Proposed Acquisition of Tuffnells Parcels Express

RNS Number : 7783W

Connect Group PLC

12 November 2014

NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, NEW ZEALAND, JAPAN, SOUTH AFRICA OR ANY OTHER JURISDICTION IN WHICH THE PUBLICATION, DISTRIBUTION OR RELEASE WOULD BE UNLAWFUL. OTHER RESTRICTIONS ARE APPLICABLE. THE ANNOUNCEMENT IS AN ADVERTISMENT AND DOES NOT CONSTITUTE A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT. NOTHING HEREIN SHALL CONSTITUTE AN OFFERING OF ANY SECURITIES REFERRED TO IN THIS ANNOUNCEMENT. PLEASE SEE THE IMPORTANT INFORMATION SECTION BELOW.

Connect Group PLC

("'Connect Group'" or "the Group")

PROPOSED ACQUISITION OF TUFFNELLS PARCELS EXPRESS

AND UNDERWRITTEN CIRCA £55 MILLION RIGHTS ISSUE

· Connect Group to acquire Tuffnells Parcels Express ("Tuffnells") a leading provider of next day Business to Business ("B2B") of mixed freight / parcel consignments, specialising in items of irregular dimension and weight;

· Leverages Connect Group's core capabilities in time sensitive and efficient delivery in specialist markets;

· A strong standalone business with proven track record underpinned by a large, fragmented and growing market;

· Provides the Group with a national distribution network with potential opportunities to enhance the Group's existing operations in the medium term, such as Pass my Parcel;

· The Acquisition is a significant strategic opportunity and a key step in the Group's medium term diversification ambitions;

· Initial consideration of £113.4m on a multiple of 6.3x LTM Adjusted EBITDA¹, funded through recently extended debt facilities and circa £55m Rights Issue. Additional £15.3m deferred consideration subject to performance and retention conditions over a three year period;

· Run rate cost synergies of £2.0m per annum expected by year three and opportunity for additional revenue synergies through shared network and distribution capabilities;

· Strong financial effects of the transaction, being earnings enhancing in Year 1 and substantially enhancing in Year 3, with return on invested capital ahead of the Group's cost of capital in first full year²; and

· Strong cash generation supports continuation of the Group's progressive dividend policy

Background to the transaction

Connect Group, a leading specialist distributor operating in three divisions; News & Media, Books and Education & Care, today announces the proposed acquisition of the entire issued share capital of The Big Green Parcel Machine Holding Company Limited, whose principal subsidiary trades as Tuffnells Parcels Express on a debt free basis.

Tuffnells is a leading provider of next-day B2B delivery of mixed freight / parcel consignments, specialising in items of irregular dimension and weight ("IDW"), examples of which include bulky furnishings, building materials and automotive parts. Tuffnells offers distribution coverage throughout the UK through a network of 34 depots and operates a largely depot-to-depot operational model, providing over 10 million deliveries per annum through a wide range of services to over 4,200 customers focusing on SMEs.

As a specialist IDW freight/parcel handler, Tuffnells differentiates itself through its ability to efficiently sort mixed freight (for example, parcels and pallets) within one organisation, handling items too large and too awkward for automated networks. It plays a critical role as the supply chain partner for many of its customers providing time sensitive and complex deliveries that are essential to their businesses. The commercial and operational model positions the business well within its core market.

A large majority of Tuffnells' customers are regional or locally based, and their customer service and sales functions are structured to build local relationships and the provision of bespoke services which traditional carriers don't match. Connect Group's Directors estimate Tuffnells core addressable market to be worth £740m, and believe that this market is expected to grow at 3 - 4 per cent. per annum.

For the year ended 31 December 2013 revenue for Tuffnells was £127.8 million, up 11.5 per cent. on the prior year, with a three-year CAGR of 7.6 per cent., Adjusted EBITDA for the year ended 31 December 2013 was £15.2 million, up 17.2 per cent. on the prior year, with a three-year CAGR of 9.8 per cent. Twelve month revenue to 31 August 2014 was £138.5 million and Adjusted EBITDA was £16.0 million¹.

Tuffnells has an experienced and proven management team with an established track record that has delivered a consistently strong financial performance, underpinned by continued revenue and profit growth as well as attractive cash generation. The business is positioned well with considerable potential for future growth.

The Acquisition is on a debt-free basis for an initial consideration of £113.4 million, resulting in a transaction multiple of 6.3x LTM Adjusted EBITDA¹ payable on completion and deferred consideration of up to a further maximum amount of £15.3 million. The total initial consideration is payable in cash to all Sellers on completion and the balance is payable in cash or Ordinary Shares to the Tuffnells Management Sellers and Option Sellers subject to the achievement of certain financial targets and their continued employment over a period of up to three years.

The Acquisition is being funded partly through extended debt facilities by a circa £55m Rights Issue and will result in proforma leverage for Connect Group of c.2.0x net debt to Adjusted EBITDA with a strong focus on future deleveraging and maintaining a progressive dividend policy for the enlarged Group.

Rationale and Highlights of the Transaction include:

The Acquisition represents a significant strategic opportunity for the Connect Group and, in the opinion of the Directors, offers the following benefits:

· a good strategic fit with the Connect Group's existing core competencies in time sensitive specialist distribution;

· a business with a strong track record, well positioned for further growth, and able to build upon its leading position in a market with sustainable growth characteristics;

· in line with the Group's ambition over the medium term to derive at least 50 per cent. of profits from outside of newspaper and magazine wholesaling;

· adds value to the organic revenue growth opportunities for the Enlarged Group, in particular via provision of a national distribution network;

· the opportunity to achieve pre-tax cost synergies across the Enlarged Group of £2.0 million per annum within three years and the potential to generate revenue synergies from shared infrastructure;

· creates significant value for shareholders:

o EPS accretive in year 1 and substantially accretive by year 3³

o Post tax ROIC above cost of capital in year 1²

· in addition, the strong cash generation of Tuffnells supports the Group's progressive dividend policy.

Following Completion, Tuffnells will operate within the Enlarged Group as a separate division, adding scale and supporting future emerging organic opportunities.

The Connect Group's strategic ambition is to generate 50 per cent. of profits from activities outside newspaper and magazine wholesaling over the medium term, and the proposed Acquisition of Tuffnells represents a significant step towards achieving this ambition.

Financing

The Company proposes to finance the initial consideration through:

· its recently extended debt facilities of £50.0 million; and

· the proceeds of the 2 for 7 Rights Issue at 102.0 pence per New Ordinary Share, being approximately £52.3 million, net of expenses.

Due to the size of the Acquisition in relation to the Company, the Acquisition is classified as a Class 1 transaction for the purposes of the Listing Rules, and therefore requires the approval of Connect Group's Shareholders.

