Proposed recommended acquisition

RNS Number : 4580G

Melrose PLC

29 June 2012

 



NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, AUSTRALIA, CANADA, JAPAN OR SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION (THE "EXCLUDED TERRITORIES"). 

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND NOT A PROSPECTUS AND INVESTORS SHOULD NOT SUBSCRIBE FOR OR PURCHASE ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT EXCEPT ON THE BASIS OF INFORMATION TO BE CONTAINED IN THE PROSPECTUS EXPECTED TO BE PUBLISHED BY THE COMPANY TODAY IN CONNECTION WITH THE PROPOSED ACQUISITION AND RIGHTS ISSUE. COPIES OF THE PROSPECTUS WILL BE AVAILABLE FROM THE COMPANY'S REGISTERED OFFICE AND VIA THE NATIONAL STORAGE MECHANISM AND ON THE COMPANY'S WEBSITE.  THE PROSPECTUS WILL NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES IN ANY EXCLUDED TERRITORY.

29 June 2012 

For immediate release

MELROSE PLC

Proposed recommended acquisition of Elster Group SE and fully underwritten £1.2 billion Rights Issue

Today the Board of Melrose PLC ("Melrose" or "the Company") announces that it has reached agreement with Elster Group SE ("Elster") on the terms of a recommended proposal whereby Mintford AG, a wholly owned subsidiary of Melrose, will acquire for cash the entire issued ordinary share capital of Elster (the "Elster Shares") ("the Acquisition").

The Acquisition will be implemented principally by a US tender offer to Elster ADS Holders and Elster Shareholders at a price of $20.50 per Elster ADS or $82 per Elster Share (approximately $2.3 billion, or £1.5 billion¹ in aggregate) which is expected to commence on or about 6 July 2012.  Following the Tender Offer becoming Effective, Mintford AG will have the ability to take steps to pursue a delisting of Elster ADSs from the NYSE.  The offer price for each Elster ADS represents a premium of approximately 48.6 per cent. to the price of an Elster ADS on 11 June 2012, the last business day before press speculation that CVC was considering a sale of its Elster holding and approximately 44.3 per cent. to the average price of an Elster ADS in the six month period ending on 11 June 2012. The administrative board of Elster has unanimously approved the transaction and intends, in its Schedule 14d-9 filing with the U.S. Securities and Exchange Commission, to recommend that holders of Elster ADSs and/or Elster Shares tender their Elster ADSs and/or Elster Shares into the Tender Offer.

Mintford AG has received irrevocable undertakings to tender unconditionally (and not withdraw) Elster ADSs (or the underlying Elster Shares to which they relate) pursuant to the Tender Offer from Rembrandt and Nachtwache in respect of their entire beneficial holdings (amounting in aggregate to approximately 62.17 per cent. of the total share capital of Elster as at the day immediately prior to this announcement) and has also received irrevocable undertakings from certain of the Elster Directors and Management Elster ADS Holders, except in certain circumstances, to tender (and not withdraw) their entire beneficial holdings (amounting in aggregate to approximately 2.02 per cent. of the total share capital of Elster as at the day immediately prior to this announcement).

Melrose proposes to finance the Acquisition and associated expenses through a combination of new debt and by way of a fully underwritten Rights Issue of 2 New Melrose Ordinary Shares for each 1 Melrose Existing Ordinary Share at 142 pence, raising approximately £1.2 billion, before expenses.  Melrose has recently undertaken pre-marketing meetings with a number of its institutional shareholders. Melrose believes they were supportive of the Acquisition and Melrose has been informed by the Joint Underwriters that certain shareholders have already committed to sub-underwrite more than 60 per cent. of the Rights Issue.

Elster is a world leading engineering company and one of the world's largest providers of gas, electricity and water meters, gas utilisation products and related communications, networking and software solutions. Elster is a European public limited liability company (Societas Europaea, or SE) with its registered seat in Essen, Germany. Elster ADSs representing Elster's ordinary share capital are traded on the NYSE and on the OTC (over the counter) market (Freiverkehr) on the stock exchanges of Berlin, Frankfurt am Main, Stuttgart and the Tradegate Exchange (one Elster ADS represents one-fourth of one Elster Share).

The Acquisition represents a significant opportunity for Melrose to execute its strategy of buy, improve, sell. The Melrose Board believes that:

·      Elster is a good manufacturing business with further potential which:

o  serves strong end markets with attractive long term demand drivers such as growing global energy demand, energy efficiency and conservation and global gasification;

o  is the global market leader in gas metering, Elster's highest margin sector;

o  is a global leader in gas solutions, supplying products to many parts of the gas supply chain including gas utilisation products; and

o  has a strong foothold in smart technology, which is increasing in global adoption.

·      There are further opportunities to improve Elster's performance:

o  expand profit margins, which have declined recently despite reasonable revenue growth;

o  achieve benefits from Elster's recently announced restructuring programme, which the Melrose Board endorses;

o  improve performance by driving revenue growth in the higher margin product areas (Gas Metering and Smart Meters);

o  improve the quality of the business through investment and development (including bolt-on acquisitions); and

o  achieve cost savings if Elster is delisted from the NYSE.

The Melrose Board expects that the Acquisition will be dilutive to earnings per share in the first full financial year of ownership (2013), and will start to become accretive thereafter^{2, 3}. Over the medium term, the Acquisition is not expected to be dilutive to the Melrose headline³ operating margins currently being achieved.

Due to its size, the Acquisition constitutes a Class 1 transaction under the UK Listing Rules and therefore requires the approval of Melrose Shareholders. Melrose Shareholders will also be asked to approve certain other resolutions and authorities in connection with the Rights Issue and certain other matters. Accordingly, the Melrose General Meeting will be convened for 10.00 a.m. on 16 July 2012 at the offices of Investec. Subject to the satisfaction or, where permissible, waiver of the conditions of the Tender Offer, it is expected that the Tender Offer will become Effective during August 2012.

Melrose's Chief Executive, Simon Peckham said:

"We believe that Elster is an excellent fit with the Melrose acquisition criteria. Elster is a high quality business with strong end markets and the potential for significant development and improvement under Melrose management."

Melrose's Chairman, Christopher Miller added:

"We are pleased to reach agreement with the Elster Board, who are recommending our offer.  Since flotation in 2003 we have created over £1 billion of shareholder value and we believe that this acquisition gives us further opportunity to continue our track record of creating significant value for our shareholders."

This preceding summary should be read in conjunction with the full text of the following announcement and its appendices, including the announcement published by Melrose simultaneously with this announcement which includes, amongst other matters, financial information on Elster.

