Replacement - Prop. Acq. - Waste Management - Pt 2

Shanks Group PLC 10 March 2000 The issuer has advised that the headline for the Shanks Group plc announcement released at 07:31 today under RNS No 418h should read 'Acqn/Placing Pt 2' and not as originally shown. All text details remain unchanged. Part 2 SHANKS GROUP PLC ---------------- PROPOSED ACQUISITION OF WASTE MANAGEMENT NEDERLAND BV ------------------------------------------------------ Introduction ------------ It was announced today that Shanks has entered into a conditional agreement to acquire Waste Management Nederland BV, the Dutch business of Waste Management International BV for consideration of USD328.2 million (GBP207.7 million) subject to certain closing balance sheet adjustments. Waste Management Nederland is one of the four largest waste operators in the Netherlands by turnover and the largest industry participant in the Randstad region. Waste Management Nederland operates eight business units providing solid waste, hazardous waste and electronic product recycling services. The Acquisition will be financed through an 'accelerated book building' vendor placing of 21,134,000 Placing Shares underwritten at a minimum price of 170 pence per share to raise a minimum of GBP35.9 million gross with the balance being funded by the New Debt Facility provided by ABN Amro and The Royal Bank of Scotland. In view of the size of Waste Management Nederland relative to Shanks, the Acquisition and Placing are conditional, inter alia, upon the approval of Shanks shareholders, which is to be sought at an Extraordinary General Meeting to be held on 3rd April, 2000. Background to and reasons for the Acquisition --------------------------------------------- Over the last five years Shanks has pursued a strategy of building an integrated waste management business with the capability of providing a wide range of advanced waste solutions to customers. At the same time, it has actively participated in the consolidation of the industry. Shanks has also sought opportunities to expand its geographical presence in markets where it can achieve a leading position. The acquisition of Shanks' Belgian operations in 1998 represented such an opportunity. Waste Management Nederland operates eight business units providing solid and hazardous waste collection, recycling and industrial cleaning and other added value services between waste collection and disposal in the Netherlands. It owns a substantial hazardous waste facility, treating in excess of 750,000 tonnes annually and has a leading electronics recycling business. The management is decentralised and has a successful record of developing the business. The board of Shanks believes that the business has significant potential for further growth. In addition, Waste Management Nederland's operations represent a good geographical fit with Shanks' neighbouring Belgian activities. The market for waste services in the Netherlands is highly developed as a result of the country's environmental policy, which is one of the most advanced in the world. Waste Management Nederland has significant technological expertise in recycling and operates several state of the art facilities. Of particular significance are pyrolysis (high temperature treatment in the absence of air), refuse derived fuel and soil cleaning technologies. The board of Shanks believes that there are significant opportunities to apply these technologies across the Shanks Group especially as environmental regulation in Europe is tightened. In particular, it is expected that changes in the UK regulations will create greater demand for recycling and other technologies and that, following the Acquisition, Shanks will be better positioned to exploit the opportunities that result. The board of Shanks expects that the acquisition of Waste Management Nederland will enhance Shanks' earnings per share before goodwill amortisation in the first full year of Shanks' ownership and considers that the value to Shanks justifies the price of the Acquisition. Information on Waste Management Nederland ----------------------------------------- Waste Management Nederland is one of the four largest waste operators in the Netherlands by turnover and the largest industry participant in the Randstad region. Waste Management Nederland is comprised of eight operating units in the solid waste, hazardous waste and electronic product recycling sectors. There are five solid waste businesses: Icova in Amsterdam, van Vliet Contrans between the Hague and Rotterdam, van Vliet Group Milieudienstverleners in Utrecht, Klok Containers in Rotterdam and Vliko in Leiden. All are involved in various transfer and recycling activities. Waste Management Nederland has two hazardous waste units, ATM which is involved in soil cleaning, water and sludge processing and pyrolsis, and Reym which provides industrial cleaning services and transport. The final operating