A combined Class 1 circular and prospectus ("the Prospectus") containing further details of the Acquisition and Rights Issue and containing the notice convening the General Meeting (to be held at 10 a.m. on Monday 1 December 2014) will be sent to Connect Group shareholders as soon as practicable.

Mark Cashmore, Group Chief Executive of Connect commented:

"We are delighted to be announcing the acquisition of Tuffnells today, which we believe offers significant strategic and commercial opportunities for the Enlarged Group. The addition of Tuffnells will see us broaden our reach into an area of specialist distribution which complements our core skills and competences of time sensitive distribution with high levels of service and efficiency.

"The transaction is expected to be significantly earnings enhancing for our shareholders and accelerates our clearly articulated diversification strategy. The Group remains focused on growing profits and generating free cash flow to support our progressive dividend policy."

Lloyd Dunn, Managing Director of Tuffnells commented:

"I am delighted that Connect Group has recognised Tuffnells' leading expertise and future growth prospects. By combining our businesses we will immediately benefit from opportunities to share skills and create synergies. We are already planning for strong standalone growth and expect there will be significant further benefits as we combine with Connect Group to deliver for the next phase of our development."

¹Calculated on the basis of (i) Tuffnells' Adjusted EBITDA for the 12 months to 31 August 2014 (unaudited) of £16.0 million plus anticipated cost synergies of £2.0 million, and (ii) Initial Consideration of £113.4 million, maximum consideration of £128.7 million, each as described in more detail in this announcement.

² Year 1 post tax return on investment capital based on a full year pro-forma basis. Current Connect Group cost of capital for period ended 31 August 2014 reported as 9.0 per cent.

³This is not intended as a profit forecast

………………………………………………………………………………………………………………………………………………………..

A meeting for analysts will be held at the office of Buchanan, 107 Cheapside, London, EC2V 6DN on 12 November 2014 commencing at 10.30 a.m.

If you are unable to attend, a live conference call facility is available by dialling one of the following numbers, approximately 5 minutes before the meeting starts

· From UK: 0808 237 0040

· Rest of world: +44 203 428 1542

· Participant pass code: 52014136#

· A separate audio webcast will also be available on:

http://vm.buchanan.uk.com/2014/connectgroup121114/registration.htm

……………………………………………………………………………………………………………………………………………….

J.P. Morgan Cazenove and Liberum Capital are acting as Joint Sponsors and Financial Advisors in connection with the Acquisition. J.P. Morgan Cazenove and Liberum Capital are acting as Joint Bookrunners in connection with the Rights Issue. Lazard & Co. Ltd is acting as Independent Financial Adviser in connection with the Rights Issue. Herbert Smith Freehills is acting as legal adviser to the company. Simmons & Simmons LLP is acting as legal adviser to the Joint Sponsors and Joint Bookrunners.

This preceding summary should be read in conjunction with the full text of the following announcement and its appendices, together with the Prospectus which is expected to be published today.

Indicative abridged timetable

Dates	Event
12 November 2014	Announcement of Acquisition and Rights Issue
12 November 2014	Notice of General Meeting and the Form of Proxy posted to shareholders
27 November 2014 - close of business	Record date for entitlements under Rights Issue
27 November 2014 - 10 a.m.	Latest date for receipt of Forms of Proxy for the General Meeting
1 December 2014	General Meeting
2 December 2014	Admission and commencement of dealing in New Ordinary Shares (nil paid)
16 December 2014 - 11 a.m.	Last time and date for acceptance
17 December 2014	Dealings in New Ordinary Shares to commence on the London Stock Exchange fully paid and expected date of announcement of results of the Rights Issue through a Regulatory Information Service

Enquiries:

Connect Group PLC
Mark Cashmore, Group Chief Executive
Nick Gresham, Chief Financial Officer Today: 020 7466 5000 Thereafter: 01793 563641
www.connectgroupplc.com
Buchanan
Jeremy Garcia, Gabriella Clinkard Tel: 020 7466 5000

www.buchanan.uk.com

J.P. Morgan Cazenove

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

+44 (0) 20 7588 2828

Richard Walsh

Guy Bomford

Laurene Danon

Liberum Capital Limited

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

+44 (0) 20 3100 2228

Chris Bowman

Richard Bootle

Steven Tredget

Lazard & Co., Ltd

(Independent Financial Adviser in connection with the Rights Issue)

+44 (0) 20 7187 2000

Nick Fowler

Matthew Knott

About Connect Group PLC:

Connect Group PLC is a leading specialist distributor operating in large and diverse markets. The Group has three separate divisions, connecting suppliers to customers in an efficient, knowledgeable and service oriented way:

· Connect News & Media - Encompassing: Smiths News and Dawson Media Direct. Smiths News is the UK's largest newspaper and magazine wholesaling business with an approximate 55per cent. market share. It distributes newspapers and magazines on behalf of the majority of the major national publishers as well as a large number of regional publishers serving approximately 30,000 customers across England and Wales, including large general retailers as well as smaller independent newsagentswith approximately 40 million newspapers supplied weekly; Dawson Media Direct is an international media direct business supplying newspapers, magazines and inflight entertainment technology and content to over 80 airlines in 50 countries. In October 2014, the Connect Group announced the launch of Pass My Parcel, a new wholly-owned 'click and collect' delivery service to be operated by the News Business with Amazon as its first client. The Directors consider it to be an important organic opportunity with significant potential.

· Connect Books - Combining a number of recognised brands in print and digital bookselling, including Bertrams, Dawson Books and Wordery. A leading distributor of physical and digital books, the division serves over 8,200 customers in approximately 100 countries, with over 156,000 in stock titles and access to over a further seven million consumer and twenty million academic titles.

· Connect Education & Care - A leading independent supplier of consumable products through The Consortium and West Mercia Supplies. The division currently holds an approximate 5 per cent. market shareof the estimated addressable market, compromising the consumables element of education spend and serves over 30,000customers with an extensive range of over 40,000 products across a branded, own-brand and value range, including stationery, arts and craft and cleaning.

IMPORTANT NOTICES

The capitalised terms not otherwise defined in this announcement have the meanings given to them set out in Part XXII of the Prospectus. This announcement has been issued by and is the sole responsibility of the Company.

This announcement is not a prospectus but an advertisement and investors should not acquire any Nil Paid Rights, Fully Paid Rights or New Ordinary Shares referred to in this announcement except on the basis of the information contained in the Prospectus. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. This announcement cannot be relied upon for any investment contract or decision. The information in this announcement is subject to change.

