Tender Offer

British Telecommunications PLC 18 June 2001 NR 0134 British Telecommunications public limited company ('BT') 18 June 2001 Rights Issue Confirmation of Acceptances International Tender for 206,884,792 new BT Shares Background BT has received valid acceptances in respect of 1,768,695,260 new BT Shares representing 89.5% of the total number of new BT Shares being offered under its 3 for 10 rights issue at 300p (the 'Rights Issue'). Accordingly, Cazenove & Co. Ltd ('Cazenove') and Merrill Lynch International ('Merrill Lynch') are today seeking subscribers for the 206,884,792 new BT Shares for which valid acceptances have not been received. This process is being managed by way of an international strike price tender (the 'International Tender'). Cazenove and Merrill Lynch are acting as joint bookrunners (the 'Joint Bookrunners'). Details of International Tender The International Tender is open with immediate effect and it is expected that it will remain open until 4.00pm (London time) today. The Joint Bookrunners reserve the right to alter the closing time. Any changes to the closing time will be notified by way of a London Stock Exchange Regulatory News Service ('RNS') announcement. Successful applicants in the International Tender will subscribe for new BT Shares at a single strike price expressed in sterling to be determined by the Joint Bookrunners as soon as possible after the book closes, and an equivalent price in US dollars for the ADSs. Pricing will be announced and successful applicants will be notified of their allocations and the amounts payable as soon as possible after the book has closed. Non-UK Bidders The International Tender is not open to investors in Australia, South Africa or Japan. Pre-registration Over 250 institutional investors and London Stock Exchange member firms have pre-registered for the International Tender. Pre-registration is not required to participate in the International Tender. However, those accounts who have pre-registered will, if they have requested it, be forwarded a copy of the rules and an official tender form. Procedure for Bidding Institutional investors and London Stock Exchange member firms wishing to submit bids may submit a telephone order via their usual sales contact at Cazenove or Merrill Lynch. Alternatively, institutional investors or LSE member firms may complete an official tender form (and, if required, a supplementary official tender form) and return it by fax in accordance with the instructions set out on the form(s). Faxed bids will only be accepted if submitted on an official tender form. Official tender forms and supplementary official tender forms can be obtained by calling either Mr Michael Willmott (Tel: +44 (0) 207 457 3385) or Mrs Louise Clarke (Tel: +44 (0) 207 512 6379) at Cazenove or Jacquie Whittingham (Tel: +44 (0) 207 867 3700) at Merrill Lynch. Bids may be submitted, in whole pence, on either: * a fixed price basis; or * a strike price basis; Bids at multiple fixed prices will be accepted. In relation to all such bids, bidders are requested to set down the total demand for new BT Shares at each price at which they bid. Bids expressed in US dollars will be accepted. Bids in currencies other than sterling or US dollars will not be accepted. Bids may also be made for ADSs. One ADS will represent ten new BT Shares. The purchase price payable for successful bidders of ADSs will be calculated with reference to: * the strike price achieved in the International Tender; and * the sterling dollar exchange rate as determined by the Joint Bookrunners. Amendment or cancellation of bids Bids, whether submitted orally or by fax, may only be amended or cancelled before the close of the International Tender. Telephone bids may only be amended or cancelled by the individual who placed the bid speaking to the Cazenove or Merrill Lynch representative through whom the original telephone bid was placed. Bids received by way of a faxed official tender form may only be amended or cancelled by: * in the case of an amended bid, a new official tender form being faxed to Cazenove or Merrill Lynch, making clear that the new official tender form replaces the official tender form previously sent; * in the case of a cancelled bid, the original official tender form being faxed to Cazenove or Merrill Lynch with the words 'TENDER CANCELLED' clearly marked across the original official tender form. After the close of the International Tender, bids shall become irrevocable and shall be binding on such bidders. Allocation policy Allocations under the International Tender will be at the sole discretion of the Joint Bookrunners. However, in deciding allocations, the Joint Bookrunners expect to take the following criteria into account: * price leadership with fixed price bids favoured over strike price bids; * the timeliness of bids received; and * pre-registration. Bidding history and market