ownership. The Melrose Board believes this wasachieved through: (i) significant investment in capital and restructuring toimprove efficiency, add capacity and remove cost; (ii) full product and customerprofitability reviews resulting in renegotiated prices and product linediscontinuations; (iii) senior management changes and managementincentivisation; (iv) purchasing initiatives; (v) where appropriate, investmentin working capital to reduce lead times and improve availability in criticalaftermarkets; and (vi) introduction of KPI controls covering commercial,manufacturing and financial management. 12. For the years ended 31 December 2005, 2006 and 2007, Melrosehas substantially increased the operating margins of Dynacast since May 2005(from 12.1 per cent. prior to acquisition to 14.8 per cent.). The Melrose Boardconsiders that this has been achieved through: (i) increased capital expenditureto fund growth in the Far East and Mexico, increased capacity and efficiencywith new technology for new markets, replacing ageing equipment andrestructuring spend on site consolidation in North America and Europe; (ii)renegotiating with all customers metal pass through to reduce lag impacts involatile markets; (iii) senior management appointments and incentivisation; and(iv) introduction of KPI controls to improve working capital management andoperational controls. Growth has been supported with acquisitions to enhancetechnology and the utilisation of existing sites. 13. The Melrose Directors consider that Melrose has posted strongresults for 2007 and seen operational improvements in all its businesses. Forthe years ended 31 December 2005, 2006 and 2007, Melrose's operating marginshave increased and the average profit to cash conversion ratio for thecontinuing group has been 94 per cent. between May 2005 and December 2007. Forthese purposes, "profit to cash conversion ratio" is calculated as: (i) operating profit; plus (ii) depreciation; less (iii) working capital; less (iv) net capital expenditure. 14. The Melrose Group currently trades on the basis of 14 days networking capital. 15. A shareholder investing in Melrose in May 2005, when 95 percent. (£244 million) of the total capital subscribed in Melrose sinceincorporation was raised, has achieved an internal rate of return of 23 percent. The weighted average internal rate of return for all capital raised sinceflotation is approximately 22 per cent. as at 4 April 2008. The sale of theMcKechnie Aerospace division for £428 million realised a total cash profit of2.35 times its original cost and generated an internal rate of return of 61 percent. Proposed financing of FKI 16. Melrose intends to reduce FKI's high gearing by reducing itsopening net debt to approximately 2.5 x EBITDA (where EBITDA is a combinedfigure for both Melrose and FKI for their continuing operations before specialitems for the years ended 31 December 2007 and 31 March 2008 respectively).Currently the underlying net debt is over 3.5 x EBITDA (where underlying netdebt is calculated as set out in paragraph 4 and EBITDA is FKI's EBITDA for itscontinuing operations before special items as derived from its annual report andaccounts for the year ended 31 March 2007). Melrose will aim to combat low cashgeneration by increasing the profit to cash conversion ratio, which iscalculated as set out in paragraph 13. Between April 2006 and September 2007 theFKI profit to cash conversion ratio was 30 per cent., based on figures extractedfrom its annual report and accounts for the years ended 31 March 2006 and 2007and interim report for the six months ended 30 September 2007. 17. Under the current financing structure, FKI has access to: (i) a £120 million working capital facility, £460 millionunder its Eurobond and £40 million under the US guaranteed private placementnotes in 2008; (ii) £460 million under the Eurobond and £40 million under theUS guaranteed private placement notes in 2009; (iii) £40 million under the US guaranteed private placementnotes in 2010 and 2011; and (iv) £28 million under the US guaranteed private placementnotes in 2012. The above figures are extracted or derived from FKI's annual report and accountsfor the year ended 31 March 2007. The sterling figures for the Eurobond and USguaranteed private placement notes assume a Euro to sterling exchange rate ofEUR 1.30 to £1 and a US dollar to sterling exchange rate of USD 2.0 to £1. Under the proposed new debt financing structure, FKI would have access to: (a) £500 million under a five year committed term loan and£250 million under a five year working capital facility from 2008 to 2010; (b) £475 million under a five year committed term loan and£250 