Indicative abridged timetable⁴                                                                                                                                                 2012

Publication and posting of the Prospectus, the Notice of General                                    Meeting and the Form of Proxy	29 June
Tender Offer commenced in the US when the Tender Offer Document is filed with the US Securities and Exchange Commission	On or around 6 July
Elster to file Recommendation Statement on Schedule 14D-9, in which the Elster    Board recommends acceptance of the Tender Offer	On or around 6 July
Rights Issue Record Date	close of business 12 July
Latest time and date for receipt of Forms of Proxy	10.00 a.m. on 12 July
Melrose General Meeting	10.00 a.m. on 16 July
Despatch of Provisional Allotment Letters	16 July
Existing Melrose Ordinary Shares marked "ex" by the London Stock Exchange	8.00 a.m. on 17 July
Dealings in New Melrose Ordinary Shares, nil paid, commence on the                           London Stock Exchange	8.00 a.m. on 17 July
Latest time and date for acceptance, payment in full and registration                            of renunciation of Provisional Allotment Letters	11.00 a.m. on 31 July

Enquiries:

J.P. Morgan Cazenove

(Financial Adviser, Joint Corporate Broker, Joint Sponsor, Joint Underwriter and Joint Bookrunner)

[phone]

John Mayne

Nicholas Hall

Luke Bordewich

Investec Bank plc

(Joint Corporate Broker, Joint Sponsor, Joint Underwriter and Joint Bookrunner)

[phone]

Keith Anderson

Christopher Baird

Barclays

(Co-Bookrunner and Joint Underwriter)

[phone]

Jim Renwick

Chris Madderson

HSBC

(Co-Bookrunner and Joint Underwriter)

[phone]

Nick Donald

Stuart Dickson

RBC

(Co-Bookrunner and Joint Underwriter)

[phone]

Mark Preston

Oliver Hearsey

M: Communications (PR Adviser to Melrose)               

[phone]

Nick Miles

Ann-Marie Wilkinson

Andrew Benbow

(1) Based on an exchange rate of £1.00 = $1.55 on 28 June 2012

(2) Nothing in this document is intended to be, or is to be construed as, a profit forecast or to be interpreted to mean that earnings per Melrose Ordinary Share for the current or future financial years, or those of the Enlarged Group, will necessarily match or exceed the historical earnings per Melrose Share

(3) Before exceptional costs, exceptional income and intangible asset amortisation

(4) The times and dates set out in the indicative abridged timetable above and mentioned throughout this document may be adjusted by Melrose and/or Mintford AG in consultation with J.P. Morgan, JPMSL, Investec, Barclays, HSBC and RBC in which event details of the new times and dates will be notified to the UKLA, the London Stock Exchange and, where appropriate, Qualifying Shareholders

The defined terms set out in Appendix 2 to this announcement apply in this announcement.

This announcement (including the additional information below) is not for release, publication or distribution, in whole or in part, directly or indirectly, in, into or from the United States, Australia, Canada, Japan or South Africa or any other jurisdiction where to do so would constitute a violation of the relevant securities laws. This announcement (including the additional information below) does not, and is not intended to, constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities pursuant to this announcement. None of the securities referred to in this announcement (including the additional information below) have been or will be registered under the US Securities Act of 1933, as amended, or under any other relevant federal securities laws or the securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, pledged, renounced, transferred or delivered, directly or indirectly, in or into the United States at any time without registration or an applicable exemption from or in a transaction not subject to the registration requirements of the US Securities Act of 1933, as amended, and in compliance with state securities laws.

This announcement is for information purposes only and shall not constitute an offer to buy, sell, issue or subscribe for, or the solicitation of an offer to buy, sell, issue, or subscribe for, any securities in Melrose PLC or any other entity. Any such offer will be made solely by means of a prospectus to be published in due course and any supplement or amendment thereto and any acquisition of securities in Melrose PLC should be made solely on the basis of the information contained in such prospectus. The prospectus will not constitute an offer to sell or a solicitation of an offer to buy any securities in the United States.

This announcement has been issued by, and is the sole responsibility of, Melrose PLC. Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan, JPMSL, Investec, Barclays, HSBC or RBC under FSMA or the regulatory regime established thereunder: (i) none of J.P. Morgan, JPMSL, Investec, Barclays, HSBC or RBC accepts any responsibility whatsoever and makes no warranty, express or implied, in relation to the contents of this document, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with Melrose, Mintford AG, the Nil Paid Rights, the Fully Paid Rights, the Melrose Shares, the Acquisition or the Rights Issue; and (ii) each of J.P. Morgan, JPMSL, Investec, Barclays, HSBC and RBC accordingly disclaims, to the fullest extent permitted by law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this document or any such statement.

This announcement is for informational purposes only and is not an offer to buy or the solicitation of an offer to sell any Elster Shares or Elster ADSs.  The tender offer described herein has not yet been commenced.  On the commencement date of the tender offer, an offer to purchase, letters of transmittal and related documents will be filed with the United States Securities and Exchange Commission (SEC).  The solicitation of offers to buy Elster Shares and/or Elster ADSs will only be made pursuant to the offer to purchase, the letters of transmittal and related documents. Elster securityholders are strongly advised to read both the tender offer statement and the solicitation/recommendation statement that will be filed by Elster regarding the tender offer when they become available as they will contain important information.  Elster securityholders may obtain free copies of these statements (when available) and other documents filed with respect to the tender offer at the SEC's website at www.sec.gov.  In addition, copies of the tender offer statement and related materials (when available) may be obtained for free by directing such requests to the information agent for the tender offer.  The solicitation/recommendation statement and related documents (when available) may be obtained by directing such requests to Elster.

The Banks, each of which is authorised and regulated in the United Kingdom by the Financial Services Authority, are acting exclusively for Melrose PLC in connection with the matters set out in this announcement and the proposed Acquisition and Rights Issue. The Banks are not, and will not be, responsible to anyone other than Melrose PLC for providing the protections afforded to their respective clients or for providing advice in relation to the proposed Acquisition and Rights Issue or any other matters referred to in this announcement. Apart from the responsibilities and liabilities, if any, which may be imposed on each of them by the Financial Services and Markets Act 2000, each of the Banks accept no responsibility whatsoever and makes no representation or warranty, express or implied, for the contents of this announcement including its accuracy, completeness or verification,  or for any other statement made or purported to be made by it, or on its behalf, in connection with Melrose PLC, Mintford AG, the proposed Acquisition or the Rights Issue (including the Nil Paid Rights, Fully Paid Rights and Melrose Shares), and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. Each of the Banks accordingly disclaims to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement.

This announcement has been prepared in accordance with English law, the Listing Rules and the Disclosure and Transparency Rules and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

The distribution of this announcement in jurisdictions other than the United Kingdom may be affected by the laws of relevant jurisdictions. Therefore any persons who are subject to the laws of any jurisdiction other than the United Kingdom will need to inform themselves about, and observe any applicable requirements.

Neither the content of the Company's website (or any other website) nor the content of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

This announcement contains (or may contain) certain forward-looking statements with respect to certain of Melrose's current expectations and projections about future events. These statements, which sometimes use words such as "anticipate", "believe", "intend", "estimate", "expect", "will", "shall", "may", "aim", "predict", "should", "continue" and words of similar meaning and/or other similar expressions that are predictions of or indicate future events and/or future trends, reflect the directors' beliefs and expectations at the date of this announcement and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement.

Statements contained in this announcement regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The information contained in this announcement is subject to change without notice and, except as required by applicable law, neither Melrose nor any of the Banks assumes any responsibility or obligation to update publicly or review any of the forward-looking statements contained herein. You should not place undue reliance on forward-looking statements, which speak only as of the date of this announcement.