activity by prospective bidders will be closely monitored by the Joint Bookrunners. Right to reject bids Cazenove and Merrill Lynch reserve the right to reject any bid or part of any bid. Full details of the rules relating to the International Tender are being published as an Appendix to this announcement. Settlement Ordinary shares: Settlement for the new BT Shares will be through CREST and will be on a T+3 basis. Settlement is expected to be due on 22 June 2001. The new BT Shares will be subscribed for free of Stamp Duty and PTM levy. ADSs: Settlement for any ADSs purchased will be through DTC and will be on a T+3 basis. Settlement is expected to be due on 22 June 2001. Purchasers of ADSs will be required to pay SDRT at the rate of 1.5% in addition to an issuance fee of no more than 5 cents per share and any other foreign exchange costs incurred. For full details please refer to the International Tender rules. Contacts Cazenove & Co. Ltd. Telephone: +44 20 7588 2828 David Mayhew Edmund Byers Merrill Lynch International Telephone: +44 20 7628 1000 Rupert Hume-Kendall Rupert Evenett This announcement, which has been issued by, and is the sole responsibility of, British Telecommunications public limited company ('BT), has been approved by Cazenove & Co. Ltd and Merrill Lynch International, each of which is regulated in the UK by The Securities and Futures Authority, solely for the purposes of Section 57 of the Financial Services Act 1986. Each of Cazenove & Co. Ltd and Merrill Lynch International is acting for BT and no one else in connection with the Rights Issue and the International Tender and will not be responsible to anyone other than BT for providing the protections afforded to customers of Cazenove & Co. Ltd or Merrill Lynch International respectively or for providing advice in relation to the Rights Issue or the International Tender. This announcement does not constitute, or form part of, an offer or any solicitation of an offer, for securities. The above materials are not an offer of securities for sale in the United States. The securities being offered in the International Tender may not be sold in the United States absent registration or an exemption from registration under the U.S. Securities Act of 1933, as amended. A registration statement relating to these securities has been filed with the U.S. Securities and Exchange Commission and has become effective. Any public offering of the securities in the United States will be made only by means of a US prospectus containing detailed information regarding BT and BT's management, including financial statements. Such US prospectus is available through BT at 81 Newgate Street, London EC1A 7AJ. Appendix: The International Tender Rules Under the terms of the British Telecommunications public limited company ('BT') rights issue, which was announced on 10 May 2001, Cazenove & Co. Ltd ('Cazenove') and Merrill Lynch International ('Merrill Lynch') (the 'Joint Bookrunners'), acting as agents for BT, have undertaken to procure subscribers for those new BT Shares not validly subscribed for (the 'Sale Shares'). These Sale Shares will only be placed to the extent that a price at least equal to the issue price (300p) can be obtained. Subscribers for the Sale Shares are being sought by way of an international strike price tender (the 'International Tender'), which commences at 7.00a.m. (London time) on 18 June 2001(the 'Tender Date'). The following are the rules (the 'Rules') for the conduct of the International Tender. Contents The Rules contain: 1. Expected timetable 2. Structure of the International Tender 3. Settlement Procedures 4. General 1. Expected timetable Please note that all times relate to British Summer Time. The International Tender commences at 7.00a.m. on 18 June 2001 following the release of a London Stock Exchange Regulatory News Service ('RNS') announcement confirming the launch of the International Tender and the precise number of Sale Shares to be sold in the International Tender. The International Tender is expected to remain open until 4.00p.m. (London time) on 18 June 2001. However, the Joint Bookrunners reserve the sole right to alter the closing time. Any changes to the closing time will be notified by way of an RNS announcement. Bidders will be notified of the outcome of their bids as soon as possible after the book has closed. It is expected that bidders will be notified by no later than 8.00a.m. on the business day following the close of the International Tender. Transactions resulting from successful bids in the International Tender will be effected on the business day following the close of the International Tender for settlement on a T+3 basis. Settlement is expected to be on 22 June 2001. 