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Maclellan Group (MLG)

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Monday 11 October, 2004

Maclellan Group

Acquisition

Maclellan Group PLC
11 October 2004


11 October 2004

MacLellan Group plc (the "Company" or "MacLellan")

Proposed acquisition of First Security Group Limited ("First Security") for £18
million

Proposed vendor placing of 16,666,667 new ordinary shares at 60p per share to
raise £10 million

MacLellan today announces that it has conditionally agreed to acquire the entire
issued share capital of First Security on a cash and debt free basis with a
normal level of working capital, at a cost of £18 million. MacLellan will make a
further payment of approximately £1.26 million to reflect the excess of First
Security's current working capital position over its agreed normal level. The
acquisition will be funded by a vendor placing pursuant to which MacLellan will
issue 16,666,667 New Ordinary Shares in the Company at the Placing Price and the
extension of MacLellan's existing banking facilities. The principal activity of
First Security is the provision of manned guarding, reception, post-room and
key-holding services.

John Foley, Chief Executive, commented:

"We are delighted that First Security is joining MacLellan. First Security is a
high quality provider of security services and we welcome all its employees into
the MacLellan Group. Our businesses have similar outlooks regarding the delivery
of service provision and we are pleased that the management of First Security is
remaining with the business to provide its customers with an individual, first
class service."

For further information, please contact:

MacLellan Group plc

John R Foley, Chief Executive                             01905 744400

Stephen Shipley, Finance Director                         01905 744400


Investec

David Currie/ Lee Aston                                   020 7597 5970


Williams de Broe Plc

Ian Stanway                                               0121 609 0050


Investec, which is authorised and regulated in the United Kingdom by The
Financial Services Authority in respect of regulated activities, is acting for
MacLellan and no one else in connection with the matters described herein, and
will not be responsible to anyone other than MacLellan for providing the
protections afforded to customers of Investec or for providing advice in
relation to the matters contained in this announcement or any matter concerning
the Proposals. The responsibility of Investec as nominated adviser to the
Company is owed solely to the London Stock Exchange.

Williams de Broe, which is authorised and regulated in the United Kingdom by The
Financial Services Authority in respect of regulated activities, is acting for
MacLellan and no one else in connection with the matters described herein, and
will not be responsible to anyone other than MacLellan for providing the
protections afforded to customers of Williams de Broe or for providing advice in
relation to the matters contained in this announcement or any matter concerning
the Proposals.


11 October 2004

MacLellan Group PLC (the "Company" or "MacLellan")

Proposed acquisition of First Security Group Limited ("First Security") for £18
million

Proposed vendor placing of 16,666,667 new ordinary shares at 60p per share to
raise £10 million

1.         Introduction

MacLellan today announces that it has conditionally agreed to acquire the entire
issued share capital of First Security on a cash and debt free basis with a
normal level of working capital, at a cost of £18 million. MacLellan will make a
further payment of approximately £1.26 million to reflect the excess of First
Security's current working capital position over its agreed normal level. The
acquisition will be funded by a vendor placing pursuant to which MacLellan will
issue 16,666,667 New Ordinary Shares in the Company at the Placing Price and the
extension of MacLellan's existing banking facilities.  The principal activity of
First Security is the provision of manned guarding, reception, post-room and
key-holding services.

2.         Information on First Security

Outline of Operations

First Security was formed in April 1998 following the institutional buy-out of
First Security (Guards) Limited from Orbis plc. First Security has approximately
1,800 trained and vetted personnel, providing a range of security, manpower and
associated support services, including manned guarding, reception, post-room and
key holding. Its "blue-chip" customer base is based largely in London. First
Security works at over 300 sites and its customers include property management
companies, financial institutions, government departments, managing agents and
shopping centres.

In the year ended 31 March 2004, First Security generated an operating profit
(before goodwill and exceptional items) of approximately £2.6 million on sales
of £44.4 million.  As at 31 March 2004, First Security had net assets of
£932,000.