A copy of the Prospectus when published will be available from the registered office of the Company and on the Company's website at www.connectgroupplc.com provided that the Prospectus will not, subject to certain exceptions, be available (whether through the website or otherwise) to Shareholders in the Excluded Territories. Neither the content of the Company's or Tuffnell's websites nor any website accessible by hyperlinks on the Company's or Tuffnell's websites is incorporated in, or forms part of, this announcement and no reliance should be placed on them. The Prospectus will give further details of the New Ordinary Shares, the Nil Paid Rights and the Fully Paid Rights being offered pursuant to the Rights Issue.

The Nil Paid Rights, the Fully Paid Rights, the Provisional Allotment Letters and the New Ordinary Shares have not been and will not be registered under the US Securities Act of 1933 (the "Securities Act"), or with any securities regulatory authority or under the relevant 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, into or 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 in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The New Ordinary Shares are being offered and sold (i) outside the United States in reliance on Regulation S under the Securities Act; and (ii) in the United States to persons reasonably believed to be "qualified institutional buyers" as defined in Rule 144A under the Securities Act ("Rule 144A") in reliance on Rule 144A or another exemption from the registration requirements of the Securities Act. Prospective investors are hereby notified that the sellers of Ordinary Shares may be relying upon the exemption from the provisions of section 5 of the Securities Act provided by Rule 144A.

Neither the US Securities and Exchange Commission ("SEC"), nor any securities regulatory authority of any State of the United States, has approved the Nil Paid Rights, Fully Paid Rights, Provisional Allotment Letters, New Ordinary Shares or passed upon the adequacy or accuracy of this announcement. Any representation to the contrary is a criminal offence in the United States.

The distribution of this announcement into jurisdictions other than the United Kingdom may be restricted by law, and, therefore, persons into whose possession this announcement comes should inform themselves about and observe any such restrictions and take legal advice, as necessary. Any failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdiction.

This announcement does not constitute an offer to sell or the solicitation of an offer to purchase any securities in any jurisdiction in which such offer or sale would be unlawful prior to registration, exemption from registration or qualification under the securities laws of any jurisdiction. In particular, the information contained herein is not for release, publication or distribution, directly or indirectly, in or into Australia, Canada, New Zealand, Japan, South Africa, the United States or any other Excluded Territory and should not be distributed, forwarded to or transmitted in or into any jurisdiction where to do so might constitute a violation of the securities laws or regulations of such jurisdiction. No public offering of the Provisional Allotment Letters, the Nil Paid Rights, the Fully Paid Rights or the New Ordinary Shares is being made in any such jurisdiction.

No statement in this announcement is intended to be a profit forecast for any period, or a profit estimate, and no statement in this announcement should be interpreted to mean that the earnings or earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share of the Company.

This announcement does not constitute a recommendation concerning the Rights Issue. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each Shareholder or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

J.P. Morgan Securities plc, which is authorised in the United Kingdom by the Prudential Regulatory Authority ("PRA") and regulated by the PRA and the FCA in the United Kingdom, and J.P. Morgan Limited, Lazard and Liberum, which are each authorised and regulated in the United Kingdom by the FCA, are each acting exclusively for the Company and no-one else in connection with the Acquisition, Rights Issue and Admission, will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Acquisition, the Rights Issue or Admission and will not be responsible to anyone other than the Company for providing the protections afforded to their respective clients, or for providing advice, in relation to the Acquisition, the Rights Issue, Admission or any other transaction or arrangement referred to herein.

Apart from the responsibilities and liabilities, if any, which may be imposed on J.P. Morgan Securities plc, J.P. Morgan Limited, Lazard or Liberum by FSMA or the regulatory regime established thereunder, none of J.P. Morgan Securities plc, J.P. Morgan Limited, Lazard or Liberum (and none of their respective Directors, officers, employees or advisors) accepts any responsibility whatsoever, or makes any representation or warranty, express or implied, in relation to the contents of this announcement, including its accuracy, completeness or for any other statement made or purported to be made by it or on behalf of it, the Company, the Directors or any other person, in connection with the Company, the Ordinary Shares, the Acquisition, the Rights Issue or Admission and nothing in this announcement shall be relied upon as a promise or representation in this respect, whether as to the past or the future. Each of J.P. Morgan Securities plc, J.P. Morgan Limited, Lazard and Liberum (and each of their respective Directors, officers, employees or advisors) accordingly disclaims to the fullest extent permitted by law all and any responsibility or liability whatsoever, 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.

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

This announcement contains forward looking statements regarding the financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies, budgets, capital and other expenditures, competitive positions, growth opportunities, plans and objectives of management and other matters relating to the Connect Group and Tuffnells. Statements in this announcement that are not historical facts are hereby identified as "forward looking statements". In some instances, these forward looking statements can be identified by the use of forward looking terminology, including the terms "projects", "forecasts", "anticipates", "expects", "believes", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. Such forward looking statements, including, without limitation, those relating to the future strategy business prospects, revenue, and/or capital needs, in each case relating to the Connect Group and Tuffnells wherever they occur in this announcement, are necessarily based on assumptions reflecting the views of the Company, involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward looking statements and speak only as at the respective dates on which they are made. The Company and the Directors expressly disclaim any obligations or undertaking to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable law, the Prospectus Rules, the Listing Rules, the London Stock Exchange Rules or the Disclosure and Transparency Rules.

Additional Information:

1. INTRODUCTION

On 12 November 2014, Connect announced the proposed acquisition of the entire issued share capital of Tuffnells on a debt-free basis for a total consideration of up to £128.7 million comprising initial consideration of £113.4 million payable on Completion (the "Initial Consideration"), and deferred consideration of up to a further maximum amount of £15.3 million. The total Initial Consideration is payable in cash to all Sellers on Completion and the balance (the "Deferred Consideration") is payable in cash or Ordinary Shares to the Tuffnells Management Sellers and Option Sellers subject to the achievement of certain financial targets and (in respect of certain of the Tuffnells Management Sellers) their continued employment over set periods of time (comprising cash and Ordinary Shares). The Connect Group's strategic ambition is to achieve 50 per cent of profits from activities outside newspaper and magazine wholesaling. The proposed acquisition of Tuffnells represents a significant step towards achieving this ambition.

Tuffnells is a leading provider of next-day business-to-business delivery of mixed freight/parcel consignments, specialising in items of irregular dimension and weight ("IDW"), examples of which include bulky furnishings, building materials and automotive parts. Tuffnells offers distribution coverage throughout the UK through a network of 34 depots and operates a largely depot-to-depot operational model, providing services to a diverse customer base. As a specialist IDW freight/parcel handler, Tuffnells differentiates itself through its ability to sort mixed freight (for example, parcels and pallets) within one organisation, then deliver the same in one delivery whilst providing a next-day delivery service.