2. Structure of the International Tender Pricing Successful applicants in the International Tender will subscribe for the Sale Shares at a single strike price, expressed in sterling, to be determined by the Joint Bookrunners as soon as possible after the book closes, and an equivalent price in US dollars for the ADSs. The minimum price (the 'Minimum Price') at which bids will be accepted will be equal to the subscription price (300p). Bids below the Minimum Price will not be accepted. Pre-registration Pre-registration is not required to participate in the International Tender. However, those accounts who have pre-registered, will, if they have requested it, be forwarded a copy of the Rules and an official tender form. Procedure for Bidding Order Submission Institutional investors and LSE member firms wishing to submit bids may submit a telephone bid via their usual sales contact at Cazenove or Merrill Lynch. Alternatively, institutional investors or LSE member firms may complete an official tender form (and, if required, a supplementary official tender form) and return it by fax in accordance with the instructions set out on the form (s). Faxed bids will only be accepted if submitted on an official tender form. Bids may be submitted, in whole pence, on either: * a fixed price basis; or * a strike price basis. Bids at multiple fixed prices will be accepted. In relation to such bids, bidders are requested to set down the total demand for new BT Shares or ADSs at each price at which they bid. Bids expressed in US dollars will be accepted. Bids in currencies other than sterling or US dollars will not be accepted. Bids may also be made for ADSs. One ADS will represent ten new BT Shares. The purchase price payable by successful bidders for ADSs will be calculated with reference to: * the strike price achieved in the International Tender; and * the sterling dollar exchange rate as determined by the Joint Bookrunners. Bids made in accordance with these Rules will be binding on the bidders upon receipt by Cazenove or Merrill Lynch of the telephone order or of the official tender form and, if required, a supplementary official tender form, unless validly withdrawn. By submitting a bid which is not validly amended or cancelled, in accordance with these Rules, a bidder will irrevocably undertake to acquire the number of Sale Shares at the prices specified (or such lesser number of Sale Shares as the Joint Bookrunners may notify to that bidder). After the close of the International Tender, bids shall become irrevocable and shall be binding on bidders. Official Tender Forms Official tender forms and supplementary official tender forms are only necessary for faxed bids. These can be obtained by calling either Mr Michael Willmott (Tel: +44 (0) 207 457 3385) or Mrs Louise Clarke (Tel: +44 (0) 207 512 6379) at Cazenove or Ms Jacquie Whittingham (Tel: +44 (0) 207 867 3700) at Merrill Lynch. Use of Official Tender Forms and Supplementary Official Tender Forms When institutional investors or LSE member firms wish to submit a written bid they must use an official tender form provided by either Cazenove or Merrill Lynch. In the event that the official tender form has insufficient space, they should use a supplementary official tender form to complete their bid. Bids received solely by way of a supplementary official tender form may not be accepted. Amendment or cancellation of bids Bids, whether submitted orally or by fax, may only be amended or cancelled before the close of the International Tender. Telephone bids may only be amended or cancelled by the individual who placed the bid speaking to the Cazenove or Merrill Lynch representative through whom the original telephone bid was placed. Bids received by way of a faxed official tender form and, if required, a supplementary official tender form, may only be amended or cancelled by: * in the case of an amended bid, a new official tender form being faxed to Cazenove or Merrill Lynch, making clear that the new official tender form replaces the official tender form previously sent; * in the case of a cancelled bid, the original official tender form being faxed to Cazenove or Merrill Lynch with the words 'TENDER CANCELLED' clearly marked across the original official tender form. Faxed bids, amendments or cancellations Institutional investors and LSE member firms are reminded that proven despatch of a faxed official tender form or supplementary official tender form is not proof of delivery to Cazenove or Merrill Lynch. Bidders may therefore wish to seek verbal confirmation through the designated Cazenove or Merrill Lynch representative that faxed official tender forms, supplementary official tender forms, amendments or cancellations have been received. Allocation Policy Allocations under the International Tender will be at the sole discretion of the Joint Bookrunners. However, in deciding allocations, the Joint Bookrunners expect to take the following criteria into account: * price leadership, with fixed price bids favoured over strike price bids; * the timeliness of bids received; and * pre