million under a five year working capital facility in 2011; and (c) £425 million under a five year committed term loan and£250 million under a five year working capital facility in 2012 18. The purpose of the five year term facility of £500 million willbe to purchase or refinance the Eurobond and the US guaranteed private placementnotes. The £250 million working capital facility will be underwritten by LloydsTSB Bank PLC, Barclays Bank plc, The Royal Bank of Scotland plc, J.P. MorganPLC, HSBC Bank PLC and Commerzbank AG. There will be no required amortisationuntil the end of the third year of the term loan and the margin will be 150 basepoints over LIBOR. Forecast industry growth 19. A broker note published by Credit Suisse on 20 December 2007predicted the following oil and gas production growth between 2007 and 2010:IOCs 2% PetroChina 6%Gazprom 1% Petrobras 7%ONGC 2% SINOPEC 9%ENI 4% CNOOC 17%Statoil 5% 20. A note on pan-European oilfields services published by Cazenoveon 26 February 2008, which cited Rystad Energy, forecast that up to 2015 thenumber of heavy lifts required for installations will rise slightly, but thatthe number will rise significantly from 2013 in decommissioning and subseaprojects. Lifting Products and Services 21. Lifting Products and Services trades as Crosby (whichmanufactures hooks, sheaves and shackles used in material handling) and Bridon(which manufactures wire ropes for heavy lifting). It also comprises the smallerbusinesses of Harris, Welland Forge and Acco, which together contributeapproximately 18 per cent. of the Lifting Products and Services division's 2007sales. Harris designs and manufactures scrap processing and recycling equipment,Welland Forge utilises both hammers and presses to produce a wide range ofclosed die forgings and Acco manufactures monorail, cranes and hoists. Bridonhad 2007 sales of approximately £210 million, is positioned as a premium qualitysupplier, is one of the largest global market players in its sector and hasstrong growth in end markets. Crosby had 2007 sales of approximately £144million, is the leading North American supplier in its sector, has strong growthin end markets, has opportunities to grow geographically and is headquartered inTulsa, Oklahoma. 22. Bridon and Crosby had a turnover of approximately £354 millionin 2007, divided amongst industries as follows:Energy 41% Mining 8%Industrial 32% Infrastructure 6%Non-residential construction 10% Fishing 3% 23. Set out below are key financial data on the Lifting Productsand Services division's operational performance:£m 2005 2006 2007 2008 - H1 ----------- ---------- ---------- ---------- ----------Turnover 316.0 393.3 434.2 221.3EBITDA before 47.4 55.1 67.4special itemsEBITDA margin 15.0% 14.0% 15.5%Operating profit 37.4 45.0 57.7 30.4before specialitemsOperating margin 11.8% 11.4% 13.3% 13.7% The figures for 2005, 2006, 2007 and 2008 (H1) are extracted or derived from theFKI annual reports and accounts for the years ended 31 March 2006, 2007 and theinterim statement for the period ended 30 September 2007. 24. Melrose intends to invest in Lifting Products and Servicesthrough: • acquisitions; • global expansion; • capital investment to improve operational performance; • developing its presence in the Far East; • incentivisation of operational management on their operations alone; • simplification of the division when appropriate; • reduction of working capital (there has been no such focus to date); and • invest in product development. Energy Technology 25. Sources show that there is a positive energy market for theforeseeable future, with world marketed energy consumption having grown between1980 and 2005 and projected to grow between 2010 and 2030 (sources: Brushinvestor presentation, Energy Information Administration, the InternationalEnergy Annual 2004 (ww.eia.doc.gov/iea), Energy Information Administration,System for the Analysis of Global Energy Markets (2007)). Sources also show thatthe number of gas turbines for power generation is expected to increase steadilybetween 2008 and 2012 (sources: Brush investor presentation, ForecastInternational). 26. Set out below are key financial data on the Energy Technologydivision's operational performance:£m 2005 2006 2007 2008 - H1 ------------ ---------- ---------- ---------- ---------Turnover 254.8 275.0 344.4 191.1EBITDA before 30.8 28.6 30.2special itemsEBITDA margin 12.1% 10.4% 8.8%Operating profit 23.0 21.5 24.2 19.3before specialitemsOperating margin 9.0% 7.8% 7.0% 10.1% The figures for 2005, 2006, 2007 and 2008 (H1) are extracted or derived from theFKI annual reports and accounts for the years ended 31 March 2006, 2007 and theinterim statement for the period ended 30 September 2007. 