unit: Frazier Europe in Utrecht is an electronic product recycler, dealing mainly in computers. In 1999, revenue was split approximately 60 per cent. for solid waste, 37 per cent. for hazardous waste and 3 per cent. for electronic recycling. Waste Management Nederland operates ten facilities each of which provide recycling, processing, collection depots and transfer stations, as well as three stand-alone hazardous waste treatment facilities. Waste Management Nederland operates approximately 450 collection vehicles and serves over 15,000 residential customers and approximately 21,000 other customers. There is strong customer diversity with no single customer representing more than five per cent. of turnover. The top ten customers represent less than 25 per cent. of turnover. Waste Management Nederland had audited turnover of NG450.2 million (GBP124.4 million) in the year ended 31st December, 1999 (1998 unaudited: NG424.6 million (GBP117.3 million)) and audited operating profit of NG67.7 million (GBP18.7 million) (1998 unaudited: NG63.6 million (GBP17.6 million)) and audited cash flow from operating activities of NG104.3 million (GBP28.8 million) (1998 unaudited: NG98.9 million (GBP27.3 million)). The audited net assets, which take into account inter-company liabilities of NG233.2 million (GBP64.4 million) at 31st December, 1999 were NG80.4 million (GBP22.2 million). Details of the Placing ---------------------- Hoare Govett (as agent for the Company) has agreed to use its reasonable endeavours to place with institutional investors a total of 21,134,000 Placing Shares through an 'accelerated book building' vendor placing at a minimum price of 170 pence per Placing Share. Any Placing Shares not acquired by institutional investors will be acquired by Hoare Govett at the Placing Price. Hoare Govett is acting as sole underwriter and book runner to the Placing. Principal terms of the Acquisition ---------------------------------- Under the terms of the Acquisition Agreement, Shanks and Shanks BV have agreed to purchase and Waste Management has agreed to sell the entirety of the issued share capital of Waste Management Nederland. The Acquisition Agreement is made between Waste Management and Waste Management International BV (which is a wholly owned subsidiary of Waste Management)(together the 'Seller'), the Company and Shanks BV (whose ultimate parent company is Shanks)(together the 'Purchaser') and is dated 9th March, 2000. Waste Management guarantees the obligations of Waste Management International and Shanks guarantees the obligations of Shanks BV. The total consideration payable by the Purchaser in respect of the Acquisition of USD328.2 million (GBP207.7 million) is comprised of approximately GBP171.8 million in cash and approximately GBP35.9 million through the Placing, and includes the procurement of the repayment of intra-group indebtedness owed to the Seller. The Acquisition Agreement provides for an initial share purchase price adjustment ('initial adjustment') and a final share purchase price adjustment ('final adjustment'). The initial adjustment provides that on Completion a payment in respect of equity contributions made by Waste Management to Waste Management Nederland since 31st December, 1999 net of dividends and distributions made by Waste Management Nederland to Waste Management over the same period will be made by one party to the other by adjustment of the consideration. The final adjustment requires the Seller to provide an unaudited consolidated balance sheet to be prepared as at Completion within 90 days thereafter on the same basis as the accounts to 31st December, 1999. In the event that this discloses a difference between the Final Consolidated Shareholders' Equity and the 31st December, 1999 Consolidated Shareholders' Equity (each term as defined in the Acquisition Agreement) of an amount equivalent to more than 0.3 per cent. of the Initial Consideration (as defined in the Acquisition Agreement) then the relevant party shall pay to the other party an amount equal to such difference. The Acquisition is subject to the following conditions, among others, having been satisfied on or before Completion: 1. the passing of the first, second, third and fifth resolutions to be proposed at the Extraordinary General Meeting; 2. the Placing Agreement defined in paragraph 6.3 of Part 5 of the Circular (which includes provisions as to satisfaction of the conditionality concerning the New Debt Facility) becoming unconditional in all respects (other than as regards, inter alia, admission of the Placing Shares to the Official List, conditional closing as defined in the Acquisition Agreement and receipt by ABN Amro of the proceeds of the Placing); and 3. admission of the Placing Shares to the Official List. The Acquisition Agreement includes certain warranties and indemnities, claims under which are subject to limitations (in particular limiting the