registration. Bidding history and market activity by prospective bidders will be closely monitored by the Joint Bookrunners. Cazenove and Merrill Lynch reserve the right to allocate fewer Sale Shares than the number bid for (including making a zero allocation) to any bidder, regardless of the price(s) at which that bidder tendered, where, in Cazenove's and Merrill Lynch's joint opinion and without liability to the bidder concerned, that bidder is considered to be unlikely to be able to make the necessary payment in full in respect of the Sale Shares for which it has bid. Right to reject bids Cazenove and Merrill Lynch reserve the right, in their absolute discretion and without liability to any bidder, to refuse to accept any oral bid, official tender form or, where submitted, supplementary official tender form that they consider to be illegible, incomplete, incorrectly completed or unclear in any significant way. Non-UK Bidders Institutions located in Australia, South Africa or Japan are not able to participate in the International Tender. Cazenove and Merrill Lynch reserve the right to disregard any bids received if they consider (in their absolute discretion) that applicable securities laws make it appropriate or advisable to do so. All non-UK bidders are only entitled to rely on the information contained in the US prospectus when determining whether to make an investment decision. UK bidders are only entitled to rely on the information contained in the UK prospectus when determining whether to make an investment decision. It is the responsibility of each bidder to satisfy themselves as to the full observance of the laws of their relevant jurisdiction. Commission Agency commission will be applied to all successful bids. Stamp Duty and PTM Levy and ADS costs The Sale Shares will be subscribed for free of Stamp Duty and PTM levy. Purchasers of ADSs will pay SDRT at the rate of 1.5% plus the ADS issuance fee of no more than 5 cents per ADS. Procedures in the event of an under-subscribed International Tender Cazenove and Merrill Lynch reserve the right to amend the closing time of the International Tender or to hold further international tenders for any Sale Shares that have not been successfully sold through the International Tender. In such an event, an announcement will be made by way of an RNS announcement as soon as practicable. 1. Settlement Procedures Booking details and issuance of contract notes Ordinary shares Clients of Cazenove and Merrill Lynch will receive a contract note for each sub-account to which Sale Shares are allocated setting out the total number of Sale Shares purchased for that sub-account, the price at which those Sale Shares were purchased and details of any commission payable. Booking details must be returned to the same broker through whom the bid was submitted: + for clients of Cazenove, details should be returned either by Electronic Trade Confirmation or by telephone to the Cazenove Contract Department, Paul Cox (Tel: +44 (0)207 825 9714 or John Church (Tel: +44 (0)207 825 9597): (Fax: +44 (0)207 606 9205) or, alternatively, in accordance with the client's standard procedure for providing booking instructions. In any event, this information must be provided by 12.00 (midday) on the day following the International Tender; + for clients of Merrill Lynch, details should be returned to your appropriate sales contact at Merrill Lynch International. LSE member firms who purchase Sale Shares in the International Tender will receive a settlement letter setting out the total number of Sale Shares purchased by that LSE member firm, the price at which those Sale Shares were purchased and details of any commission payable. ADSs Clients of Cazenove and Merrill Lynch will receive a contract note for each sub-account to which ADSs are allocated setting out the total number of ADSs purchased for that sub-account, the price at which those ADSs were purchased, SDRT at the rate of 1.5%, an issuance fee of no more than 5 cents per ADS, details of any commission payable and any other foreign exchange costs incurred. Settlement Ordinary Shares All Sale Shares purchased must be settled in CREST on the third business day after the day on which the transaction is executed. Settlement is expected to be on 22 June 2001 (the 'Settlement Date'). In particular, LSE member firms, institutional investors and their custodians must ensure that they have sufficient debit caps available in CREST to enable settlement of all their purchases of Sale Shares to be completed on the settlement date. All queries relating to settlement of purchases of Sale Shares should be addressed to the CREST Checking Department at Cazenove, Jenny Bowes (Tel: +44 (0)207 825 9320) or Alex Tyson (Tel: +44 (0)207 825 9628) or at Merrill Lynch, Dave Kendall (Tel: +44 (0) 207 867 9621). ADSs Delivery of ADS allocations will be made at the discretion of the Joint Bookrunners