27. Energy Technology trades as FKI Generators (which trades underthe names Brush, HMA, SEM, Marelli and Harrington), FKI Switchgear, BrushTraction and Brush Transformers. FKI Generators manufactures turbo generatorsfor gas turbines in the UK, Holland and the Czech Republic and had sales ofapproximately £210 million in 2007. It has been established for over 100 years,is the estimated number one provider of air cooled turbo generators (20-125 MW)and has strong growth dynamics in the market place, long term relationships withgas turbine manufacturers and a strong order book. Harrington manufacturesbespoke design generators principally for the British armed forces and Marellisupplies low and medium voltage generators and specialist motors. Brush Tractionmaintains and re-engineers locomotives and rolling stock in the UK market. BrushTransformers manufactures a range of transformers and has a strong UK marketpresence. FKI Switchgear manufactures a range of medium voltage switchgear andhas a strong UK market presence. 28. According to the Brush website, the figures below show themarket share of Brush air-cooled turbo-generators 20-125 MW between 2006 and2007:Brush 57% Melco 2%GE 28% ABB 2%Siemens 9% Other 2% These figures are extracted from a Brush investor presentation and a Diesel &Gas Turbine worldwide annual gas turbine orders survey. 29. Melrose intends to invest in Energy Technology through: • further expanding its market share; • investing in capacity to meet projected market demand; • invest in product development; • reducing working capital; • developing a supply of other forms of "green" power generation; • improving after market spares and servicing; and • improving operating performance. 30. Melrose considers that Energy Technology has a strong marketshare in a high growth market, a very good brand name for quality andreliability and gas power generation has benefited from the move from coal.Melrose considers that there is a need within Energy Technology to invest todevelop capacity and expand business as well as opportunities to improveoperational performance and working capital as well as an opportunity toincentivise management. Hardware 31. According to the US Census Bureau, the number of new singleoccupancy houses being built in the United States has decreased in 2007, and abroker note published by ABN AMRO on 6 December 2007 forecasts that it willcontinue to decrease in 2008, with only a marginal increase in 2009 and 2010. 32. Set out below are key financial data on the Hardware division'soperational performance: £m 2005 2006 2007 2008 - H1 ------------ --------- --------- --------- ---------Turnover 199.7 201.6 179.7 89.4EBITDA before 36.0 35.2 22.2special itemsEBITDA margin 18.0% 17.5% 12.4%Operating profit 27.6 27.8 16.7 7.1before specialitemsOperating margin 13.8% 13.8% 9.3% 7.9% The figures for 2005, 2006, 2007 and 2008 (H1) are extracted or derived from theFKI annual reports and accounts for the years ended 31 March 2006, 2007 and theinterim statement for the period ended 30 September 2007. 33. Hardware trades as Truth, Hickory, Weber-Knapp and Rhombus.Truth is headquartered in Owatonna, Minnesota. It is the number one manufacturerof window components in North America and has gained market share over recentyears. It maintains product margins in a difficult market place, has highquality product and an excellent reputation. It had sales of approximately £85million in 2007 and continues to be profitable in 2008. Hickory is headquarteredin Nashville, Tennessee and was formed in 2006/07 from the combination of fiveunderperforming businesses. It is a designer and distributor of decorative homehardware parts for the North American market. Manufacturing is now outsourced.IT issues arising from the restructuring in 2006 have led to very high workingcapital. Hickory had sales of approximately £75 million in 2007 but is currentlyloss making. Weber-Knapp is a manufacturer of hardware for the furnitureindustry specialising in ergonomics. Rhombus is a manufacturer of casters. 