Tuffnells has an experienced and proven management team with an established track record that has delivered strong financial performance underpinned by continued strong revenue and profit growth as well as attractive cash generation, with considerable potential for future growth. For the year ended 31 December 2013 revenue was £127.8 million, up 11.5 per cent on the prior year, with a three-year CAGR of 7.6 per cent. Adjusted EBITDA for the year ended 31 December 2013 was £15.2 million, up 17.1 per cent on the prior year, with a three-year CAGR of 9.8 per cent. The business continued to perform strongly in the current financial year and as at 31 August had generated last twelve month sales of £138.5 million (unaudited) producing an Adjusted EBITDA of £16.0 million (unaudited).

The Acquisition represents a significant strategic opportunity for the Connect Group and, in the opinion of the Directors, offers the following benefits:

• a clear strategic fit with the Connect Group's existing core competencies in time-sensitive specialist distribution, and in line with the Company's strategic ambition to diversify further away from the Connect Group's traditional newspaper and magazine markets;

• a business with a strong track record, well positioned for further growth, and able to build upon its leading position in a market with sustainable growth characteristics;

• opportunities over time for organic growth across the enlarged Group;

• the opportunity to achieve pre-tax cost synergies across the Enlarged Group of £2.0 million per annum within three years and the potential to generate revenue synergies from shared infrastructure; and

• creating attractive financial returns for Connect Group Shareholders.

Following Completion, Tuffnells will operate within the Enlarged Group as a separate division, adding scale and supporting future organic opportunities.

The Company proposes to finance the Initial Consideration through:

• its recently extended debt facilities of £50 million; and

• the net proceeds of the 2 for 7 Rights Issue at an issue price of 102.0 pence per New Ordinary Share, being approximately £52.3 million, net of expenses.

The Deferred Consideration payable to the Tuffnells Management Sellers and Option Sellers, which is contingently payable over the three year period following Completion, will be satisfied by the issue of Ordinary Shares in the Company or cash. A minimum of fifty per cent of the Deferred Consideration payable to Tuffnells Management Sellers and Option Sellers is to be satisfied by the issue of Ordinary Shares in the Company. Each of these Ordinary Shares will be credited as fully paid and will upon issue rank pari passu in all respects with the other Ordinary Shares in issue at that time, including a deemed right to receive a cash amount equal to the aggregate value of all accrued dividends and other distributions (if any) paid on one Ordinary Shares in respect of the period between either (i) Completion or (ii) the beginning of the relevant financial year for the calculation of the Deferred Consideration, and the date of the allotment of the Consideration Shares.

2. SUMMARY INFORMATION ON CONNECT

Connect is a leading specialist distributor operating in large and diverse markets. In April 2014, the Company renamed and rebranded to "Connect Group PLC" from Smiths News plc. The change of name reflects the Connect Group's progress since its Demerger from WH Smith PLC in 2006 and the Connect Group's ambitions for the future to be a more diversified specialist distribution company.

The Connect Group currently has three separate divisions, connecting suppliers to customers in an efficient, knowledgeable and service oriented way:

Connect News & Media: Encompassing Smiths News and Dawson Media Direct. Smiths News is the UK's largest newspaper and magazine wholesaling business with an approximate 55 per cent market share. It distributes newspapers and magazines on behalf of the majority of the major national publishers as well as a large number of regional publishers serving approximately 30,000 customers across England and Wales, including large general retailers as well as smaller independent newsagents with approximately 40 million newspapers supplied weekly; Dawson Media Direct is an international media direct business supplying newspapers, magazines and inflight entertainment technology and content to over 80 airlines in 50 countries. In October 2014, the Connect Group announced the launch of Pass my Parcel, a new wholly-owned 'click and collect' delivery service to be operated by the News Business with Amazon as its first client. The Directors consider it to be an important organic opportunity with significant potential;

Connect Books: Combining a number of recognised brands in print and digital bookselling, including Bertrams, Dawson Books and Wordery. A leading distributor of physical and digital books, the division serves over 8,200 customers in approximately 100 countries, with over 156,000 in stock titles and access to over a further seven million consumer and 20 million academic titles; and

Connect Education & Care: A leading independent supplier of consumable products through The Consortium and West Mercia Supplies. The division currently holds an approximate 5 per cent market share of the estimated addressable market, comprising the consumables element of the total Government education budget spend and serves over 30,000 customers with an extensive range of over 40,000 products across a branded, own-brand and value range, including stationery, arts and craft and cleaning.

3. SUMMARY INFORMATION ON TUFFNELLS

Tuffnells is a leading UK provider of next day business-to-business delivery of mixed freight/parcel consignments, specialising in the distribution of IDW items. Tuffnells offers distribution network coverage throughout the UK through its depot network and operates a largely direct depot-to-depot operational model, providing services to a diversified customer base. The business operates from 34 depots utilising a fleet of over 930 vehicles and 800 trailers and containers serving over 4,200 customers across a range of industry sectors.

Tuffnells' total revenue for the year ended 31 December 2013 was £127.8 million, with a three-year CAGR of 7.6 per cent. Adjusted EBITDA for the year ended 31 December 2013 was £15.2 million, with a three-year CAGR of 9.8 per cent. As at 31 August 2014 the business had generated last twelve month sales of £138.5 million (unaudited) producing an Adjusted EBITDA of £16.0 million (unaudited). As at 31 August 2014, Tuffnells had gross assets of £58.6m.

	Year ended 31 December			Six months ended 30 June
	2013	2012	2011	2014	2013*
	(£ '000)
Revenue	127,801	114,647	109,286	69,174	61,613
Operating Profit	11,022	10,492	9,196	6,016	5,112
Profit before Tax	8,582	7,445	5,520	4,875	3,844
Profit for the Year/ Period	6,563	5,551	3,944	3,804	3,073
Adjusted EBITDA	15,247	13,015	11,400	7,401	6,405

*unaudited

Tuffnells operates in the large and growing freight/parcel market which the Directors believe is valued at over £5 billion. The Directors estimate that the segment of the core addressable market in which Tuffnells currently operates is worth approximately £740 million in 2013 and is forecast to grow at between 3-4 per cent per annum driven by growth in Tuffnells' core customer sectors, such as bulky furnishings, building materials and automotive parts. However the Directors believe that there is a more positive outlook for small and medium enterprises ("SMEs"), which is Tuffnells' largest customer segment in these sectors. Tuffnells holds a leading market position in IDW consignment handling, delivering over 10 million consignments per annum.

Tuffnells' business model focuses on its ability to be a one stop shop for the handling and express delivery of IDW freight on a national basis. Tuffnells' network coverage across the UK enables it to provide next day delivery to all parts of the United Kingdom.