No statement in this announcement is or is intended to be a profit forecast or to imply that the earnings of Melrose or Elster for the current or future financial years will necessarily match or exceed the historical or published earnings of Melrose or Elster. The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Melrose Shares, the Provisional Allotment Letters and the Shares have not been, and will not be, registered under the U.S. Securities Act of 1933 (the "Securities Act"), as amended or under the securities laws of any state, or other jurisdiction of the United States and may not be offered, sold or transferred, directly or indirectly, within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and the securities laws of any state or other jurisdiction of the United States. This announcement (including the information below) does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire, nor shall there be any sale of, the Nil Paid Rights, the Fully Paid Rights, the New Ordinary Melrose Shares, the Provisional Allotment Letters and the Shares in any jurisdiction in which such offer, solicitation or sale would be unlawful. The Nil Paid Rights, the Fully Paid Rights, the New Ordinary Melrose Shares, the Provisional Allotment Letters and the Shares have not been, and will not be, registered with any regulatory authority of any state within the United States. No money, securities or other consideration is being solicited and, if sent in response to the information herein, will not be accepted.There will be no public offer of any securities of the Company in the United States. 

ADDITIONAL INFORMATION REGARDING THE ACQUISITION AND RIGHTS ISSUE

MELROSE PLC

PROPOSED RECOMMENDED ACQUISITION OF ELSTER GROUP SE AND FULLY UNDERWRITTEN £1.2BILLIONN RIGHTS ISSUE

1.             introduction

Today the Board of Melrose announces that it has reached agreement with Elster on the terms of a recommended proposal whereby Mintford AG, a wholly owned subsidiary of Melrose, will acquire for cash the entire issued ordinary share capital of Elster. The Acquisition will be implemented principally by way of a US tender offer to Elster ADS Holders and Elster Shareholders at a price of $20.50 per Elster ADS or $82 per Elster Share (approximately $2.3 billion, or £1.5 billion¹, in aggregate) which is expected to be commenced on or about 6 July. Following the Tender Offer becoming Effective, Mintford AG will have the ability to take steps to pursue a delisting of Elster ADSs from the NYSE. The administrative board of Elster has unanimously approved the transaction and intends, in its Schedule 14d-9 filing with the U.S. Securities and Exchange Commission, to recommend that holders of Elster ADSs and/or Elster Shares tender their Elster ADSs and/or Elster Shares into the Tender Offer.

Elster is a world leading engineering company and one of the world's largest providers of gas, electricity and water meters, gas utilisation products and related communications, networking and software solutions. Elster is a European public limited liability company (Societas Europaea, or SE) with its registered seat in Essen, Germany. Elster ADSs representing Elster's ordinary share capital are traded on the NYSE and on the OTC (over the counter) market (Freiverkehr) on the stock exchanges of Berlin, Frankfurt am Main, Stuttgart and the Tradegate Exchange (one Elster ADS represents one-fourth of one Elster Share). The Acquisition represents a significant opportunity for Melrose to execute its strategy of buy, improve, sell. Subject to the satisfaction or, where permissible, waiver of the conditions of the Tender Offer, it is expected that the Tender Offer will become Effective during August 2012.

Elster has one of the most extensively installed meter bases in the world, with more than 200 million meters deployed over the course of the last decade. Its products and solutions are used to measure gas, electricity and water consumption as well as enable energy efficiency and conservation and improve safety. Elster sells its products and solutions in more than 130 countries for use in residential, commercial and industrial markets.

It is estimated (as at 2009) that Elster had the largest global market share by revenues in the gas meter market, was one of the three largest global providers in the water meter market by revenues and had the third largest share by revenues in the electricity meter market.

Melrose is proposing to finance the Acquisition and associated expenses through a combination of new debt and equity. Melrose is proposing to raise approximately £1.2 billion, before expenses, by way of a fully underwritten Rights Issue. The balance of the cost of the Acquisition, after the application of the net proceeds of the Rights Issue, will be funded by loans under the term facility and the revolving credit facility under the New Facilities Agreement which has been put in place and which will replace the Company's existing facilities.

2.             background to and reasons for the acquisition

Melrose's track record is built on the twin cores of Melrose's strategy of acquiring high quality manufacturing businesses with exposure to strong end markets which have the opportunity to be developed. Once it has achieved its strategy it will then realise value and return this to shareholders. Melrose believes that this is particularly relevant in the current economic climate and that the proposed acquisition of Elster fits well with this strategy.

Melrose believes that Elster is a good manufacturing business with further potential, which serves strong end markets with attractive long term demand drivers such as growing global energy demand, energy efficiency and conservation and the replacement cycle. Moreover, Elster has good revenue visibility with an order book of approximately four months² and contracted future revenues of approximately seven months² and low dependence on any single customer.

Elster has leading positions in attractive markets

Elster is a world leading engineering company and one of the world's largest providers of gas, electricity and water meters, gas utilisation products and related communications, networking and software solutions. It generated revenues of $1,869 million in 2011 from providing products and solutions for use in residential, commercial and industrial end markets, as well as transmission and distribution applications, and has one of the most extensively installed meter bases in the world. Elster's products and solutions measure and control the supply of electricity and gas and water in traditional and ''Smart Grid'' markets in 130 countries worldwide, and in total Elster has deployed more than 200 million meters over the course of the last decade.

Elster has leading market positions in its core product categories: gas (the highest margin sector where Elster is number one globally), electricity and water (where Elster is in the top three globally in both). Elster's strong incumbent position in these markets and its breadth of product and technology solutions provides the ability for Elster to generate attractive growth and returns. Furthermore it is well placed to benefit from the growth in its end markets, driven by ongoing developments and needs for improved efficiency, closer regulation, better customer service, greater functionality and energy conservation.

Further opportunities to develop Elster's business and improve efficiency

The Melrose Board believes there are further business development opportunities for Elster as well as an opportunity to improve efficiency, all of which are expected to improve Elster's financial performance. The Melrose Board believes through its experience it can assist the operational management of Elster to improve the financial performance of Elster.

(i) Business development opportunities

Melrose plans to support Elster's management team to grow the Elster business to its fullest potential, in accordance with a business plan to be agreed with the Elster management team. Melrose has a great track record of working with management teams to develop such plans and deliver top tier operational performance from its investments. The Melrose Board believes similar opportunities are available at Elster.

The Melrose Board believes there are two main drivers for future growth. The first is the global growth in gas, driven in particular by new gas production and distribution coming on-line, which will result in Elster's Gas division growing significantly over the medium term. Elster's Gas division represented 57.7 per cent. of its 2011 revenues and Elster operates across the entire value chain in gas, from the upstream extraction, through midstream (transmission and storage) through downstream (distribution, commercial and industrial and residential) (all together representing approximately three-quarters of Elster's Gas division) and finally through to the utilisation of gas in the home or industry (representing approximately one-quarter of Elster's Gas division).

In addition there is a rising level of adoption of smart meters which offer increased efficiency and accuracy to both customers and suppliers of gas, electricity and water. Elster should benefit across its gas, water and electricity product classes from the deployment of smart meters, but this is expected to be a particularly strong driver of growth for the electricity business. Smart products are higher value products giving scope for accelerated revenue growth and potentially margin expansion. Currently the proportion of Elster's revenues derived from Smart products is 27 per cent. and the Melrose Board believes this can grow.