34. Melrose has the following plans for the Hardware division: • Hickory: reduce working capital, complete a restructuring, exploit the customer market and product margin/pricing opportunities and realise its value; • Truth: invest in new products and reduce costs, retain the business until market conditions change and pursue further outsourcing of sub-components and components; • Other sub-divisions: restructure Weber-Knapp and review Rhombus; and Melrose believes that Truth will have increased value when the US market improves and believes that it is profitable and cash generative. FKI Logistex 35. Set out below is a summary of the acquisitions made byFKI Logistex between 1999 and 2001: Date Target Value ------- ----------------------------- ---------- November Cleco Group Ltd: UK designer and integrator of £22.5m 2001 automated warehouse and distribution systems with a predominantly blue chip client base May 2001 Stearns Airport Equipment Company: 30 years £6.6m * experience in the airport baggage handling industry and a range of baggage claim, make up devices and check in stations January SNE is a software control systems integrator £15.2m 2000 operating exclusively within the material handling industry December Pinnacle Automation, Inc: Pinnacle develops, £228.6m 1999 implements and supports integrated material flow technology solutions for the complex material handling and supply chain needs of a wide array of industries June Industry General Corporation: designs, fabricates £32.6m 1999 and installs material handling systems for a wide range of industries May 1999 Crisplant Industries: advanced sortation solutions £186.7m for various applications including; mail-order catalogue, retail, e-commerce, manufacturing distribution, postal services, shoe distribution, courier services, airlines and airports Total £492.2m * £5.2 million of the Stearns Airport Equipment Company offer value was conditional on performance criteria being met. The above information and figures have been sourced from Reuters and the Dealogic web database. 36. Set out below are key financial data on the FKI Logistex division's operational performance: £m 2005 2006 2007 2008 - H1 ------------- --------- --------- --------- --------- Turnover 348.3 403.5 372.6 153.7 EBITDA before special items 17.8 19.2 18.2 EBITDA margin 5.1% 4.8% 4.9% Operating profit before 11.6 14.6 14.2 4.4 special items Operating margin 3.3% 3.6% 3.8% 2.9% ------------- --------- --------- --------- ---------- The figures for 2005, 2006, 2007 and 2008 (H1) are extracted or derived from the FKI annual reports and accounts for the years ended 31 March 2006, 2007 and the interim statement for the period ended 30 September 2007. 37. FKI Logistex's turnover in 2007 was £372.6 million, divided as follows: Warehouse & Distribution 35% Service & Spares 22% Manufacturing Systems 17% Post & Parcel 13% Airports 12% Libraries 1% 38. Melrose considers that, at the time of the acquisitionof the businesses of FKI Logistex, there was a flawed strategy in placeto grow from part producer to project manager. Since 2003, FKI has beendealing with problem contracts, rationalising operations and improvingproject management skills and finishing loss making projects largelycomplete. The Melrose Board believes that, on average, FKI Logistexmanufactures approximately 30 per cent. of the components for itsorders. 39. Melrose has the following plans for FKI Logistex: • improve financial discipline and performance; • review overhead structure; • better working capital management; • exit from some product areas; • improve third party sourcing and project management; • incentivising FKI Logistex management; and • pursue a sale to an interested party, if the terms are appropriate. FKI pensions 40. As at 31 March 2007, the FKI defined benefit and otherpost retirement benefit schemes had assets of £683 million, liabilitiesof £788 million and net pension liabilities of £109 million (includinglimit on recognition of surplus). The main UK defined benefit pensionscheme is closed to new members. Melrose considers that the main UKpension scheme requires funding of £20 million per annum but this isexpected to be renegotiated next year. The Melrose Board believes thatcertain assumptions (e.g. mortality) need to be updated. The abovefigures are extracted from the FKI annual report and accounts for theyear ended 31 March 2007. 41. The total investments by the FKI pension scheme equal£682.8 million (fair value as at 31 March 2007), divided as follows: • Bonds: UK and Rest of the World 45% North America 13% • Equities: UK and Rest of the World 26% North America 14% • Other: UK and Rest of the World 2% North America 0% The following table sets out key financial data on the FKI Group's pension and post-retirement benefits as at 31 March 2007: --------------------------- ------------------ 31 March 2007 £m --------------------------- ------------------ Assets 682.8 Liabilities 788.3 Net pension liabilities 108.8** ** includes limit on recognition of surplus All the figures are extracted or derived from the FKI annual report and accounts for the year ended 31 March 2007. Potential tax liability 42. Certain US subsidiaries of FKI are currently underaudit by the US Internal