Tuffnells differentiates itself from other business-to-business delivery providers in that it specialises in the IDW segment of the market. The IDW segment typically requires the use of mechanical lifting or manual handling, in contrast to the automated sortation processes generally adopted by typical parcel operators. As such, most other established delivery services in the UK either do not take, or only occasionally deal with, IDW consignments because their automated operational systems designed for high volume regular parcels lack the capability and flexibility to deal with any significant volume of IDW consignments. Conversely, Tuffnells is well-suited to handle efficiently such IDW consignments, through its manual handling capability, and largely direct depot-to-depot operational model. Tuffnells also differentiates itself from other standard parcel operators in that it is able to handle all types of freight in one collection, and is not limited to one category uniform in nature or size. Tuffnells has the ability to provide sortation for all types of traffic within one organisation, while maintaining a next-day service with strong customer service. This commercial model is underpinned by a rate card process and a discipline quoting system to produce strong operating margins.

Tuffnells specialises in next-day nationwide delivery, but it also offers a wide range of delivery services which it believes addresses its customer needs and provides opportunities for future growth. These services include guaranteed (by 9.30 a.m.) next day delivery, Saturday delivery, an economy service delivered within 72 hours and offshore delivery services. Alongside domestic delivery services, Tuffnells offers a distinctive proposition tailored around localness, one-stop shop, directional trunking and towards SMEs.

4. BACKGROUND TO AND REASONS FOR THE ACQUISITION

The Acquisition represents a significant strategic opportunity for the Connect Group and, in the opinion of the Directors, offers the following benefits.

4.1 A clear strategic fit with the Connect Group's existing core competencies in specialist distribution, and in line with the Company's strategic ambition to diversify further away from the Connect Group's traditional newspaper and magazine markets

Connect aims to be a leading supply chain, trading and distribution specialist in its chosen industry sectors and plans to achieve this by providing an unrivalled customer experience, coupled with market-leading expertise which the Directors believe will allow Connect to continue growing and consistently deliver strong returns to Shareholders.

The Connect Group operates in large markets which the Directors believe favour the role of a specialist distributor, connecting customers with suppliers and adding value through bespoke services and industry expertise. The chosen markets are characterised by a large number of suppliers, a complex-to-manage product range and a diverse and dispersed customer base, typically requiring an efficient and time sensitive distribution service.

The Connect Group has diversified over time from being exclusively a newspaper and magazine wholesale operation, into a provider of time-sensitive specialist distribution services. Connect's strategic ambition is to achieve 50 per cent of profits from outside the newspaper and magazine wholesaling business and the Acquisition represents a significant step towards achieving this strategy. The Acquisition will increase Connect's percentage of underlying operating profits from outside newspaper and magazine wholesaling from 23 per cent (for the year ended 31 August 2014) to 38 per cent on a pro forma basis.

Connect intends to achieve its strategic ambition by creating and growing a balanced portfolio of businesses, making progress in each division by increasing profitability across all core markets. In addition the Company will look to develop organic growth opportunities.

Diversification seeks to protect the Connect Group from risks related to its current operations in the newspaper and magazine markets. Whilst these markets offer the ability at least to maintain profits in the medium term, the Directors believe that the core operation does not provide the Connect Group with sufficient growth potential. The Directors believe that diversifying the Connect Group's revenue and profit through organic and acquisitive growth should lower its risk profile and increase growth opportunities.

The Acquisition provides a significant milestone for the Connect Group, by enabling the Connect Group to achieve a more diversified profit mix as well as incorporating into the Connect Group a business which fits its core competencies and has future growth opportunities.

4.2 A business with a strong track record, well positioned for further growth, and able to build upon its leading position in a market with sustainable growth characteristics opportunities over time for organic growth across the Enlarged Group

Tuffnells has an established track record and has delivered a strong financial performance underpinned by continued strong revenue and profit growth and offers considerable potential for continued future growth. For the year ended 31 December 2013 revenue was £127.8 million, up 11.5 per cent on the prior year, with a three-year CAGR of 7.6 per cent. Adjusted EBITDA for the year ended 31 December 2013 was £15.2 million, with a three-year CAGR of 9.8 per cent.

Tuffnells has a diversified customer base of over 4,200 customers across a range of industry sectors. Tuffnells' scale of infrastructure and market expertise developed over many years have helped to form long-term and sustainable customer relationships.

Tuffnells offers a strong customer service proposition, regularly out-performing competitors, in a service orientated market. The Directors believe there is a strong link between the quality of the service which customers receive from a particular service provider and their willingness to use that provider again in the future, and as such believe the acquisition of a customer focussed business such as Tuffnells will be beneficial to the Connect Group as a whole.

Following Completion, the Enlarged Group's network will comprise 82 distribution centres and depots and 2.03 million square feet of warehouse space, utilising over 3,072 vehicles with 3,050 drivers (including sub-contractors) and the Enlarged Group will have access to the whole of mainland UK.

4.3 The opportunity to achieve pre-tax cost synergies across the Enlarged Group of £2.0 million per annum within three years and to generate revenue synergies from shared infrastructure

The Directors believe that the Acquisition will produce a number of synergies for the Enlarged Group, building to an annual pre-tax cost saving of approximately £2.0 million per annum within three years.

Based on the current integration plan, cost savings are expected to arise in the following areas:

• application of Group operational capability, for example in relation to vehicle routing and scheduling and use of sub-contract drivers, and greater utilisation of Tuffnells' parcel distribution capability across Connect's existing estate;

• procurement savings arising from the increased size and purchasing power of the Enlarged Group, for example in relation to leasing and repairs and maintenance of vehicles; and

• general and administrative savings, for example in relation to administration and insurance costs, without any cash investment required.

The Board expects to realise the above synergies on a phased basis as follows:

• approximately £0.2 million of the pre-tax cost synergies will be realised in the year ending 31 August 2015;

• approximately £1.0 million of the pre-tax cost synergies will be realised in the year ending 31 August 2016; and

• approximately £2.0 million of the pre-tax cost synergies (being the full pre-tax cost synergies) will be realised in the year ending 31 August 2017.

The Board expects that the integration process and the realisation of these synergies will result in non-recurring costs of approximately £1.0 million incurred over two years starting in the year commencing 1 September 2015.

Given the Connect Group's track record and the nature of Tuffnells, the Board is confident that the integration of Tuffnells into the Connect Group can be achieved without undue disruption to the underlying operations of either business whilst still ensuring its strong customer service performance is maintained. Tuffnells will operate as a separate division to help in retaining clear accountability and transparency of performance.