Summary Financials

Set out below is a summary of the consolidated results of First Security for the
three years ended 31 March 2004 which have been extracted from audited accounts:

               Year ended             Year ended             Year ended
               31 March 2002          31 March 2003          31 March 2004
                 £'000                  £'000                  £'000
Turnover         35,323                 38,940                 44,367
Cost of          30,663)               (33,510)               (37,216)
Sales
               --------------------   --------------------   --------------------
Gross profit      4,660                  5,430                  7,151
Administrative   (3,385)                (3,945)                (4,514)
Expenses
               --------------------   --------------------   --------------------
Operating         1,275                  1,485                  2,637
profit *
               ==========             ==========             ==========
* pre goodwill
amortisation
and
exceptional
items
               31 March 2002          31 March 2003          31 March 2004
                   £'000                  £'000                  £'000
               --------------------   --------------------   --------------------
Net Assets         86                     78                    932
                ==========             ==========             ==========

3.         Background to and reasons for the Acquisition

MacLellan has since 1998 pursued a strategy of increasing its presence in the
outsourced business services market and the Company is today the result of the
acquisition of eight companies since that time. The Company has grown its
turnover and profits very considerably since 1998 and now employs approximately
12,000 people. It is recognised as a specialist provider of a wide range of
services in the facilities management market sector.

The Directors believe that the acquisition of First Security will add another
strong "self perform" business to the Group with a good customer base in a
growing market and an important geographic area. It is the Directors' view that
the acquisition of First Security will substantially strengthen the Company's
existing security operations and will result in a more even spread of turnover
between MacLellan's FM, Cleaning and Security activities. The acquisition should
also provide MacLellan with cross selling and cost saving opportunities.

4.         Terms of the Acquisition

Pursuant to the Acquisition Agreement, the consideration for the Acquisition
shall be satisfied as to the sum of approximately £3.6 million by the payment of
cash and/or the issue of Loan Notes (to certain of the management vendors) and
the allotment and issue of £10 million of New Ordinary Shares at the Placing
Price to placees procured by Investec and Williams de Broe. The consideration
includes the further payment of approximately £1.26 million to reflect the
excess of First Security's current working capital position over its agreed
normal level. In addition, approximately £5.6 million will be advanced by
MacLellan to First Security to enable it to discharge existing loan facilities.

The cash element of the consideration (totalling approximately £3.6 million) and
repayment of existing First Security loans (totalling approximately £5.6
million) will be financed from an extension of MacLellan's existing banking
facilities.  The Acquisition is conditional, inter alia, on Admission becoming
effective, which is expected to take place on 14 October 2004.

5.         Details of the Vendor Placing

Investec and Williams de Broe have conditionally procured placees for the New
Ordinary Shares at the Placing Price.

The New Ordinary Shares, when issued, will represent approximately 17.1 per
cent. of the Company's ordinary share capital as enlarged by the allotment of
the New Ordinary Shares and will represent approximately 16.1 per cent. of the
Company's issued ordinary share capital assuming exercise in full of all
outstanding options. The New Ordinary Shares will rank pari passu, with the
Existing Ordinary Shares, including the right to receive all dividends and other
distributions, thereafter declared, made or paid.

The Vendor Placing, which is not underwritten, is conditional, inter alia, upon
the Placing Agreement becoming unconditional and not being terminated in
accordance with its terms and Admission taking place.

The Placing Agreement contains warranties (which are limited in amount and
duration), undertakings and other agreements on the part of the Company and the
Directors in favour of Investec and Williams de Broe. In addition, the Company
has given Investec and Williams de Broe an indemnity which applies in certain
circumstances.

6.         Increase of MacLellan's authorised share capital

Although the Acquisition will be completed within MacLellan's existing
authorised share capital limits, an increase in the Company's authorised share
capital and the Directors' authority to allot such shares will be required in
order for the Company to fully satisfy potential issues of shares in respect of
share options and earn-out consideration. MacLellan intends to post notice of an
extraordinary general meeting of shareholders to consider an ordinary resolution
to increase the Company's authorised share capital and the Directors' authority
to allot shares when it posts its interim results for the six months ended 30
June 2004 to shareholders, which is expected to be on or around 25 October 2004.