Revenue Service, which has raised issues inrelation to interest payment deductions that may result in a taxliability. Melrose believes that any such liability is unlikely to bematerial to the Enlarged Group and that any such liability has beenadequately provided for by FKI. Exchange rate fluctuations 43. Melrose estimates that (i) a 10 cent strengthening ofthe euro against sterling will increase Melrose's operating profitbefore special items by approximately £1.1 million; and (ii) a 10 centstrengthening of the US dollar against sterling will increase Melrose'soperating profit before special items by approximately £1.1 million.Melrose estimates that (a) a 10 cent strengthening of the euro againststerling will increase FKI's operating profit before special items byapproximately £2.5 million; and (b) a 10 cent strengthening of the USdollar against sterling will increase FKI's operating profit beforespecial items by approximately £2.9 million. Tax 44. Melrose believes that FKI's businesses could be soldmaterially tax free (assuming the businesses forming the LiftingProducts and Services division are being kept together). Melrose alsobelieves that in future years, FKI's profit and loss account tax rate islikely to increase from its current level. Melrose Management 45. Chris Miller, aged 56, is the Executive Chairman ofMelrose. Mr Miller qualified as a chartered accountant with Coopers &Lybrand, was an associate director of Hanson plc and in September 1988was a founding director and became Chief Executive of Wassall plc. David Roper, aged 57, is the chief executive of Melrose. Mr Roperqualified as a chartered accountant with KPMG, then was a corporatefinancier with SBC Warburg, BZW and Dillon Read. In September 1988, hewas a founding director and became Deputy Chief Executive of Wassallplc. Simon Peckham, aged 45, is the Chief Operating Officer of Melrose. MrPeckham qualified as a solicitor and worked for Clifford Chance until1990 where his clients included Wassall plc. In 1990 he joined Wassallplc and became an executive director. From October 2000 to May 2003, MrPeckham worked for the equity finance division of the Royal Bank ofScotland. Geoffrey Martin, aged 40, is the Group Finance Director of Melrose. MrMartin qualified as a chartered accountant with Coopers & Lybrand wherehe worked within the corporate finance and audit departments. In 1996 hejoined Royal Doulton PLC. He was Group Finance Director of Royal Doultonfrom October 2000 until June 2005. Mr Martin was appointed as anexecutive Director of Melrose on 7 July 2005. 46. In summary, the key terms of the existing Melrose management incentive scheme are as follows: • Management receive 10 per cent. of the difference between capital raised and market cap at conversion after adjusting for dividends/ distributions. Capital raised is increased by the increase in the retail price index plus 2 per cent per annum and reduced by dividends. • The value created is to be assessed at the end of a 3- to 5-year period (or earlier if a takeover of Melrose occurs). • Management will be paid in new shares, with the issue price being the market price of a Melrose Share at the end of the 3- to 5-year period (or the exit price, in the case of a takeover of Melrose). This summary is based on the detailed provisions of Melrose's articles of association, which set out the rights attaching to Melrose's 2007 Incentive Shares. APPENDIX 5 SCHEDULE OF IRREVOCABLE UNDERTAKINGS Name of FKI Director Number of FKI Percentage of FKI Shares issued share capital Paul Heiden 222,636 0.038% Neil Bamford 64,438 0.011% Reg Gott 38,514 0.007% Gordon Page 60,000 0.010% David Pearl - - Richard Case 10,000 0.002% Charles Matthews 16,338 0.003% Sir Michael Hodgkinson 5,370 0.001% Total 417,296 0.072% APPENDIX 6 DEFINITIONS The following definitions apply throughout this document unless the context otherwise requires: "1985 Act" the Companies Act 1985, as amended and for the time being in force "2006 Act" the Companies Act 2006, as amended and for the time being in force "Acquisition" the recommended acquisition by Melrose of all the FKI Shares to be effected by means of the Scheme or, should Melrose so elect, by means of an Offer on the terms and subject to the conditions set out in the Scheme Document or, if applicable, the Offer Document "Admission" the admission of the New Melrose Shares by the FSA (in its capacity as the UK Listing Authority) to the Official List and to trading on the London Stock Exchange "Application Form" the personalised application form on which Qualifying non-CREST Shareholders may apply for Open Offer Shares under the Open Offer "Australia" the Commonwealth