The Melrose Board has identified a number of opportunities to invest and develop the Elster business. These include investment in operations; investment in smart metering technology to ensure technology leadership; investment in new product development, for example polymer products in water; and investment in bolt-on acquisitions.

(ii) Elster's previously announced reinvestment programme and listed company cost saving

In the first quarter of the 2012 financial year, the Elster Board authorised a reinvestment programme which was intended to position Elster to take advantage of growth opportunities associated with global gasification trends and Smart Grid deployments in Europe, and further optimise operational improvements. Planned actions included consolidating operations and sites, mainly in North America and Europe, relocating certain product-lines to other existing Elster operations, increasing the mix of production in low-cost countries and improving the financial performance of Elster's water business unit. The planned consolidation of operations included the proposed closure of four major facilities and a reduction in the number of small- and mid-sized facilities. In addition, the programme included the consolidation of some functions, particularly across finance, procurement and human resources. The programme commenced in the first quarter of 2012 and is expected to continue through to 2014.

The total costs expected to be incurred were in the range of $40 million to $60 million from 2012 financial year through to 2014 financial year, with $20 million to $35 million of that total to be incurred in 2012 financial year. Approximately 70 per cent. of these costs related to severance and retention costs, with the remainder relating to operation and product line transportation, relocation costs and other exit costs. Estimated recurring annual cost savings of approximately $40 million were expected, starting in the 2014 financial year.

The Melrose Board has significant experience of successfully executing restructuring and reinvestment programmes on plan, on time and on budget and this programme has the Melrose Board's support. Consequently Melrose looks forward to working with the Elster team to maximise the efficiencies and gains to be made through this programme while potentially identifying additional areas of operational improvement.

In addition, as a company listed in the United States, Elster has significant costs related to its listing. By cancelling Elster's ADS listing in the United States and becoming a part of the Enlarged Group, Elster's management will be able to further enhance focus on growing the business and reducing the costs associated with maintaining a listing in the United States.

The Melrose Board expects that the Acquisition will be dilutive to earnings per share in the first full financial year of ownership (2013), and will start to become accretive thereafter^{3, 4}. Over the medium term, the Acquisition is not expected to be dilutive to Melrose headline⁴ operating margins currently being achieved.

3.             summary of the key terms of the acquisition

Pursuant to the Tender Offer, which will be on the terms and subject to the conditions set out in this Announcement and the Tender Offer Document, Elster ADS Holders (or Elster Shareholders, as the case may be) will receive:

for each Elster ADS                                         $20.50 in cash

for each Elster Share                                      $82 in cash

The proposed Acquisition values the entire issued ordinary share capital of Elster at approximately $2.3 billion (£1.5 billion¹), and the $20.50 per Elster ADS to be offered pursuant to the Tender Offer represents a premium of approximately 48.6 per cent. to the price of an Elster ADS on 11 June 2012, the last business day prior to speculation that CVC was considering a sale of its Elster holding and approximately 44.3 per cent. to the average price of an Elster ADS in the six month period ending on 11 June 2012. A summary of the conditions to the completion of the Tender Offer is set out below.

 The completion of the Tender Offer is conditional upon:

·      the passing (without material amendment) of the Transaction Resolutions at the Melrose General Meeting;

·      Admission having occurred;

·      receipt of anti-trust clearances from the relevant regulatory authorities in the EU, US, Ukraine and Russia;

·      there having been validly tendered (and not properly withdrawn) prior to the expiration date of the Tender Offer such number of Elster ADSs (and/or Elster Shares) that represent at least 75 per cent. of the Elster ordinary share capital as of the Tender Offer expiration date;

·      the Elster Board having recommended (and having not withdrawn its recommendation for) the Tender Offer;

·      the Investment Agreement not having been terminated in accordance with its terms; and

·      the satisfaction or waiver of the other conditions of the Tender Offer, which are considered to be customary for a transaction of this nature.

In order to facilitate the Acquisition, the Company and Mintford AG have entered into an Investment Agreement with Elster in which Elster has given certain undertakings to cooperate with the Company and Mintford AG and the Company and Mintford AG have given certain undertakings to Elster concerning, among other things, their conduct in connection with the Acquisition and their intentions in connection with the continuation of the Elster Group's business after the Acquisition.

Mintford AG has received irrevocable undertakings to tender unconditionally (and not withdraw) Elster ADSs (or the underlying Elster Shares to which they relate) pursuant to the Tender Offer from Rembrandt and Nachtwache in respect of their entire beneficial holdings (amounting in aggregate to approximately 62.17 per cent. of the total share capital of Elster as at the day immediately prior to this announcement). The undertakings from Rembrandt and Nachtwache will cease to be binding only if the Tender Offer lapses or is withdrawn. Mintford AG has also received irrevocable undertakings to tender (and not withdraw) Elster ADSs (or the underlying Elster Shares to which they relate) pursuant to the Tender Offer from certain of the Elster Directors and Management Elster ADS Holders in respect of their entire beneficial holdings (amounting in aggregate to 2,275,484 Elster ADSs representing approximately 2.02 per cent. of the total share capital of Elster as at the day immediately prior to this announcement). The undertakings from the relevant Elster Directors and Management Elster ADS Holders will cease to be binding if the Tender Offer lapses or is withdrawn or a Superior Offer is publicly proposed. The conditions relating to the approval of the Acquisition by Melrose Shareholders, clearance by the EU and US regulatory authorities, the Admission of the New Melrose Shares and the Investment Agreement not having been terminated will not be waived in whole or in part and the other conditions may be waived by Mintford AG.

Following the Tender Offer becoming Effective, Mintford AG will have the ability to take steps to pursue a delisting of Elster ADSs from the NYSE.

4.             fINANCING THE ACQUISITION          

The Acquisition and associated expenses will be funded through a combination of new debt and new equity, approximately: £1,171 million ($1,816 million¹) from the total net proceeds of the fully underwritten Rights Issue and £321 million ($498 million¹) from the proceeds of loans under the term facility and the revolving credit facility under the New Facilities Agreement which has been entered into with the Company's relationship banks. The revolving credit facility will also be used (i) by Melrose to finance the Melrose Group's working capital requirements and for general corporate purposes (including refinancing existing indebtedness under the Existing Facilities Agreement or otherwise, and for financing acquisitions) and (ii) after the Effective Date, by the Elster Group, to finance its working capital requirements and for general corporate purposes (including, if required, refinancing existing indebtedness whether under the Senior Notes, the Elster RCF or otherwise, and for financing future acquisitions). The Rights Issue has been fully underwritten on the basis set out in the Underwriting Agreement.

Melrose has always looked to maintain a prudent level of gearing (calculated as net debt divided by headline operating profit before depreciation and amortisation) in order to provide it with the flexibility to invest in its businesses. Therefore, to fund the Acquisition, in addition to new debt, Melrose intends to raise new equity. The Melrose Board, taking into account, inter alia, the size of the fundraising relative to the current market capitalisation of Melrose and to maintain pre-emption rights of Melrose Shareholders, believes the most appropriate method to do this is by way of a Rights Issue.