The Board also believes that there is a potential for longer-term network opportunities as well as a number of revenue synergies achievable from greater sharing of resources and infrastructure between Connect divisions and Tuffnells, including for example, in connection with the recently announced "Pass my Parcel" click and collect offering from the News Business with Amazon being the first client of this service. The Board believes that this process of integration will be facilitated by existing service relationships between Tuffnells and Connect divisions. For example, the Group's Education & Care Business is already a customer of Tuffnells.

The anticipated costs savings outlined above are contingent on Completion and could not be achieved independently. The estimated synergies reflect both the beneficial elements and the relevant cost.

4.4 Creating attractive financial returns for Connect Shareholders

The Board believes that, taking into account the business and prospects of the Enlarged Group, the expected synergy benefits and associated costs of achieving them and the impact of the New Ordinary Shares that will be in issue following the Rights Issue, the Acquisition will be earnings enhancing in the year ending 31 August 2015 and significantly earnings enhancing in the year ending 31 August 2017, as well as achieving a post-tax return on invested capital that is higher than the Connect Group's cost of capital in its first full year following Completion on a full year pro-forma basis.[1] The Board believes that the consideration payable in connection with the Acquisition implies an attractive valuation multiple, producing a multiple of 6.3x (based on the Initial Consideration alone) and a multiple of 7.1x (based on the maximum consideration payable in connection with the Acquisition), in each case taking into account projected synergies of £2.0 million per annum.[2]

Tuffnells has a history of strong profit and cash generation, with future growth opportunities. The Tuffnells business is not capital intensive and Connect can continue to invest for growth in the Tuffnells business whilst maintaining a strong cash yield, supporting the Enlarged Group's ability to maintain its existing progressive dividend policy.

5. KEY TERMS OF THE ACQUISITION

Under the terms of the Acquisition, Smiths News Holdings Limited, a wholly-owned subsidiary of the Company, will acquire the entire issued share capital of The Big Green Parcel Holding Company Ltd (the holding company for Tuffnells Parcels Express Limited) on a debt-free basis. The consideration payable by the Company to the Sellers is up to £128.7 million (comprising initial cash consideration of £113.4 million payable on Completion, and deferred consideration of up to a further maximum amount of £15.3 million) is payable to the Tuffnells Management Sellers and Option Sellers in cash and Ordinary Shares subject to the achievement of certain financial targets and (in respect of certain of the Tuffnells Management Sellers) their continued employment for set period of times of at least 12 months in the case of Lloyd Dunn, the managing director of Tuffnells, and up to three years for the other Tuffnells Management Sellers.

The Acquisition Agreement contains customary warranties, undertakings and conditions for a transaction of this nature.

Completion of the Acquisition is conditional upon certain conditions being satisfied, including:

• the Resolution being passed by Shareholders approving the Acquisition;

• admission of the New Ordinary Shares to the Official List of the UKLA, trading on the London Stock Exchange becoming effective and receipt by the Company of the proceeds of the Rights Issue;

• there not having occurred any event having a material adverse change on Tuffnells Group between the date of the Acquisition Agreement and the date of Completion; and

• no indication having been received from the CMA between the date of the Acquisition Agreement and the date of Completion that it is or may be considering a merger control investigation in respect of the Acquisition, or if there has been any such indication then:

o there is no initial enforcement order in force for the purpose of preventing or reserving pre-emptive action with respect to the Acquisition; and

o the CMA has issued a decision in terms satisfactory to the Purchaser that it has no intention to make a Phase 2 reference (such decision being either unconditional or conditional on the CMA's acceptance of undertakings in lieu which are satisfactory to the Purchaser) or the applicable time period for the CMA to make such a reference has expired without it having made such a reference.

• In the event that such conditions are not satisfied (or, where capable of waiver, waived) and Completion has not occurred before 1 January 2015, the Acquisition Agreement will terminate with immediate effect.

6. FINANCING THE ACQUISITION

The Company proposes to finance the Initial Consideration required for the Acquisition through a combination of:

• Debt Facilities: the Connect Group has recently extended its bank facilities, supported by four of its existing banking syndicate. Together these banks have agreed to provide a £50.0 million extension to the Company's existing £200 million of committed facilities. The new facility of £250 million is committed through to November 2018, which provides funding for the Acquisition and significant future headroom for the Enlarged Group going forward; and

• Rights Issue: the net proceeds of the 2 for 7 Rights Issue at 102.0 pence per New Ordinary Share, being approximately £52.3 million, net of expenses. The key terms of the Rights Issue are set out in paragraph 8 of this letter.

7. FINANCIAL EFFECTS OF THE RIGHTS ISSUE AND THE ACQUISITION

8. KEY TERMS OF THE RIGHTS ISSUE

The Connect Group is proposing to raise approximately £52.3 million, net of expenses, from the Rights Issue. Pursuant to the Rights Issue, the Company is proposing to offer circa 54.1 million New Ordinary Shares to Qualifying Shareholders other than to those Shareholders with a registered address, or resident in, one of the Excluded Territories or, subject to certain exceptions, the United States. The offer is to be made at 102.0 pence per New Ordinary Share, payable in full on acceptance by no later than 11:00 a.m. on 16 December 2014. The Rights Issue Price represents a 33.7 per cent discount to the theoretical ex-Rights price based on the closing middle-market price of 168.8 pence per Ordinary Share on 11 November 2014 (being the Last Practicable Date).

The Rights Issue will be made on the basis of:

2 New Ordinary Shares at 102.0 pence per New Ordinary Share for every 7 Existing Ordinary Shares

held by Qualifying Shareholders at the close of business on the Record Date.

Entitlements to New Ordinary Shares will be rounded down to the nearest whole number and fractional entitlements will not be allotted to Shareholders and will be disregarded.

The New Ordinary Shares, when issued and fully paid, will rank pari passu in all respects with the Existing Ordinary Shares, including the right to receive dividends or distributions made, paid or declared after the date of issue of the New Ordinary Shares.

The Rights Issue is underwritten by the Underwriters pursuant to the Underwriting Agreement. The principal terms of the Underwriting Agreement are summarised in Part XXI (Additional Information) of this document.

The Rights Issue will result in up to 54.1 million New Ordinary Shares being issued (representing approximately 28.6 per cent. of the existing issued share capital and 22.2 per cent. of the enlarged issued share capital immediately following completion of the Rights Issue).

The Rights Issue is conditional, inter alia, upon:

• the Underwriting Agreement having become unconditional in all respects save for the condition relating to Admission;

• Admission of the Nil Paid Rights becoming effective by not later than 8:00 a.m. on 2 December 2014 (or such later time and date as the Joint Sponsors and the Company may agree); and

• the passing, without material amendment, of the Resolution.