of Australia and its dependant territories "Authorisations" authorisations, orders, grants, recognitions, confirmations, consents, licences, clearances, certificates, permissions or approvals "Business Day" a day (other than a Saturday, Sunday, public or bank holiday) on which banks are open for business in London other than solely for trading and settlement in Euro "Canada" Canada, its provinces and territories and all areas subject to its jurisdiction or any political sub-division thereof "Capital Reduction" the proposed reduction of the capital of FKI in connection with the Scheme under sections 135 and 137 of the 1985 Act "City Code" the City Code on Takeovers and Mergers "Closing Price" the closing middle market price of a relevant share as derived from SEDOL on any particular day "Conditions" the conditions to the implementation of the Acquisition (including the Scheme), which are set out in Appendix 1 of this announcement "Consideration the new Melrose Shares to be issued and credited as Shares" fully paid to FKI Shareholders pursuant to the Acquisition "Court" the High Court of Justice in England and Wales "Court Orders" the First Court Order and the Second Court Order "Disclosure and the Disclosure and Transparency Rules as published Transparency Rules" by the FSA or "DTRs" "Dresdner Kleinwort" Dresdner Kleinwort Limited, joint financial advisor to Melrose "Dynacast" those Melrose Group businesses that trade under the name Dynacast "Effective" (i) if the Acquisition is implemented by way of the Scheme, the Scheme having become effective pursuant to its terms; or (ii) if the Acquisition is implemented by way of an Offer, such Offer having been declared or become unconditional in all respects in accordance with the requirements of the City Code "Effective Date" the date on which the Acquisition becomes Effective "Enlarged Group" with effect from the Effective Date, the combined Melrose Group and FKI Group "Enlarged Share the issued ordinary share capital of Melrose as it Capital" will be following the issue of the New Melrose Shares "Ernst & Young" Ernst & Young LLP, auditors to FKI "Firm Placed Shares" the 100,248,772 new Melrose Shares which JPMorgan Cazenove and Investec are making arrangements to place firm, conditional on the Scheme becoming Effective, on a non-pre-emptive basis with certain institutional investors pursuant to the Placing "First Court Order" the order of the Court sanctioning the Scheme under section 899 of the 2006 Act "FKI" FKI plc, incorporated in England and Wales with registered number 164945 "FKI Board" or "FKI the board of directors of FKI Directors" "FKI Dividend" a dividend of 3 pence per FKI Share which, prior to the Scheme becoming Effective, FKI intends to declare in lieu of the final dividend that FKI Shareholders would have otherwise received in respect of the financial year ended 31 March 2008 "FKI Dividend Record the time and date specified as such in the Scheme Time" Document or, if the Acquisition is implemented by way of an Offer, the Offer Document, which, in the case of the Scheme, is expected to be 5.30 p.m. on the Business Day immediately preceding the Second Court Hearing "FKI Extraordinary the extraordinary general meeting of FKI General Meeting" or Shareholders to be convened to consider and, if "FKI EGM" thought fit, approve certain resolutions required to implement the Scheme (including any adjournment thereof) "FKI Group" FKI, its subsidiaries and subsidiary undertakings "FKI Share(s)" the existing unconditionally allotted or issued and fully paid ordinary shares of 10 pence each in the capital of FKI "FKI Shareholder(s)" holders of FKI Shares "FKI Share Schemes" the 2005 Deferred Bonus Plan, the 2005 Long Term Incentive Plan, the 1999 Executive Share Option Scheme and the Sharesave Scheme "FSA" the United Kingdom Financial Services Authority "Hoare Govett" Hoare Govett Ltd, corporate broker to FKI "Implementation the implementation agreement entered into by Agreement" Melrose and FKI on 22 April 2008, governing the implementation of the Acquisition "Independent (i) an offer, scheme of arrangement, merger or Competing Offer" business combination, recapitalisation or other transaction relating to FKI (whether or not on a pre-conditional basis) which, if accepted or otherwise carried out in full, would result in a person, other than Melrose or a person who is acting in concert with Melrose, acquiring 50 per cent. or more of the voting share capital of FKI; or (ii) an offer, proposal or approach from a party, other than Melrose or a person who is acting in concert with Melrose, to acquire all or a substantial part or value of the assets of any