amount that can be claimed in respect of breach of the Acquisitions Agreement (other than, in effect, title to the shares sold under it) to 50 per cent. of the amount payable by the Group) and, in the case of the warranties, to the information disclosed prior to the signing of the Acquisition Agreement. The Purchaser will bear 20 per cent. of any loss suffered from breach of warranty in relation to environmental matters. The Acquisition Agreement also contains certain warranties by the Purchaser which include a warranty that, so far as Shanks is aware the warranties given by Shanks in the Acquisition Agreement relating to the Placing and New Debt Facility are true and correct. The Acquisition Agreement also provides for certain transitional services to be provided by the Purchaser to the Seller and vice versa, for the conduct of the business in the ordinary course between signing and Completion, for the release of certain intra-group guarantees by the Purchaser and for a two year non-compete covenant on the part of the Seller. In the event that the Seller notifies the Purchaser before Completion of a breach of warranty, covenant or representation in respect of which it is not prepared to permit the Purchaser to complete the Acquisition and bring a claim in respect of such breach, the Purchaser can either complete without being able to bring such claim or decline to complete (but without compensation). In addition, the Acquisition Agreement contains the provisions relating to the pyrolysis permit (the 'Permit'). The indemnity secured by the Company provides that a daily payment of NG45,902 (GBP12,680) to be made by the Seller to the Purchaser for every day in respect of which the Permit is not in place in the period to the end of this calendar year. Adjustments in relation to the Permit effectively provide that in the event a permit is obtained but on terms less satisfactory than the Permit (the 'Alternative Permit'), a lesser daily sum is to be calculated to take into account the existence of the Alternative Permit. The Seller also accepts the burden of any financial penalties arising from investigations of its plant from 10th March, 2000 to Completion. The Acquisition Agreement also provides that the Seller will pay all Taxes (as defined in the Acquisition Agreement) which includes value added tax attributable to any period or part thereof ending on or prior to the Completion Date. Current trading and prospects ----------------------------- Since the Company's announcement of its interim results in November, its operations, including the Belgian subsidiaries and the operations of Caird Group PLC acquired in June 1999, have continued to make satisfactory progress and the Board is confident of a positive outcome for the current financial year to 4th April, 2000. Given the historical strength and predictability of its cash flows, the Directors believe that the prospects for the Enlarged Group following the Acquisition are encouraging. Extraordinary General Meeting ----------------------------- In view of its size, the Acquisition requires the approval of shareholders. A circular has been posted to shareholders today convening an Extraordinary General Meeting for 3rd April, 2000 for this purpose. Enquiries --------- Shanks Group plc Today: Hoare Govett Limited 020 7678 8000 ---------------- Later: 01628 524 523 Michael Averill (Group Chief Executive) David Downes(Group Finance Director) Lazard Brothers & Co., Limited Tel: 020 7588 2721 ------------------------------ Nicholas Jones Julian Goodwin Hoare Govett Limited Tel: 020 7678 8000 -------------------- Garth James There will be an analysts' presentation at 10.00 am to be held at the offices of Hoare Govett, 250 Bishopsgate, London EC2M 4AA. Each of Lazard Brothers & Co., Limited and Hoare Govett Limited, which are regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting exclusively for Shanks Group plc in relation to the proposed acquisition and is not advising any other person or treating any other person as its customer in relation thereto. Appendix I: Definitions ----------------------- 'ABN Amro' ABN Amro Bank NV, the joint arranger and co-underwriter of the New Debt Facility; 'Acquisition' the proposed acquisition of Waste Management Nederland pursuant to the Acquisition Agreement; 'Acquisition Agreement' the agreement dated 9th March, 2000 between, inter alia, the Company and Waste Management International relating to the Acquisition of which further details are set out in part 4 of the Circular; 'Board' or 'Directors' the directors of Shanks; 'Circular' the circular to Shanks shareholders dated 10th March, 2000; 'Companies Act' the Companies Act 1985 (as amended); 'Enlarged Group' the Shanks Group as enlarged by the Acquisition; 'Hoare Govett' Hoare Govett Limited, a member of the ABN Amro group; 'Lazard' Lazard Brothers & Co., Limited; 'New Debt Facility' the new multi-tranche, multi-currency