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Maclellan Group (MLG)

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Wednesday 08 May, 2002

Maclellan Group

Acquisition of Broadreach

Maclellan Group PLC
8 May 2002

MacLellan Group plc


Acquisition of the entire issued share capital of Broadreach Group Limited


Introduction



The Board of MacLellan Group plc ("MacLellan") or ("the Group") announces that
it has today entered into a conditional contract to acquire the entire issued
share capital of Broadreach Group Limited ("Broadreach").



Initial consideration of £16.88 million is payable on completion and will be
satisfied by the issue to the vendors of 7,647,059 new ordinary shares and £10
million in cash, raised by a vendor consideration placing of 11,111,111 new
ordinary shares at 90p per share, underwritten by Williams de Broe Plc,
MacLellan's Nominated Broker.  Deferred consideration of up to a maximum of £2.5
million, to be satisfied by the issue of further new ordinary shares, valued at
the average middle market price for the three business days prior to allotment,
or cash at MacLellan's option, will be payable if Broadreach achieves new
annualised sales to the value of £7.5 million by the first anniversary of
completion or £10 million of new annualised sales by the second anniversary of
completion. The purchase consideration is subject to downward adjustment if the
defined net assets of Broadreach are less than £403,103. Completion is expected
to be on 13 May 2002. The maximum consideration payable in respect of this
acquisition will be £19.38 million.



The vendors of Broadreach have undertaken to retain the 7,647,059 new ordinary
shares issued to them for at least a 12 month period following allotment of the
shares. Any disposal of shares after this time will be through MacLellan's
broker with a view to maintaining an orderly market.



The maximum percentage of MacLellan's issued ordinary share capital that will be
held by the vendors of Broadreach immediately after completion is 10.3 per cent.



Application has been made for the new ordinary shares to be issued to the
vendors by way of initial consideration and to be issued under the placing to be
admitted to trading on the Alternative Investment Market of the London Stock
Exchange Plc.  It is expected that trading in these new ordinary shares will
commence on 13 May 2002.



Information on Broadreach



Broadreach, founded in 1990, is a national cleaning and support services
business with over 5,000 employees and an annual turnover of approximately £40
million.  With its head office in Hatfield, Hertfordshire, Broadreach provides
coverage across the UK through a nationwide network of regional offices
including offices in Northern Ireland, the Republic of Ireland, Scotland and the
north of England where MacLellan has no offices of its own.



David Evans, Chairman, and Jack Broadley, Managing Director, have been with
Broadreach since its foundation.  David Evans was previously the founder of
Exclusive Office Cleaning Limited and Chairman of Brengreen (Holdings) plc when
it was purchased by BET plc in 1986.  Jack Broadley was Managing Director of the
Exclusive Cleaning group of companies within Brengreen (Holdings) plc and
subsequently became Managing Director (Southern) of the Initial Cleaning
Services activities of BET plc.



Broadreach has grown organically since 1995 at a rate of between 8 per cent. and
21 per cent. per annum and has been operating profitably throughout the period.
It achieved a profit before tax, after restating management's fees to reflect
the basis going forward, of £1.03 million for the 48 weeks ended 3 March 2002 on
turnover of £37.19 million. Broadreach's current net operating margin is just
over 4.0 per cent. on this revised basis.



Broadreach bases its corporate policy on the concept of "partnership" between
itself and its customers. It possesses a high degree of management and
operational expertise in the field of Cleaning and Support Services and its
principal target markets are the retail (approximately 65 per cent. of turnover)
and commercial (approximately 35 per cent. of turnover) market sectors.
Broadreach has a large number of national retailers as major customers.



Reasons for the acquisition



MacLellan's strategy involves increasing the Group's presence in the outsourced
business services market.  Its target markets are the retail, commercial,
industrial and PFI market sectors. Prior to today's announcement it had made
five acquisitions since July 1998 in order to implement its strategy and the
Group's financial performance for the year ended 31 December 2001 showed healthy
organic turnover growth, increased profit levels, 27 per cent. earnings per
share improvement and strong cash generation.



MacLellan is currently Broadreach's fourth largest customer and so their
respective cultures and methods of operation are well known to each other. Jack
Broadley will become Chief Operating Officer and a director of MacLellan
International Limited's Cleaning and Support Services Division and will report
to John Ellis, Managing Director of MacLellan's Integrated Services businesses.
David Evans will offer his services on a consultancy basis.



The combination of MacLellan and Broadreach will offer existing and new
customers a strong nationwide service offering, in particular in the retail and
commercial markets.  There are also opportunities to integrate and improve
certain management and overhead structures, especially where both companies have
overlapping management functions or geographic based structures.  The Directors
of MacLellan believe that this process will take a six month period to achieve
but should result in an annualised benefit of approximately £700,000 per annum.
They estimate that the process of integration will cost approximately £400,000.



Current Trading



MacLellan finished 2001 with a strong pipeline of potential new work and an
order book at its highest ever level. Trading in the current year is in line
with the Director's expectations.



Conclusion



The Directors expect that the combination of MacLellan and Broadreach will be
earnings enhancing for MacLellan's shareholders in the year ending 31 December
2003 and look forward to the new challenges and opportunities available to the
enlarged Group.



Contacts:


John Foley                                            David Currie
Stephen Shipley

MacLellan Group plc                                   Investec Investment Banking
01905 744400                                          0207 597 5970





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