member of the FKI Group which is material in the context of the Acquisition other than, for the avoidance of doubt, in respect of the Logistex Disposal "Investec" Investec Bank (UK) Limited, joint sponsor to Melrose and underwriter to the Placing and Open Offer "Issue Price" 145 pence per Open Offer Share or Firm Placed Share as the case may be "Japan" Japan, its cities, prefectures, territories and possessions "JPMorgan Cazenove" JPMorgan Cazenove Limited, joint financial advisor and joint sponsor to Melrose "JPMorgan Securities" J.P. Morgan Securities Limited, underwriter to the Placing and Open Offer "Listing Rules" the listing rules made by the FSA under section 73A of the Financial Services and Markets Act 2000 "Logistex Disposal " the proposed disposal by FKI of its Logistex division "London Stock the London Stock Exchange plc or its successor Exchange" "LSE Admission the rules issued by the London Stock Exchange in Standards" relation to the admission to trading of, and continuing requirements for, securities admitted to trading on the London Stock Exchange's market for listed securities "McKechnie" the group of businesses acquired by Melrose in May 2005 which, at that time, included the MPC, MVC, Aerospace Aftermarket, Aerospace OEM and PSM businesses (some of which have now been sold) "Melrose" Melrose PLC, incorporated in England and Wales with registered number 4763064 "Melrose Circular" the circular to be sent to Melrose Shareholders in connection with the Acquisition "Melrose Board" or " the board of directors of Melrose Melrose Directors" "Melrose the extraordinary general meeting of Melrose to be Extraordinary convened to consider, and if thought fit, approve General Meeting" or the Resolution "Melrose EGM" "Melrose Group" Melrose, its subsidiaries and subsidiary undertakings "Melrose Share(s)" ordinary shares of 0.2 pence each in the capital of Melrose "Melrose holders of Melrose Shares Shareholders" "Mix and Match the mix and match facility under which FKI Facility" Shareholders (other than certain overseas shareholders) may elect, subject to availability and off-setting elections, to vary the proportions in which they receive Consideration Shares and cash under the Acquisition "MPC" McKechnie Plastic Components; "MVC" McKechnie Vehicle Components; "New Melrose Shares" the Consideration Shares, the Firm Placed Shares and/or the Open Offer Shares "Offer" a takeover offer as that term is defined in section 974 of the 2006 Act "Offer Document" should Melrose decide to implement the Acquisition by way of an Offer, the document which would be dispatched to FKI Shareholders containing and setting out the terms and conditions of the offer "Offer Period" the period commencing on (and including) 1 February 2008 and ending on the Effective Date "Official List" the Official List of the UKLA "Open Offer" the conditional invitation by Melrose, to Qualifying Melrose Shareholders to apply for the Open Offer Shares on the terms and conditions set out in the Prospectus and, in the case of Qualifying non-CREST Shareholders, the Application Form "Open Offer Record 6.00 p.m. on 21 April 2008 Date" "Open Offer the United States, Canada, Australia and Japan, and Restricted any other jurisdiction where the extension or Jurisdiction" availability of the Open Offer (and any other transaction contemplated thereby) would breach any applicable laws "Open Offer Melrose Shareholders with registered addresses in, Restricted or who are citizens, residents, or national of, any Shareholders" Open Offer Restricted Jurisdictions "Open Offer Shares" the 100,248,772 new Melrose Shares to be issued to Qualifying Melrose Shareholders pursuant to the Open Offer "Panel" the Panel on Takeovers and Mergers "pence" and "£" the lawful currency of the United Kingdom "Placing" the conditional placing by Investec and/or JPMorgan Cazenove of the Firm Placed Shares at the Issue Price "Placing Agreement" the agreement dated 22 April 2008 entered into between Melrose, Investec, JPMorgan Cazenove and JPMorgan Securities in relation to the Placing and the Open Offer "Profit Estimate" the profit estimate for FKI for the year ended 31 March 2008 set out in Appendix 2 "Profit Estimate the interim management statement made by FKI on 6 Announcements" February 2008 and the announcement of the interim results of FKI for the half year ended 30 September 2007 "Prospectus" a prospectus relating to Melrose and the listing of the New Melrose Shares on the Official List (together with any supplements or amendments thereto) "Qualifying Melrose Melrose Shareholders on the Register at the Open Shareholders" Offer Record Date other than Open Offer