banking facility dated 10th March, 2000 between the company and ABN Amro and The Royal Bank of Scotland which forms part of the financing arrangements for the Acquisition; 'Ordinary Shareholders' the holders of Ordinary Shares; 'Ordinary Shares' ordinary shares of 10 pence each in Shanks; 'Placing' the placing of the Placing Shares at the Placing Price; 'Placing Price' the price at which the Placing Shares are placed in accordance with the terms of the placing agreement as detailed in paragraph 6.3 of part 5 of the Circular; 'Placing Shares' the 21,134,000 New Ordinary Shares to be placed in accordance with the placing agreement as detailed in paragraph 6.3 of part 5 of the Circular; 'Shanks' or 'Company' Shanks Group plc; 'Shanks Group' or 'Group' Shanks and its existing subsidiaries; 'Shareholders' shareholders of existing Ordinary Shares; 'The Royal Bank of Scotland' The Royal Bank of Scotland plc, the joint arranger and co-underwriter of the New Debt Facility; 'Waste Management' Waste Management, Inc.; 'Waste Management International' Waste Management International BV; and 'Waste Management Nederland' Waste Management Nederland BV. Appendix II: Details of the Placing ------------------------------------ Vendor Placing of 21,134,000 new Ordinary Shares at a minimum price of 170 pence per Ordinary Share. * Hoare Govett is today placing with institutional investors (as agent for the Company) a total of 21,134,000 new ordinary shares in Shanks through an 'accelerated book building' Placing at a minimum price of 170 pence per ordinary share * Hoare Govett is acting as sole underwriter and bookrunner to the Placing. * The paragraph below entitled 'How to Participate in the Placing Tender' contains details of how to participate in this transaction. Participation will only be available to regulated financial institutions that are clients of Hoare Govett or any affiliate. Important information --------------------- If you choose to participate in the Placing by making an oral, and legally binding, offer to acquire Placing Shares you will be deemed to have read and understood this announcement in its entirety and to be making such offer on the terms and conditions contained herein and to be providing the representations, warranties and acknowledgements contained in this announcement. This announcement does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire Ordinary Shares in the capital of the Company in any jurisdiction in which such offer or solicitation is unlawful. The Placing Shares referred to in this announcement have not been and will not be registered under the US Securities Act of 1933 (the 'Securities Act') and, subject to certain exceptions, may not be offered or sold within the United States or to, or for the account or benefit of, US persons (as defined in Regulation S under the Securities Act ('Regulation S')). The Placing Shares are being offered and sold outside the United States to non-US persons in reliance on Regulation S and within the United States to 'qualified institutional buyers' in reliance on Rule 144A under the Securities Act ('Rule 144A'). Prospective purchasers are hereby notified that the Company may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. The distribution of this announcement and the Placing and/or issue of Placing Shares in certain jurisdictions may be restricted by law. No action has been taken by the Company or Hoare Govett that would permit an offer of Placing Shares or possession or distribution of this announcement or any other offering or publicity material relating to Placing Shares in any jurisdiction where action for that purpose is required, other than in the United Kingdom. Persons into whose possession this announcement comes are required by the Company and Hoare Govett to inform themselves about and to observe any such restrictions. The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any state securities commission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the Placing Shares or the accuracy of this announcement. Any representation to the contrary is a criminal offence in the United States. Details of the Placing Agreement and the Placing Shares ------------------------------------------------------- Hoare Govett has today entered into a placing agreement (the 'Placing Agreement') with Shanks whereby Hoare Govett has, subject to the conditions set out therein, agreed to use its reasonable endeavours as agent for the Company to procure placees to acquire the Placing Shares at a price at, or in excess of, 170 pence (the 'Underwritten Price') or failing which Hoare Govett will itself, as principal, acquire any Placing Shares for which it is unable to procure placees at the Underwritten Price. During the course of today Hoare Govett will be conducting an open price tender (the 'Placing Tender') for participation in the Placing. This announcement gives details of the terms and