through the DTC on 22 June 2001. Please enter instructions with DTC to receive your allotment from either: * Cazenove's account at DTC a/c no. 5117 (reference: Cazenove - BT Tender); or * Merrill Lynch's account at DTC a/c no. 161 (reference: Merrill Lynch International Syndicate - BT). For clients of Cazenove, please fax Stewart Hammond, International Settlements (Fax: +44 (0) 207 606 9205) not later than 2.00p.m. on 21 June 2001 with the following details: 1. Name and DTC a/c no of your DTC clearing agent or New York broker; 2. Your account number ('Institutional ID') with the clearing agent or broker; and 3. Name and telephone number of the contacts in your settlements department and at your clearing agent or New York broker. For clients of Merrill Lynch, please fax James Bewley, Equity Operations and Settlements (Fax: +44 (0) 207 772 2547) not later than 2.00p.m. on 21 June 2001 with the following details: 1. Name and DTC a/c no of your DTC clearing agent or New York broker; 2. Your account number with the clearing agent or broker; 3. Name and telephone number of the contacts in your settlements department and at your clearing agent or New York broker. Cazenove and Merrill Lynch reserve the right to charge interest to purchasers who fail to settle on the due settlement date at the rate of 2.0 per cent. per annum above the base rate of The Royal Bank of Scotland plc from time to time on the amount payable in respect of the purchases of Sale Shares or ADSs. Cazenove and Merrill Lynch reserve the right in their absolute discretion to cancel all or part of the allocation to, and sell or re-allocate the Sale Shares of, a bidder to whom Sale Shares were previously allocated where that bidder has not made payment by the due time and date or, in Cazenove's or Merrill Lynch's joint opinion and without liability to the bidder concerned, where, the bidder is unlikely to be able to make the necessary payment in full, whether before or after the due time, in respect of the Sale Shares for which it has tendered. In such a case, the bidder will be notified in writing by Cazenove or Merrill Lynch, as appropriate, by the end of the day on which such a sale has occurred. 1. General Each bidder in the International Tender will be deemed, by submitting a tender, either verbally or by fax on an official tender form or, if required, a supplementary official tender form to represent, warrant and undertake to Cazenove and Merrill Lynch that: i. the bidder has read and understood the International Tender Rules (including these representations, warranties and undertakings); and ii. the bidder has full power and authority to purchase the Sale Shares in accordance with the terms of the International Tender and all necessary corporate and other actions have been taken to authorise such a purchase; and iii. the bidder has complied with all relevant laws or regulations of any relevant territory outside the UK and that none of Cazenove or Merrill Lynch will infringe any laws of any jurisdiction outside the UK as a result of acceptance of that bidder's application (whether in whole or part); and iv. the bidder is not located in Australia, South Africa or Japan and is not a resident or national of any such country and is not applying on behalf of any such person; and v. the person who has executed the official tender form or supplementary official tender form is duly authorised to do so in respect of such number of Sale Shares at such prices as are set out in the official tender form or supplementary official tender form; and vi. in making an investment decision, the bidder has relied solely on information contained in the BT UK prospectus dated 10 May 2001 or, as the case may be, the BT US prospectus dated 10 May 2001; and vii. the bidder has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by him/her in relation to the Sale Shares in, from or otherwise involving the United Kingdom; and he/she has only issued or passed on and will only issue or pass on in the United Kingdom any document received by him/her in connection with the International Tender to a person described in Article 11 (3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1997 or a person to whom the document may otherwise lawfully be issued or passed on; and viii. the bidder submits to the jurisdiction of the Courts of England and Wales in respect of all matters arising in connection with the International Tender. Cazenove and Merrill Lynch reserve the right to amend or supplement these rules at any time without the consent of or notice to any person. Where possible, Cazenove and Merrill Lynch will endeavour to announce such amendments or supplementary rules by way of an RNS announcement. This document has been approved by Cazenove & Co. Ltd and Merrill Lynch International for the purposes of Section 57 of the Financial Services Act 1986

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