Restricted Shareholders "Qualifying Qualifying Melrose Shareholders whose Melrose non-CREST Shares on the Register on the Open Offer Record Shareholders" Date are in certificated form "register" the statutory register of members of Melrose or FKI, as applicable "Registrar of the Registrar of Companies in England and Wales, Companies" within the meaning of the 1985 Act "Regulation S" Regulation S under the US Securities Act "Regulatory one of the regulatory information services Information Service" authorised by the UKLA to receive, process, and disseminate regulatory information from listed companies "relevant securities" as the context requires, Melrose Shares and other Melrose securities carrying similar rights to any being issued as consideration for FKI Shares and FKI Shares, other FKI share capital and any securities convertible into or exchangeable for, and rights to subscribe for, any of the foregoing "Reorganisation the time and date specified as such in the Scheme Record Time" Document, expected to be 6.00 p.m. on the Business Day immediately preceding the Second Court Hearing "Resolution" the special resolution to be proposed at the Melrose EGM (and set out in the notice of extraordinary general meeting to be contained in the Melrose Circular) to approve the Acquisition, increase the share capital of Melrose, authorise the Melrose Directors to allot the New Melrose Shares and empower the Melrose Directors to dis-apply pre-emption rights in relation to the allotment of the Firm Placed Shares and Open Offer Shares "Rothschild" N M Rothschild & Sons Limited, financial advisor to FKI "Scheme" the proposed scheme of arrangement of FKI under Part 26 of the 2006 Act to implement the Acquisition "Scheme Document" the document to be dispatched to FKI Shareholders in relation to the Scheme including the particulars required by section 897 of the 2006 Act "Scheme Meeting" the meeting of the Scheme Shareholders to be convened by an order of the Court under section 896 of the 2006 Act to consider and, if thought fit, approve the Scheme (with or without amendment) and any adjournment thereof "Scheme Shareholders" the holders of the Scheme Shares "Scheme Shares" (a) the FKI Shares in issue at the date of the Scheme Document; (b) any FKI Shares issued after the date of the Scheme Document but before the Scheme Voting Record Time; and (c) any FKI Shares issued at or after the Scheme Voting Record Time but before the Reorganisation Record Time in respect of which the original or any subsequent holders thereof are, or shall have agreed in writing to be, bound by the Scheme, in each case other than any FKI Shares beneficially owned by Melrose or any subsidiary undertaking of Melrose "Scheme Voting 6.00 p.m. on the second day before the Scheme Record Time" Meeting or, if the Scheme Meeting is adjourned, 6.00 p.m. on the second day before the date of such adjourned meeting "Second Court the hearing by the Court to confirm the Capital Hearing" Reduction "Second Court Order" the order of the Court confirming the Capital Reduction "SEDOL" the Stock Exchange Daily Official List "subsidiary", shall be construed in accordance with the 1985 Act "subsidiary (but for this purpose ignoring paragraph 20(1)(b) undertaking", of Schedule 4A of the 1985 Act) "associated undertaking" and "undertaking" "UK" or "United United Kingdom of Great Britain and Northern Kingdom" Ireland "UK Listing the FSA in its capacity as the competent authority Authority" or "UKLA" for the purposes of Part VI of the Financial Services and Markets Act 2000 "United States" or " the United States of America (including the states US" of the United States and the District of Columbia), its possessions and territories and all areas subject to its jurisdiction "US Person" has the meaning as defined in Regulation S "US Securities Act" the US Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder "Wider Melrose Melrose Group and associated undertakings and any Group" other body corporate, partnership, joint venture or person in which Melrose and such undertakings (aggregating their interests) have an interest of more than 20 per cent. of the voting or equity capital or the equivalent "Wider FKI Group" FKI and associated undertakings and any other body corporate, partnership, joint venture or person in which FKI and such undertakings (aggregating their interests) have an interest of more than 20 per cent. of the voting or equity capital or the equivalent All times referred to are London time unless otherwise stated. This information is provided by RNS The company news service from the London Stock Exchange

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