conditions and mechanics of participation in the Placing Tender. Any Placing Shares which are successfully allocated to placees in the Placing Tender ('Placing Participation') will be free of stamp duty (subject to a placee representing and warrantying the terms set out in this announcement). No commissions will be paid to placees or by placees in respect of any Placing Participation. The Placing Shares will be credited as fully paid and will rank pari passu in all respects with the existing issued ordinary shares of 10 pence each in the capital of the Company including the right to receive all dividends and other distributions declared, made or paid after today's date. Admission is expected to take place on 4th April, 2000 for settlement the same day. How to participate in the Placing Tender ---------------------------------------- This announcement sets out the basis on which Hoare Govett is conducting the Placing Tender for participation in the Placing. If you wish to tender you should communicate your bid by telephone to your usual sales contact (or to Jeremy Thompson on 020 7678 1760) at ABN AMRO Equities. Participation in the Placing will be on the basis of the terms and conditions set out in this announcement. If successful, your allocation will be confirmed to you orally, or by fax, by close of business today, and a fax confirming your allocation together with a CREST Registration Instruction Form will be dispatched as soon as possible thereafter. Hoare Govett's confirmation to you whether orally or by fax will constitute a legally binding commitment upon you to acquire the Placing Shares comprised in your Placing Participation on the terms and conditions set out in this announcement which you will be deemed to have read and understood. The Placing Tender will close in any event at 3.00 pm today, 10th March, 2000, but may be closed at any time after 12.00 noon today at the sole discretion of Hoare Govett. Hoare Govett may at its sole discretion choose to accept bids which are received after the Placing Tender has closed. The Placing Tender may be closed with demand for less than all the Placing Shares in which case Hoare Govett will subscribe and/or purchase the balance of the Placing Shares outstanding at the Placing Price (as defined below). Hoare Govett anticipates making a further announcement later today, 10th March, 2000, detailing the price at which the Placing Shares have been placed (the 'Placing Price Announcement'). Principal terms of the Placing Tender ------------------------------------- 1. Hoare Govett has underwritten the Placing Shares at 170 pence per share and is arranging the Placing. 2. Participation will only be available to regulated financial institutions who are clients of Hoare Govett or ABN AMRO Equities (UK) Ltd ('ABN AMRO Equities'). Hoare Govett is entitled to enter bids as principal in the Placing Tender. 3. The Placing Tender will establish a single price ('the Placing Price') payable by all placees. The Placing Price will not be set below the Underwritten Price of 170 pence per share. The Placing Price will be determined by Hoare Govett in its sole discretion after consultation with the Company and having regard to such factors as Hoare Govett considers appropriate. Once the Placing Price has been determined, the Placing Price Announcement will be made. 4. To enter a bid into the Placing Tender, you should communicate your bid by telephone to your usual sales contact (or to Jeremy Thompson on 020 7678 1760) at ABN AMRO Equities. Your bid should state the number of Placing Shares that you wish to acquire and the price that you are prepared to pay in respect of this number of shares. You may also choose to enter a bid at the Placing Price which is ultimately established by Hoare Govett (a 'Strike Price Bid'). 5. In entering a bid in the Placing Tender you give the representations and warranties contained in the section of this announcement entitled 'Representations and Warranties'. 6. Any bid made by you will be legally binding upon you to the extent that it is not varied or revoked prior to the close of the Placing Tender and will not be capable of variation or revocation after the close of the Placing Tender. 7. Hoare Govett reserves the right not to accept bids or to accept bids in part rather than in whole. The acceptance of bids by Hoare Govett shall be at its complete discretion. 