Connect can give notice that it wishes to terminate the Acquisition Agreement prior to Completion of the Acquisition if certain conditions, as detailed within the Acquisition Agreement, are not satisfied. It is therefore possible that the Rights Issue could proceed but the Acquisition does not. In such circumstances, and to the extent possible in the circumstances, the Company intends to refund the net proceeds raised by the Right Issue to Shareholders in a tax efficient way.

Certain resolutions authorising the allotment of further shares in the Company and the waiver of pre-emption rights in connection with a rights issue were passed at the annual general meeting of the Company held on 23 January 2014. These authorities will be relied upon for the purposes of the Rights Issue.

Applications will be made to the UKLA for the New Ordinary Shares to be admitted to the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective and that dealings in the New Ordinary Shares (nil paid) will commence by 8.00 a.m. on 2 December 2014 and in the New Ordinary Shares (fully paid) by 8.00 a.m. on 17 December 2014.

The Directors are fully supportive of the Rights Issue. Each of the Directors who hold Ordinary Shares either intends, to the extent that they are able, to take up in full their rights to subscribe for New Ordinary Shares under the Rights Issue or to sell a sufficient number of their Nil Paid Rights during the nil paid dealing period to meet the costs of taking up the balance of their entitlements to New Ordinary Shares.

9. MANAGEMENT AND EMPLOYEES

The senior management of both Connect and Tuffnells possess significant experience and success in the distribution industry, with the Tuffnells senior management team having between them over 100 years' experience in the industry. The Tuffnells senior management team includes Lloyd Dunn, Managing Director, Ian Brewer, Finance Director, Robin Batchford, Systems Director, Graham Hollingdrake, Operations Director and Chris Tresadern, Sales & Commercial Director. Further information on the senior management team will be contained in the Prospectus. The majority of the Tuffnells senior management team have agreed to remain with the Tuffnells business following Completion (save for those senior managers anticipated to retire in the ordinary course of the business). The Directors believe that the combined knowledge and expertise of the existing Tuffnells senior management team and the Connect senior management team will help Tuffnells' anticipated growth, assist a smooth transition into the Enlarged Group and assist in the delivery on the Enlarged Group's strategy. Following Completion, the Board will review and provide appropriate support for the continuing development of Tuffnells' management team, as well as considering the appropriate management structure for Tuffnells in the longer-term, utilising the skills and experiences of Tuffnells and Connect's existing management teams.

The Board is pleased that Lloyd Dunn, the managing director of Tuffnells, has agreed to join the Connect Group Executive Committee for a period of at least 12 months following Completion. As part of the Enlarged Group's succession planning Lloyd Dunn will assist with the recruitment of his successor. It is expected that once such successor has been appointed Mr Dunn will become executive chairman of Tuffnells before retiring from the Enlarged Group on or around 31 March 2016. No changes will be made to the Board as a result of the Acquisition.

The Board believes there is strong alignment and close business fit between Connect and Tuffnells, with a consistent belief in striving for market leading excellence through providing high quality customer service and valuing long term partnerships. As such, the Board attaches importance to the skills and experience of Tuffnells' existing management and employees, and believes that there will be opportunities for them to excel within the Enlarged Group. The Acquisition Agreement provides for the Deferred Consideration which is payable to the Tuffnells Management Sellers and Option Sellers to be paid to the Tuffnells Management Sellers and Option Sellers, subject to certain conditions including (in respect of certain of the Tuffnells Management Sellers) continuation of employment for set periods and the financial performance of Tuffnells over the three-year period following Completion.

The Board does not currently anticipate any significant headcount reductions for the Enlarged Group following Completion and the Board intends to invest in and grow the Tuffnells business offering greater development opportunities.

Following Completion, the Enlarged Group's headquarters and registered office will remain the current registered offices of the Company.

10. DIVIDEND POLICY OF THE ENLARGED GROUP

Connect paid dividends per Ordinary Share of 9.3 pence and 8.6 pence for the years ended 31 August 2013 and 31 August 2012, respectively. The proposed final dividend of 6.6 pence per Ordinary Share for the year ended 31 August 2014 announced on 15 October 2014 in Connect's Preliminary Results Announcement will be adjusted to reflect the impact of the Rights Issue in connection with the Acquisition. The proposed final dividend will be adjusted to 6.0 pence per Ordinary Share to reflect the bonus element associated with the Rights Issue and both Existing Ordinary Shares and New Ordinary Shares will be entitled to receive this dividend.[4] The proposed final adjusted dividend of 6.0 pence per Ordinary Share is subject to approval by Shareholders at the Annual General Meeting on 4 February 2015 and, if approved, will be paid on 6 February 2015 to Shareholders on the register of members of at close of business on 9 January 2015.

Following the Acquisition, Connect intends to maintain its existing progressive dividend policy, having regard to the availability of distributable reserves and cash, and taking into account the Enlarged Group's working capital and investment requirements.

11. CURRENT TRADING, TRENDS AND PROSPECTS

11.1 Connect

On 15 October 2014, the Connect Group announced its audited preliminary results for the year ended 31 August 2014.

In the year ending 31 August 2014 the Connect Group delivered a steady financial performance whilst continuing to enhance shareholder returns. Total underlying revenue of £1.8 billion, was marginally ahead of the prior year, underlying profit before tax of £50.0 million was up 0.2 per cent versus the prior year reflecting a good performance in both the News & Media Division and the Education & Care Division, offset by under-performance in the Books Division. Statutory profit before tax for the year was £43.1 million, up from £38.9 million from the previous year.

Underlying earnings per Ordinary Share at 21.7 pence was up 2.8 per cent with a lower effective tax rate, predominantly due to prior year releases, enhancing earnings growth.

Free cash flow was a strong result at £37.2 million, up 14.1 per cent on last year.

The News & Media Division, our largest division, delivered an 8.1 per cent increase in underlying operating profit, with better than forecast sales coupled with continued delivery of its efficiency plans. News distribution underlying operating profit was up 7.3 per cent to £42.9 million supported by strong supermarket promotions and World Cup sales. The Connect Group made a number of investments that leverage the core skills and infrastructure of the business, the highlight being the launch of 'Pass my Parcel', an innovative parcel delivery service with potential for significant growth. DMD, the media distribution business, delivered underlying operating profit of £2.3 million, up 22.8 per cent; the business now has over 50 per cent of revenues secured on long-term contracts.

The Books Division had a disappointing year, suffering from market weakness as well as changes to sales mix impacting margin and cost pressures. Underlying operating profit decreased from £7.2 million to £2.5 million. The Connect Group's recovery actions are now taking effect and have stabilised the business. A new Managing Director has recently been appointed and will be supported by a strengthened management team. The Board remains confident there are opportunities for growth in this market, highlighted by the trading of Wordery.