5.             Principal terms of the Rights Issue

Melrose proposes to raise approximately £1.2 billion (net of commissions), by way of a fully underwritten Rights Issue of up to 844,418,024 New Melrose Shares.

Subject to the fulfilment of, amongst others, the conditions set out below, the Company proposes to offer by way of the Prospectus and, where applicable, the Provisional Allotment Letters, New Melrose Shares pursuant to the Rights Issue to Qualifying Shareholders on the following basis:

2 New Melrose Shares at 142 pence each for every 1 Existing Melrose Share

held by Qualifying Shareholders on the Record Date. Holdings of Existing Melrose Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. Fractional entitlements to New Melrose Shares will not be allotted and, where necessary, entitlements will be rounded down to the nearest whole number of New Melrose Shares.

The New Melrose Shares will, when issued and fully paid, rank pari passu in all respects with the Existing Melrose Shares, including the right to receive in full all dividends and other distributions declared, made or paid by reference to a record date after the date of their issue. Melrose Shares including the New Melrose Shares may be held in certificated or uncertificated form.

The Rights Issue is conditional upon, amongst other things:

·      the passing (without material amendment) of the Transaction Resolutions at the Melrose General Meeting;

·      the Underwriting Agreement having become unconditional in all respects (save for the condition relating to Admission) and not having been terminated in accordance with its terms; and

·      Admission having occurred by not later than 8.00 a.m. on 17 July 2012 (or such later time and/or date as the parties to the Underwriting Agreement may agree).

While the Rights Issue is conditional on the Transaction Resolutions being passed it is not conditional upon the Tender Offer becoming Effective or on the New Facilities Agreement.

The Rights Issue Price of 142 pence per New Melrose Share, which is payable in full on acceptance by not later than 11.00 a.m on 31 July 2012, represents a 61.5 per cent. discount to the Closing Price of 369 pence per Existing Melrose Share on 28 June 2012 (being the last trading day prior to the publication of this document) and a 34.7 per cent. discount to the theoretical ex-rights price of 218 pence per New Melrose Share calculated by reference to the Closing Price on the same day. If a Qualifying Shareholder does not take up any of his entitlement to New Melrose Shares, his proportionate shareholding will be diluted by 66.7 per cent. However, if a Qualifying Shareholder takes up his Rights in full, he will, after the Rights Issue has been completed and excluding any fraction of an Ordinary Share, as nearly as practicable have the same proportionate voting rights and entitlements to dividends as he had on the Record Date.

If a Qualifying Shareholder does not subscribe for the New Melrose Shares to which he is entitled, such Shareholder can instead sell his rights to those New Melrose Shares and receive the net proceeds in cash. This is referred to as dealing in the rights ''nil paid'' and subject to the fulfilment of certain conditions, dealings on the London Stock Exchange in the Nil Paid Rights are expected to commence at 8.00 a.m. on 17 July 2012. If a Qualifying Shareholder does not wish to take up his rights, he does not have to take any action and the Joint Underwriters will try to find investors to take up such rights at the end of the Rights Issue offer period. If the Joint Underwriters find investors and are able to achieve a premium over the Rights Issue Price and the related expenses of procuring those investors (including any applicable brokerage and commissions and amounts in respect of VAT which, in the reasonable opinion of the Joint Underwriters, are not recoverable), such Qualifying Shareholder will be sent a cheque for the amount of that aggregate premium above the Rights Issue Price less related expenses (including any applicable brokerage and commissions and amounts in respect of VAT which, in the reasonable opinion of the Joint Underwriters, are not recoverable), so long as the amount in question is at least £5.

The results of the Rights Issue, including the aggregate number of New Melrose Shares issued and the aggregate amount raised, net of expenses, is expected to be announced by Melrose through a Regulatory Information Service by 8.00 a.m. on 1 August 2012.

Melrose Shareholders who hold their Melrose Shares in certificated form and who take up their rights in part or in full will receive definitive share certificates in respect of their New Melrose Shares on 8 August 2012.

Assuming the Tender Offer becomes Effective, the Rights Issue proceeds will be applied to partially satisfy the consideration to be paid to (i) Elster ADS Holders and Elster Shareholders who have tendered their Elster ADSs and/or Elster Shares (as the case may be) pursuant to the Tender Offer and (ii) Elster ADS Holders and Elster Shareholders pursuant to further purchases of Elster ADSs and/or Elster Shares (as the case may be) made following the Effective Date in connection with the Acquisition.

Having received irrevocable undertakings to tender unconditionally (and not withdraw) Elster ADSs and/or Elster Shares pursuant to the Tender Offer from Rembrandt and Nachtwache in respect of their entire beneficial holdings, and having received irrevocable undertakings, unless a Superior Offer is publicly proposed, to tender (and not withdraw) Elster ADSs and/or Elster Shares pursuant to the Tender Offer from certain of the Elster Directors and Management Elster ADS Holders in respect of their entire beneficial holdings, amounting in aggregate to approximately 62.17 per cent. of the total share capital of Elster as at the day immediately prior to this announcement, Melrose believes that the Tender Offer will be successful. However, Melrose Shareholders should note that while the Rights Issue is conditional on the passing of the Transaction Resolutions, it is not conditional upon the Tender Offer becoming Effective or on the New Facilities Agreement and that, subsequent to the Rights Issue becoming wholly unconditional, the Tender Offer may not become Effective. In the event that the Rights Issue settles but the Tender Offer does not become Effective, the Melrose Directors' current intention is that the net proceeds of the Rights Issue will be invested on a short-term basis while the Melrose Directors evaluate other acquisition opportunities and, if no acquisitions can be found on acceptable terms, the Melrose Directors will consider how best to return surplus capital to Melrose Shareholders in a timely manner. Such a return could carry fiscal costs for certain Melrose Shareholders and will have costs for the Company.

Applications will be made to the UKLA for the New Melrose Shares to be admitted to the premium segment of the Official List and to the London Stock Exchange for the New Melrose Shares to be admitted to trading on the main market for listed securities of the London Stock Exchange. It is expected that Admission will become effective and dealings (for normal settlement) in the New Melrose Shares will commence, nil paid, at 8.00 a.m. on 17 July 2012.

The Joint Underwriters as agents for the Company, have agreed under the terms of the Underwriting Agreement to procure subscribers for the New Melrose Shares not taken up in the Rights Issue at the Rights Issue Price, failing which, the Joint Underwriters shall themselves subscribe for New Melrose Shares.

It is expected that the Provisional Allotment Letters will be despatched to Qualifying non-CREST Shareholders (other than those having a registered address in the United States or any Excluded Territory) on 16 July 2012, after the Melrose General Meeting.

Any investment decision relating to the Rights Issue should be based upon the consideration of the Prospectus, which Qualifying Shareholders (other than those with registered addresses in the United States or any Excluded Territories) should read in full prior to making any such investment decision.