8. The Placing Tender will close in any event at 3.00 pm today, 10th March, 2000, but may be closed at any time after 12.00 noon today at the sole discretion of Hoare Govett. Hoare Govett may at its sole discretion choose to accept bids which are received after the Placing Tender has closed. The Placing Tender may be closed with demand for less than all the Placing Shares in which case Hoare Govett will acquire the balance of the Placing Shares outstanding at the Placing Price determined by it. Allocations are expected to be made on a formula basis consistent with the Placing being allocated in full and therefore successful tenders may be scaled down. However preferential allocations may be given to bids at fixed prices over Strike Price Bids. Hoare Govett retains absolute discretion as to allocations of Placing Shares. Conditions of the Placing ------------------------- The Placing is conditional on: 1. the London Stock Exchange having admitted the Placing Shares to the Official List ('Admission') on or before 8.30 am on , 4th April, 2000 in accordance with the Listing Rules or by such later time and date as Hoare Govett and the Company may agree, save that it will be no later than 18th April, 2000; 2. The Placing Agreement becoming unconditional in all respects, including shareholder approval at the Extraordinary General Meeting convened to be held on 3rd April, 2000; and (or the condition relating to shareholder approval). 3. Hoare Govett not terminating the Placing Agreement in accordance with its terms prior to Admission. Hoare Govett may in its absolute discretion (and without liability to any other person) waive in whole or in part any condition in the Placing Agreement, but not the condition referred to in paragraph 1 above. No prospectus has been or will be submitted to be approved by the London Stock Exchange in relation to the Placing Shares. Registration and settlement --------------------------- Shanks has applied for the Placing Shares to be admitted to the Official List. Accordingly, the settlement of transactions in the Placing Shares following Admission will take place within the CREST system. Placees will receive any shares placed with them in uncertificated form by registration to their CREST member account. If you are allocated any Placing Shares in the Placing Tender you will be sent a CREST Registration Instruction Form which will contain details of the information which we will require from you in order to deliver your Placing Participation into your CREST account. Settlement for Placing Participations will take place on 4th April, 2000. Interest is chargeable daily on payments to the extent that value is received after the due date at the rate of 5 percentage points above prevailing LIBOR. Hoare Govett reserves the right to settle allocations in certificated form if for any reason it wishes to do so. Representations and warranties ------------------------------ By participating in the Placing Tender you represent, warrant and acknowledge that: 1. you are not applying as, or as (a) nominee(s) or agent(s) of (a) person(s) who is/are or may be, (a) person(s) liable to stamp duty or stamp duty reserve tax at a rate in excess of 0.5 per cent. under sections 67, 70, 93 or 96 of the Finance Act 1986 (depository receipts and clearance services); 2. you are a person whose ordinary activities involve you in acquiring, holding, managing or disposing of investments (as principal or agent) for the purpose of your businesses and undertake that you will acquire, hold, manage or dispose of the Placing Shares comprised in your Placing Participation for the purposes of your businesses; 3. you have complied with the Money Laundering Regulations (1993) (the 'Regulations') and, if you are making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by you to verify the identity of the third party as required by the Regulations; 4. you have read this announcement; 5. by participating in the Placing Tender (i) the only information on which you have relied upon is that contained in this announcement and any information previously published by the Company by notification to the Company Announcements Office of the London Stock Exchange or otherwise publicly filed and which has not been subsequently varied by any other publicly filed information or matter of public record; and (ii) you are a person who falls within paragraph 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996; 6. you are entitled to subscribe for and/or purchase Placing Shares under the laws of all relevant jurisdictions which apply to you and that you have fully observed such laws and obtained all guarantees and other consents which may be required thereunder and complied with all necessary formalities; 7. If you are a purchaser of Placing Shares within the United States pursuant to Rule 144A: (a) You are (i) a qualified institutional buyer within the meaning of Rule 144A ('QIB'), (ii) acquiring such Placing Shares for your own account or for the account of a QIB and (iii) aware, and each beneficial owner of such Placing Shares has been advised, that the sale of such Placing Shares to it is being made in reliance on Rule 144A. (b) You understand that such Placing Shares have not been and will not be registered under the Securities Act and may not be offered, sold, pledged or otherwise transferred except (i) in accordance with Rule 144A to a person that you and any other person acting on your behalf reasonably believe