Education & Care Division delivered a 5.0 per cent increase in underlying operating profit, with good growth in the division's core education categories which was maintained across the vital peak trading period. The Education & Care Division made significant development to its service proposition and saw strong levels of growth in core categories, performing well in the key peak trading period.

We maintain our ambition of achieving 50 per cent of profits from activities outside of newspaper and magazine wholesaling through a combination of both organic and acquisitive growth. 'Pass my Parcel' highlights the opportunity of future organic revenue streams with scalable growth, and the Connect Group continues to evaluate potential future acquisitions from a pipeline of opportunities across a range of markets.

In the year ended 31 August 2014 the Connect Group's strong cash flow generation reduced net debt and strengthened our financial position; making more of our committed bank facility available for future acquisitions.

The Connect Group is committed to generating strong shareholder returns and in the year ended 31 August 2014 delivered EPS and DPS growth. Recent trading is in line with current management expectations and we remain in a good position to build on the progress made in the last financial year.

11.2 Tuffnells

In the six month period ended 30 June 2014 Tuffnells continued to grow sales and EBITDA in line with trends seen over the last few years. Total revenue of £69.2 million was £7.6 million or 12.3 per cent ahead of the six month period ended 30 June 2013, resulting in an Adjusted EBITDA of £7.4 million which was £1.0 million or 15.6 per cent ahead of the same period last year. This growth was driven by increased consignment volumes compared to the same period in the prior year, which has been further enhanced by an increase in the revenue per consignment. During this period the business has continued to increase capacity by opening new depots. In the six month period ended 30 June 2014 profit before tax was £4.9 million which was £1.1 million or 25.6 per cent ahead of the prior year.

Since the 30 June 2014 the business has continued to trade strongly.

Recent trading remains in line with management expectations and trends from the first six months.

12. GENERAL MEETING

A notice convening a General Meeting to be held at the offices of Herbert Smith Freehills LLP, Exchange House, Primrose Street, London, EC2A 2EG at 10:00 a.m. on Monday 1 December 2014 at which the Resolution will be proposed will be published in due course. The purpose of the General Meeting is to consider and, if thought fit, pass the Resolution as set out in full in the Notice of General Meeting.

Because of the size of Tuffnells when compared with Connect, the Acquisition is classified under the Listing Rules as a Class 1 transaction and therefore requires the approval of Shareholders. The Resolution will be proposed as an ordinary resolution requiring a simple majority of votes in favour. The Resolution proposes that the Acquisition be approved and the Directors be authorised to take all steps and enter into all agreements and arrangements necessary or desirable to implement the Acquisition.

Your attention is again drawn to the fact that the Acquisition is conditional and dependent upon the Resolution being passed (there are also additional conditions which must be satisfied before the Acquisition and the Rights Issue can be completed).

Shareholders should be aware that it is possible that, subsequent to the Admission becoming effective, the Acquisition could fail to complete.

For further information in relation to the Resolution to be proposed at the General Meeting, see the Notice of General Meeting at the end of this document.

13. ACTION TO BE TAKEN

13.1 General Meeting

If you are a Shareholder, you will receive a Form of Proxy for use at the General Meeting. Whether or not you intend to be present at the General Meeting, you are asked to complete the Form of Proxy in accordance with the instructions printed on it and to return it to the Company's registrar, Equiniti, at Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA as soon as possible and, in any event, so as to arrive not later than 10.00am on 27 November 2014.

You may also submit your proxies electronically at www.sharevote.co.uk and logging into your share portal account or registering for the share portal if you have not already done so. To register for the share portal you will need your investor code set out on the form of proxy. Once registered, you will be able to vote immediately.

If you hold shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction to the issuer's agent, ID RA19, so that it is received no later than 10.00am 27 November 2014.

The completion and return of the Form of Proxy, or completion of a proxy electronically, will not preclude you from attending the General Meeting and voting in person if you wish to do so.

13.2 Rights Issue

The latest time for acceptance by Qualifying Shareholders under the Rights Issue is 11.00a.m. 16 December 2014. The procedure for acceptance and payment will be set out in the Prospectus. Further details also appear in the Provisional Allotment Letter which will be sent to all Qualifying Non-CREST Shareholders (other than, subject to certain exceptions, those Qualifying Non-CREST Shareholders with a registered address in the United States or Excluded Territories).

If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant, fund manager or other independent financial adviser authorised under FSMA if you are in the United Kingdom or, if you are not, from another appropriately authorised independent financial adviser.

14. RECOMMENDATION

The Board believes the Acquisition and the Rights Issue to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolution to be put to the General Meeting as they intend to do (or seek to procure to be done) in respect of their own beneficial holdings of 822,040 Connect Ordinary Shares in aggregate, representing approximately 0.43 per cent of the existing issued ordinary share capital of Connect.

The Directors are fully supportive of the Rights Issue. Each of the Directors who hold Ordinary Shares either intends, to the extent that he is able, to take up in full his or her rights to subscribe for New Ordinary Shares under the Rights Issue or to sell a sufficient number of their Nil Paid Rights during the nil paid dealing period to meet the costs of taking up the balance of their entitlements to New Ordinary Shares.

[1] This statement is not intended as a profit forecast.

2 Calculated on the basis of (i) Tuffnells' 12 month Adjusted EBITDA for the 12 months to 31 August 2014 (unaudited) of £16.0, million, and (ii) Initial Consideration of £113.4 million, maximum consideration of £128.7 million and anticipated synergies of £2.0 million, each as described in more detail in this document."

3 This statement is not intended as a profit forecast.

4 DPS adjusted for Rights Issue Bonus Factor Adjustment of 91.2 per cent, calculated as TERP and
closing price as of 11 November 2014

IMPORTANT NOTICES

INFORMATION REGARDING FORWARD LOOKING STATEMENTS

[1] This statement is not intended as a profit forecast.

[2] Calculated on the basis of (i) Tuffnells' 12 month Adjusted EBITDA for the 12 months to 31 August 2014 (unaudited) of £16.0, million, and (ii) Initial

Consideration of £113.4 million, maximum consideration of £128.7 million and anticipated synergies of £2.0 million, each as described in more detail in this document."

This information is provided by RNS

The company news service from the London Stock Exchange

END

ACQGXBDBSSBBGSD

Companies

Smiths News (SNWS)

Tuesday, 14th May 2024

COMPANIES COVERED:

VOD OTB CURY

Currys impressed this morning as sales performance improved after Christmas, whilst the reshaped Vodafone also found support from full yar earnings. On The Beach was however looking stranded as the cost of living crisis continues to bite.

Full Archive

UK 100

Latest directors dealings

32 minutes ago OSB Group
35 minutes ago RM
36 minutes ago Dr. Martens
37 minutes ago FirstGroup
44 minutes ago RM

All directors dealings today