The Melrose Board is fully supportive of the Rights Issue. Each of the directors of Melrose intends, after Admission, to sell such number of Rights (nil paid) as will enable him to take up in full the balance of his entitlement other than Mr Dowley, who intends to take up his Rights in full and Mr Grant and Mr Templeman, each of whom intend to take up at least such part of their entitlement to New Melrose Shares as may be funded by the sale, after Admission of such number of rights (nil paid) as will enable them to take up the balance of his entitlement.

6.             INformation relating to Elster

Elster is a European public limited liability company (Societas Europaea, or SE) with its registered seat in Essen, Germany. Its share capital amounts to €28,220,041 and is divided into 28,220,041 Elster Shares. Elster is one of the world's largest providers of gas, electricity and water meters, gas utilisation products and related communications, networking and software solutions. Its products and solutions are used to measure gas, electricity and water consumption as well as enable energy efficiency and conservation and improve safety.

Elster has one of the most extensively installed meter bases in the world, with more than 200 million meters deployed over the course of the last decade. Elster sells its products and solutions in more than 130 countries across gas, electricity, water and multi-utility settings for use in residential, commercial and industrial markets.

It is estimated (as at 2009) that Elster had the largest global market share by revenues in the gas meter market, was one of the three largest global providers in the water meter market by revenues and had the third largest share by revenues in the electricity meter market.

7.             FINANCIAL Information relating to ELSTER

The financial information presented below has been extracted without material adjustment from (i) Form 20-Fs filed with the SEC by Elster for the three financial years ended 31 December 2009, 31 December 2010 and 31 December 2011; and (ii) Elster's unaudited quarterly report for the first quarter ended 31 March 2012. The financial information is prepared in accordance with US GAAP.

	Audited full year ending:					Unaudited quarter ending:
($, in thousands)	31 Dec 11	31 Dec 10	31 Dec 09				31 Mar 12	31 Mar 11
Revenue	1,868,975	1,759,339	1,695,122				446,707	443,883
Operating income	189,778	175,991	143,839				21,226	40,693
Income from continuing operations before income tax	140,468	118,870	91,693				13,672	34,893
Total assets	1,971,349	2,164,257	2,141,442				2,022,746	1,971,349
Total liabilities	1,253,100	1,508,028	1,718,738				1,281,017	1,253,100
Total equity	718,249	656,229	422,704				741,729	718,249

8.             Information relating to Melrose

Melrose is a public limited company registered in England and Wales which has a track record of acquiring businesses and making the necessary changes to maximise the value inherent in those businesses to the benefit of shareholders; as such, Melrose typically raises large amounts of equity to fund acquisitions and return cash to shareholders upon realisation of its investments.  Melrose currently operates in three segments: Energy, Lifting and Other Industrials. The Energy segment incorporates the Brush Turbogenerators, Brush Transformers, Marelli and Hawker Siddeley Switchgear business units, all specialist suppliers of energy industrial products to the global market. The Lifting segment includes the businesses of Bridon and Crosby, serving oil and gas production, mining, petrochemical, alternative energy and general construction markets. Other Industrials incorporates all other operating businesses.

Melrose seeks to achieve returns on investments through improving management and operating performance of the businesses acquired.

9.             Elster adminstrative board recommendation

The Administrative Board of Elster has unanimously approved the transaction. Elster's Administrative Board intends to include in the Schedule 14D-9 that (i) in its opinion, the Tender Offer is fair to and in the best interests of Elster and its stakeholders, including its shareholders, employees and customers, (ii) it approves the Acquisition and (iii) it recommends that the Elster shareholders accept the Tender Offer and tender the Elster ADSs and/or Elster Shares that they hold into the Tender Offer.

10.          Current trading

(i) Melrose current trading, trends and prospects

On 26 June 2012, Melrose announced that it had signed and completed for sale of all the issued share capital of MPC for a cash consideration of £31 million.

On 9 May 2012, Melrose published its interim management statement for the period from 1 January 2012 to 9 May 2012. The following has been extracted without material adjustment from that statement:

Overview

The positive momentum experienced in Melrose's businesses on revenue and order intake during 2011 has continued into 2012. Revenue for the Melrose Group in the first four months of 2012, at constant currency, is up 9 per cent. compared to the same period in 2011, and the total value of orders received in the period is 3 per cent. higher than revenue. Whilst the first quarter is historically the slowest quarter of the year, the start to 2012 has been pleasing to the Melrose Board.

The investment phase, referred to in Melrose's annual results statement for 2011, continues in Melrose's businesses with capital expenditure significantly ahead of depreciation. Current trading remains in line with plan. Since the date of the interim management statement, Melrose continues to trade in line with the Melrose Board's expectations.

(ii) Elster current trading, trends and prospects

Elster's first quarter 2012 revenues were $446.7 million, up $2.8 million, or 0.6 per cent., over the first quarter of 2011, and up 3.3 per cent. on a constant currency basis⁵. Growth in Elster's water and gas segments outweighed weaker performance in the electricity segment.

Elster recorded adjusted EBITDA⁶ of $63.1 million in the first quarter of 2012, up 1.4 per cent. compared to the first quarter of 2011. Adjusted EBITDA margin of 14.1 per cent. was in line with prior year results. First quarter 2012 non-GAAP net income attributable to Elster Group SE was $27.1 million, or $0.24 per Elster ADS compared to $29.0 million, or $0.26 per Elster ADS, in the first quarter of 2011. The decrease is impacted by the level of unrealised gains on interest rate swap agreements of $6.4 million in the first quarter of 2011 compared to unrealised gains of $1.4 million in the first quarter of 2012.

First quarter 2012 gross margin, net of charges related to the reinvestment programme, was 32.4 per cent. compared to 33.0 per cent. in the first quarter of 2011. The decrease was attributable to less favourable product mix in Elster's gas segment and to reduced volumes in Elster's electricity segment.   Since March 2012, monthly revenues have been steady and margins slightly below those in the previous quarter. The order book is at a similar level to that at the end of the first quarter and includes the large order from a North American hydro electric customer received in March 2012.

11.          Melrose general meeting

A General Meeting will be convened to be held at the office of Investec Bank plc, 2 Gresham Street, London, EC2V 7QP at 10.00 a.m. on 16 July 2012 at which the Resolutions will be proposed and shareholder approval for the Acquisition and authorisation for the allotment of the New Melrose Shares will be sought.

12.          Further information

Further details in relation to the Acquisition and Rights Issue will be set out in the Prospectus and Circular which will be published shortly. Melrose Shareholders' attention is drawn, in particular, to the risk factors included in these documents.