is a QIB purchasing for its own account or for the account of a QIB, (ii) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S or (iii) pursuant to an exemption from registration under the Securities Act provided by Rule 144 thereunder (if available), in each case in accordance with any applicable securities laws of any State of the United States. (c) You understand that such Placing Shares (to the extent they are in certificated form), unless otherwise determined by the Company in accordance with applicable law, will bear a legend substantially to the following effect: THIS ORDINARY SHARE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER (2) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATIONS UNDER THE SECURITIES ACT OR (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER IF AVAILABLE), IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT FOR RESALES OF THIS ORDINARY SHARE. Prospective purchasers are hereby notified that the Company may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A; 8. If you are a purchaser of Placing Shares outside the United States pursuant to Regulation S and each subsequent purchaser of such Placing Shares in resales prior to the expiration of the distribution compliance period: (a) You are or at the time Placing Shares are purchased will be, the beneficial owner of such Placing Shares and (i) not a US person or resident of Canada, Japan or Australia and you are located outside the United States (within the meaning of Regulation S), Canada, Japan and Australia and (ii) you are not an affiliate of the Company or a person acting on behalf of such an affiliate. (b) You understand that such Placing Shares have not been and will not be registered under the Securities Act and that, prior to the expiration of the distribution compliance period, you will not offer, sell, pledge or otherwise transfer such Placing Shares except (i) in accordance with Rule 144A under the Securities Act to a person that you and any person acting on your behalf reasonably believe is a QIB purchasing for its own account or the account of a QIB or (ii) in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S, in each case in accordance with any applicable securities laws of any State of the United States. (c) You understand that such Placing Shares (to the extent they are in certificated form), unless otherwise determined by the Company in accordance with applicable law, will bear a legend to the following effect: THIS SECURITY HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT. The Company, Hoare Govett, and others will rely upon the truth and accuracy of the foregoing representations, warranties and acknowledgements. Hoare Govett is acting for Shanks in relation to the Placing and the Placing Tender. Hoare Govett will not be responsible to any other person for providing the protections afforded to the customers of Hoare Govett nor for advising any other person on the transactions and arrangements referred to in this letter. CONSISTENT WITH US LAW AND PRACTICE, THE FOLLOWING CAUTIONARY STATEMENTS ARE PROVIDED: Availability of information --------------------------- Neither the Company nor any of its subsidiaries is required to file periodic reports under Section 13 or 15(d) of the US Securities Exchange Act of 1934 (the 'Exchange Act'). The Company has agreed that, for so long as any Ordinary Shares are 'restricted securities' within the meaning of Rule 144(a)(3) under the Securities Act, the Company will, during any period in which it is neither subject to Section 13 or 15(d) of the Exchange Act nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, deliver to the holder or beneficial owner of such restricted securities to any prospective purchaser of the restricted securities designated by any such holder, beneficial owner or prospective purchaser, upon the request of such holder, beneficial owner or prospective purchaser, the information required to be delivered pursuant to Rule 144(d)(4) under the Securities Act. Notice to New Hampshire ----------------------- NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. Enforceability of judgements ---------------------------- The Company is a public limited company incorporated under the laws of the United Kingdom. All of the directors and executive officers of the Company are citizens or residents of countries other than the United States. All or a substantial portion of the assets of such persons and substantially all the assets of the Company are located outside the United States. As a result, it may not be possible for investors to effect service of process within the United States upon such persons or the Company or to enforce against them judgements of US courts, including judgements predicated upon civil liabilities under the securities law of the United States or any State or territory within the United States.

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