7.         Information on MacLellan

Outline of operations

MacLellan is an AIM listed facilities services provider which "self performs" a
wide range of facilities support services to corporate customers in the UK and
Eire.

MacLellan's roots lie in providing technical services to customers in the
industrial market place and it has transferred these same skills to the retail,
commercial and public sectors. MacLellan believes in integration and self
performance so that facilities services are delivered wherever possible by its
own employees in order to guarantee quality and ensure genuine accountability.
It self performs services in a marketplace where sub-contracting is common. An
integrated approach to service provision requires the management and delivery of
a portfolio of facilities services to customers through a single point of
contact.

MacLellan aspires to be the most admired facilities services provider by its
customers and the Board believes that its current strategy will achieve this
goal and deliver healthy growth. MacLellan also pursues an acquisition policy in
order to extend the range of self performed services and/or penetrate new
markets.

Interim Results for the six months ended 30 June 2004

Set out below is a summary of MacLellan's interim results for the six months
ended 30 June 2004 announced on 28 September:
                 6 months to             6 months to         12 months to
                 30 June 2004            30 June 2003        31 December 2003
                 (unaudited)             (unaudited)         (audited)
                      £'000               £'000               £'000
Turnover              86,995              74,850             153,268
Cost of Sales        (75,016)            (66,329)           (132,621)
                    -----------------    -----------------   -----------------
Gross profit         11,979               8,521              20,647
Administrative       (9,095)             (6,065)            (15,023)
Expenses*
                    -----------------    -----------------   -----------------
Operating             2,884               2,456               5,624
profit
                    ========             ========            ========
* pre goodwill
amortisation and
exceptional
items

                 30 June 2004            30 June 2003        31 December 2003
                 (unaudited)             (unaudited)         (audited)
                       £'000               £'000               £'000
                 -----------------       -----------------   -----------------
Net Assets             51,519              46,231              51,201
                   ========                ========            ========

Current trading and prospects

The Company's interim results were announced on 28 September 2004 and there has
been no material change in the financial position of MacLellan since the interim
period end and trading and the development of the Company since the interim
period end have continued in line with Directors' expectations.

8.         Other Information

Admission to AIM, settlement and dealings

Application has been made for the New Ordinary Shares to be admitted to AIM.
Subject to completion of the Acquisition and the Placing, Admission to AIM and
trading in the New Ordinary Shares is expected to commence on 14 October 2004.

9.         Definitions

The following definitions apply throughout this announcement unless otherwise
stated or the context otherwise requires:

"Acquisition"     the proposed acquisition by MacLellan of the entire issued
                  share capital of First Security pursuant to the Acquisition
                  Agreement

"Acquisition      the conditional agreement dated 11 October 2004 between (1)
Agreement"        the Vendors (as defined therein) and (2) MacLellan relating to
                  the acquisition of the entire issued share capital of First
                  Security by MacLellan

"Admission"       admission of the New Ordinary Shares to trading on AIM and
                  such admission becoming effective in accordance with the AIM
                  Rules

"AIM"             a market operated by the London Stock Exchange

"AIM Rules"       the rules relating to the admission of securities to trading
                  on     AIM, as published by the London Stock Exchange from
                  time to time

"Board" or        the board of directors of the Company
"Directors"

"Completion"      completion of the Proposals

"Existing         the Ordinary Shares of MacLellan in issue at the date of this
Ordinary          announcement
Shares"

"First            First Security Group Limited
Security"

"Group"           the Company and its existing subsidiaries
"London Stock     London Stock Exchange plc
Exchange"

"New Ordinary     the 16,666,667 new Ordinary Shares to be issued pursuant to
Shares"           the Vendor Placing

"Ordinary         ordinary shares of 5p each in the capital of the Company
Shares"

"Placing          The conditional agreement dated 11 October 2004 between the
Agreement"        Company, the Directors and Investec relating to the Placing

"Placing Price"   60p per New Ordinary Share

"Proposals"       the Acquisition and the Vendor Placing

"Vendor           the conditional vendor placing by Investec and Williams de
Placing"          Broe of the New Ordinary Shares subject to the terms of the
                  Placing Agreement



                      This information is provided by RNS
            The company news service from the London Stock Exchange