Enquiries:

J.P. Morgan Cazenove

(Financial Adviser, Joint Corporate Broker, Joint Sponsor, Joint Underwriter and Joint Bookrunner)

[phone]
John Mayne

Nicholas Hall

Luke Bordewich

Investec Bank plc

(Joint Corporate Broker, Joint Sponsor, Joint Underwriter, and Joint Bookrunner)

[phone]

Keith Anderson

Christopher Baird

Barclays

(Co-Bookrunner and Joint Underwriter)

Jim Renwick

Chris Madderson

HSBC

(Co-Bookrunner and Joint Underwriter)

Nick Donald

Stuart Dickson

RBC

(Co-Bookrunner and Joint Underwriter)

Mark Preston

Oliver Hearsey

M: Communications (PR Adviser to Melrose)

[phone]

Nick Miles

Ann-Marie Wilkinson

Andrew Benbow

(1) Based on an exchange rate of £1.00 = $1.55 on 28 June 2012

(2) As at 31 March 2012

(3) Nothing in this document is intended to be, or is to be construed as, a profit forecast or to be interpreted to mean that earnings per Melrose Share for the current or future financial years, or those of the Enlarged Group, will necessarily match or exceed the historical earnings per Melrose Share

(4) Before exceptional costs, exceptional income and intangible asset amortisation

(5) Constant currency rates: Calculated by translating the results from entities that have functional currencies other than US dollars into dollars using the exchange rates of the prior year

(6) Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA margin is consolidated adjusted EBITDA as a percentage of consolidated revenue

APPENDIX 1

Expected timetable of principal events¹

Each of the times and dates in the table below is indicative only and may be subject to change.

All references in this document to times are to London time unless otherwise stated.

Announcement of the Acquisition and Rights Issue	expected on or around 29 June 2012
Publication of and posting of this document, the Prospectus, the Notice of General Meeting and the Form of Proxy	29 June 2012
Tender Offer commences in the US/ Tender Offer Document is filed with the SEC	On or around 6 July 2012
Elster to file Recommendation Statement on Schedule 14D-9, in which the Elster Board recommends acceptance of the Tender Offer	On or around 6 July 2012
Rights Issue Record Date	close of business on 12 July 2012
Latest time and date for receipt of Forms of Proxy	10.00 a.m. on 12 July 2012
Melrose General Meeting	10.00 a.m. on 16 July 2012
Despatch of Provisional Allotment Letters (to Qualifying non-CREST Shareholders only) 2	16 July 2012
Publication of notice in the London Gazette	17 July 2012
Existing Melrose Shares marked "ex" by the London Stock Exchange	8.00 a.m. on 17 July  2012
Dealings (for normal settlement) in New Melrose Shares, nil paid, commence on the London Stock Exchange	8.00 a.m. on 17 July 2012
Nil Paid Rights credited to stock accounts in CREST (Qualifying CREST Shareholders only)2	as soon as practicable after 8.00 a.m. on 17 July 2012
Nil Paid Rights and Fully Paid Rights enabled in CREST	as soon as practicable after 8.00 a.m. on 17 July 2012
Recommended latest time for requesting withdrawal of Nil Paid Rights and Fully Paid Rights from CREST (i.e., if your Nil Paid Rights and Fully Paid Rights are in CREST and you wish to convert them to certificated form)	4.30 p.m. on 25 July 2012
Latest time for depositing renounced Provisional Allotment Letters, nil or fully paid, into CREST or for dematerialising Nil Paid Rights or Fully Paid Rights into a CREST stock account (i.e. if your Nil Paid Rights and Fully Paid Rights are represented by a Provisional Allotment Letter and you wish to convert them to uncertificated form)	3.00 p.m. on 26 July 2012
Latest time and date for splitting Provisional Allotment Letters, nil or fully paid	3.00 p.m. on 27 July 2012
Latest time and date for acceptance, payment in full and registration of renunciation of Provisional Allotment Letters	11.00 a.m. on 31 July 2012
Results of Rights Issue to be announced through a Regulatory Information Service	by 8.00 a.m. on 1 August 2012
Dealings in New Melrose Shares, fully paid, commence on the London Stock Exchange	by 8.00 a.m. on 1 August 2012
New Melrose Shares credited to CREST accounts	as soon as practicable after 8.00 a.m. on 1 August 2012
Despatch of definitive share certificates for the New Melrose Shares in certificated form	by no later than 8 August 2012
Tender Offer Expiration Date	expected in August 2012
Announcement of the Tender Offer results and acceptance of the Elster ADSs and/or Elster Shares tendered in the Tender Offer3	Promptly after the Tender Offer Expiration Date

(1) The times and dates set out in the expected timetable of principal events above and mentioned throughout this document may be adjusted by Melrose and/or Mintford AG in consultation with J.P. Morgan, JPMSL, Investec, Barclays, HSBC and RBC in which event details of the new times and dates will be notified to the UKLA, the London Stock Exchange and, where appropriate, Qualifying Shareholders

(2) Subject to certain restrictions relating to Qualifying non CREST Shareholders with registered addresses outside the EEA

(3) Acceptance of the Elster ADSs and/or Elster Shares tendered in the Tender Offer assumes all conditions to the Tender Offer have been satisfied or waived by Mintford AG

APPENDIX 2

Definitions and Glossary of Technical Terms

Acquisition:	the acquisition of the Elster Shares and/or Elster ADSs by way of (i) the Tender Offer, and, following the Effective Date, (ii) any further offer or offers required to be made by applicable law, arising from or in connection with steps taken by the Company to delist the Elster ADSs from the NYSE, to implement a domination agreement with Elster or to implement a Squeeze-out or a Merger Squeeze-out; and/or (iii) any further tender offer or purchases of Elster ADSs and/or Elster Shares by Mintford AG;
Admission:	the proposed admission of the New Melrose Ordinary Shares by the FSA (in its capacity as the UKLA) to listing on the premium segment of the Official List and by the London Stock  exchange to trading nil paid on the main market of the London Stock Exchange;
ADS:	an American Depository Share;
Banks:	J.P. Morgan Cazenove, Investec, Barclays, HSBC and RBC;
Barclays:	Barclays Bank PLC;
Board(s):	the Melrose Board and/or the Elster Board (as the case may be);
Circular:	the circular to be sent to Melrose Shareholders on or about the date hereof in connection with the Acquisition and the Rights Issue;
Closing Price:	the closing middle market price of a relevant share as derived from SEDOL on any particular day;
Company or Melrose:	Melrose PLC;
Co-Bookrunners:	Barclays, HSBC and RBC;
Disclosure and Transparency Rules:	the Disclosure and Transparency Rules as published by the FSA;
EBITDA:	earnings before interest, tax, depreciation and amortisation;
Effective:	acceptance and payment by Mintford AG in respect of the Elster ADSs and Elster Shares validly tendered pursuant to the Tender Offer (and not properly withdrawn) following the satisfaction or waiver of the conditions to the Tender Offer;
Effective Date:	the date on which the Tender Offer becomes Effective;
Elster:	Elster Group SE, a German Societas Europaea registered in the commercial register of the local court of Essen, Germany, under HRB number 22030;
Elster ADS:	an ADS representing one fourth of one Elster Share;
Elster ADS Holder:	a holder of Elster ADSs;
Elster Board:	the administrative board of Elster;
Elster Directors:	the members of the Elster Board;
Elster Group:	Elster, its subsidiaries and subsidiary undertakings;
Elster RCF:	the Elster Revolving Credit Facility entered into by Elster in April 2011;
Elster Share(s):	the ordinary registered shares with each in the share capital of Elster;
Elster Shareholders:	holders of Elster Shares;
Enlarged Group	the Melrose Group following the acquisition of the Elster Group;
Excluded Territories:	Australia, Canada, Japan and South Africa and any other jurisdictions where the extension and availability of the Rights Issue would breach any applicable law;
Existing Facilities Agreement:	the multi-currency revolving credit facilities agreement entered into by Melrose on 22 December 2011;
Existing Melrose Shares:	the ordinary shares of 14⁄55 pence each in the capital of Melrose in issue immediately prior to the Rights Issue;
Form of Proxy:	the form of proxy for use at the Melrose General Meeting;
FSA	The United Kingdom Financial Services Authority;
Fully Paid Rights:	rights to acquire the New Melrose Shares, fully paid;
HSBC:	HSBC Bank PLC;
Investec:	Investec Bank plc;
Investment Agreement:	the investment agreement between Melrose, Mintford AG and Elster dated 29 June 2012;
JPMSL:	J.P. Morgan Securities Ltd.;
J.P. Morgan:	J.P. Morgan Limited;
J.P. Morgan Cazenove:	Both J.P. Morgan and JPMSL;
Joint Bookrunners:	JPMSL and Investec;
Joint Sponsors:	JPMSL and Investec;
Joint Underwriters:	JPMSL, Investec, Barclays, HSBC and RBC;
Listing Rules:	the listing rules made by the FSA under section 73A of FSMA;
London Stock Exchange:	the London Stock Exchange plc or its successor;
Management Elster ADS Holders:	certain members of Elster's management (other than the Elster Directors) who hold Elster ADS (and/or Elster Shares);
Merger Squeeze-out:	if following the Effective Date, Mintford AG owns 90 per cent. or more of the Elster Shares, Melrose may procure the entry into a merger agreement between Elster and Melrose Bidco followed by a squeeze-out resolution of Elster Shareholders pursuant to Section 62 para. 5 of the German Transformation Act, to be adopted within a three month period after the entry into the merger agreement between Elster and Melrose Bidco. As a consequence of such squeeze-out resolution, the Elster Shares held by the minority Elster Shareholders will be transferred to Melrose Bidco in exchange for fair cash compensation;
Mintford AG:	Mintford AG, an indirectly wholly owned Melrose subsidiary;
Melrose Board:	the board of directors of Melrose;
Melrose Directors:	the directors of Melrose;
Melrose Existing Ordinary Share:	the ordinary shares of 14/55 pence each in the capital of Melrose in issue immediately prior to the Rights Issue;
Melrose General Meeting:	the general meeting of Melrose to be held on 16 July 2012 to vote on the Resolutions;
Melrose Group:	Melrose, its subsidiaries and subsidiary undertakings from time to time;
Melrose Shares or Ordinary Shares:	ordinary shares of 14/55 pence each in the capital of Melrose;
Melrose Shareholders:	holders of Melrose Shares;
New Facilities Agreement:	the multi-currency term and revolving credit facilities agreement entered into by Melrose on 29 June 2012;
New Melrose Shares:	the ordinary shares of 14/55 pence each proposed to be issued by Melrose pursuant to the Rights Issue;
Nil Paid Rights:	New Melrose Shares in nil paid form provisionally allotted to Qualifying  Shareholders pursuant to the Rights Issue;
Notice of General Meeting:	the notice of Melrose General Meeting which forms part of the Melrose Circular;
NYSE:	The New York Stock Exchange;
Official List:	the official list of the UKLA;
Prospectus:	the document expected to be published on or around 29 June 2012, comprising a prospectus relating to the Company and the listing of the New Melrose Shares on the premium segment of the Official List (together with any supplements or amendments thereto);
Provisional Allotment Letter(s) or PAL(s):	the renounceable provisional allotment letters relating to the Rights Issue to be issued to Qualifying non-CREST Shareholders other than certain Overseas Shareholders;
Qualifying non-CREST Shareholders:	Qualifying Shareholders whose Melrose Shares are in certificated form;
Qualifying Shareholders:	Melrose Shareholders on the Register at the Record Date;
RBC:	RBC Europe Limited (operating under the name RBC Capital Markets);
Record Date:	close of business on 12 July 2012;
Regulatory Information Service:	one of the regulatory information services  authorised by the UKLA to receive, process, and disseminate regulatory information from listed companies;
Rembrandt:	Rembrandt Holdings S.A;
Resolutions:	the resolutions numbered 1 to 5 set out in the Notice of General Meeting;
Rights Issue:	the proposed issue of the New Melrose Shares to Qualifying Shareholders by way of Rights on the terms and subject to the conditions set out in the Prospectus and, in the case of Qualifying non-CREST Shareholders only, the Provisional Allotment Letters;
Rights Issue Price:	142 pence per New Melrose Share;
SEDOL:	the London Stock Exchange Daily Official List of share identifiers;
Senior Notes:	EUR 250 million of senior unsecured notes due 2018 with a coupon of 6.25 per cent. per annum placed by Elster in April 2011;
Squeeze-out:	If, following the Effective Date, Melrose Bidco owns 95 per cent. or more of the Elster Shares, Melrose intends to procure the passing of a resolution of Elster Shareholders pursuant to Sections 327a et seq. of the German Stock Corporation Act requiring transfer of the Elster Shares held by the minority Elster Shareholders to Melrose Bidco in exchange for fair cash compensation;
Superior Offer:	means a competing tender offer (within the meaning of Rule 14d-2 under the Exchange Act) for all Elster ADSs of Elster which the Elster Board, acting reasonably and in good faith, determines in reliance on outside legal and financial advice is more favourable to Elster and all stakeholders, including the shareholders, employees and customers of Elster than the Tender Offer, taking into account, without limitation, the matters in relation to the Tender Offer, and all of the terms and conditions of the competing tender offer including its conditionality, the likelihood of its completion in accordance with its terms and the likely timing of the transaction;
Tender Offer:	the offer by Mintford AG to purchase all of the issued and outstanding Elster ADSs (and the underlying Elster Shares to which they relate), at a purchase price of $20.50 per Elster ADS ($82 per Elster Share) in cash on the terms and subject to the conditions to be set out in the Tender Offer Document;
Tender Offer Document:	a Tender Offer Statement on Schedule TO (including the Offer to Purchase contained therein) and the related Letter of Transmittal, which will be filed with the SEC and mailed to Elster ADS Holders and Elster Shareholders on the Tender Offer Commencement Date containing and setting out the terms and conditions of the Tender Offer;
Transaction Resolutions:	the resolutions numbered 1 and 2 set out in the Notice of General Meeting;
UKLA:	the FSA in its capacity as the competent authority for the purposes of Part VI of FSMA;
Underwriting Agreement:	the agreement dated 29 June 2012 between Melrose and the Joint Underwriters pursuant to which the Joint Underwriters have conditionally agreed to underwrite the Rights Issue;
US or United States or United States of America:	the United States of America (including the states of the United States and the District of Columbia), its possessions and territories and all areas subject to its jurisdiction;
US GAAP:	generally accepted accounting principles in the United States;
VAT:	(i) within the EU, any tax imposed by any member state in conformity with the directive of the council of the European Union on the common system of value added tax (2006/112/ EC), and (ii) outside the EU, any tax corresponding to, or substantially similar to, the common system of value added tax referred to in paragraph (i) of this definition.

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END

 

 

MSCSESSIUFESEFM