Proposed MBO of Building Div.

Gleeson(M J)Group PLC
12 July 2005



              M J GLEESON GROUP PLC ('M J GLEESON' OR THE 'COMPANY')
          PROPOSED MANAGEMENT BUY-OUT OF THE GLEESON BUILDING DIVISION
                                  12 July 2005

1. Introduction

M J Gleeson today announces that its subsidiary Gleeson Construction Services
Limited ('GCSL') has today entered into a business purchase agreement (the
'Business Purchase Agreement') with CHOQS 448 Limited ('MBOCo'), a company
incorporated for the purposes of a management buy-out of M J Gleeson's building
contracting operations (the 'Gleeson Building Division') pursuant to which the
Gleeson Group (defined as M J Gleeson and its subsidiaries) has agreed, subject
to shareholder approval, to transfer certain assets and liabilities of the
Gleeson Building Division to MBOCo (the 'Transaction'). The Gleeson Group has
also agreed to make a debt and equity investment in MBOCo.

MBOCo is currently wholly owned by Martin Smout and Peter Stone, two of the
senior managers of the Gleeson Building Division. Since they have in the 12
months prior to the date of the Transaction been directors of GCSL, under the
listing rules of the UK Listing Authority (the 'Listing Rules') MBOCo is a
related party of the Gleeson Group and the Transaction is a related party
transaction.

Accordingly, the Transaction is conditional upon shareholder approval at an
extraordinary general meeting to be held at 10 a.m. on 29 July 2005 (the
'Extraordinary General Meeting). Subject to such approval being obtained, it is
expected that completion of the Transaction will take place on 1 August 2005.

A circular containing details of the Transaction and a notice of the
Extraordinary General Meeting will be posted to M J Gleeson shareholders today.

2. Background to and reasons for the Transaction

As reported in the Company's interim statement dated 22 March 2005 and the
pre-close statement dated 1 July 2005, in the course of 2004 the Gleeson Group
sustained significant losses in its building contracting activities and
instituted a review of this activity. As a result, the Board concluded that the
low margins available in building contracting did not justify the significant
associated risks and decided to withdraw from this sector. The Gleeson Group's
other operations focus on areas which the Board believes are more attractive
given the higher margins and/or lower risk profile of the work undertaken.

The Board has reviewed a number of exit options for the Gleeson Building
Division. No market appetite for either a trade sale or a standard management
buy-out structure employing third party funding was found. The Board also
reviewed the option of closing the operation but considered this unattractive
given the risk of further escalation in project overrun costs and the level of
retained divisional overhead required to manage through the ongoing contracts.
Therefore, the Board has concluded that the most appropriate option for reducing
the Gleeson Group's exposure to building risk over a period of time is to
transfer the operations to a management buy-out vehicle with sufficient
financial resources to enable it to complete the ongoing contracts and to
develop a portfolio of new contracts independently from the Gleeson Group. In
the absence of third party funding, MBOCo is being funded by the Gleeson Group
alongside the directors of MBOCo. However, as explained further in Section 5
below, the Gleeson Group will retain liability for all retained contracts. In
addition, the Gleeson Group will retain the ultimate legal liability to the
employer for ongoing contracts which are not novated to MBOCo (although,
pursuant to the Business Purchase Agreement, MBOCo will assume certain of these
liabilities).

3. Information on the Gleeson Building Division

The Gleeson Group's building activities operate from offices in Cheam,
Northampton, Sheffield, Stockport and Newcastle. Over the years, the Gleeson
Building Division has worked on the construction of a large number of
prestigious buildings including the Lloyds of London building, the Crucible
Theatre in Sheffield and the Crystal Palace Athletics Stadium in South London.

Since 2001, volumes of trade have increased significantly. However, this growth
has been accompanied in the last two years by substantial losses.

Based on unaudited analysis, which has been extracted from the consolidated
accounts of the Gleeson Group for the year ended 30 June 2004, the Gleeson
Building Division contributed £308 million of turnover and incurred losses of £6
million. As reported in the unaudited interim statement a loss of £16.6 million
was incurred in the six months to 31 December 2004 and, as announced in the
pre-close statement dated 1 July 2005, in the second half of the year further
substantial potential losses were identified on a number of recently completed
contracts. As noted below, the Board believes that the Gleeson Building Division
losses for the year to 2005 will be treated as discontinued.

4. Principal terms and conditions of the Transaction

The tangible assets, employees and certain liabilities of the Gleeson Building
Division will transfer to MBOCo. In addition, it is anticipated that certain
lease obligations, for example motor vehicles, will be assigned or novated to
MBOCo. The right to continue the trade of the Gleeson Building Division going
forward will also be acquired by MBOCo.

The treatment of the current portfolio of construction contracts will depend on
whether the building phase has been completed:

  • The ongoing contracts will be, so far as is possible, novated or
    assigned to MBOCo but to the extent this is not possible will be performed
    by MBOCo on behalf of the Gleeson Group. In respect of each of the ongoing
    contracts, there is an agreed apportionment as at 30 June 2005 of the
    estimated working capital balances and margin to such date, based on
    projected figures. A payment of £14.7 million will be made by GCSL on
    completion in respect of the estimated net working capital liabilities being
    transferred to MBOCo (calculated on a pound for pound basis). This
    represents debtors and amounts recoverable on contracts of £16.0 million
    offset by liabilities of £30.7 million in relation to payments on account
    and amounts due to sub-contractors which will, following the Transaction, be
    dischargeable by MBOCo. Within 70 days of completion the estimated net
    working capital liabilities of £14.7 million will be adjusted to reflect the
    actual position at 30 June 2005.

  • The retained contracts will remain with the Gleeson Group. MBOCo has
    agreed to perform various services in relation to these contracts
    (including, but not limited to, rectification of defects and agreement of
    sub-contractors' accounts and final accounts), with MBOCo receiving certain
    payments in respect of these services.

At completion the Gleeson Group will:

  • invest £1.1 million by way of equity in MBOCo; and

  • provide a loan of £2.5 million to MBOCo at an interest rate of 24% per
    annum.

The Gleeson Group will hold 20% of the voting shares (on a fully diluted basis)
and will also hold non-voting shares and non-voting partly paid shares in MBOCo.
The unpaid amounts on these partly paid shares may in certain circumstances be
called by MBOCo so that the Gleeson Group would be required to pay up an
additional £3.5 million in subscription monies in order to make further working
capital available to MBOCo.

During the period up to 30 June 2006, GCSL will pay MBOCo a quarterly management
charge of £413,750 (£1.7 million in total) in respect of its assistance to
manage and administer the retained contracts. The Gleeson Group will also
provide certain administrative services to MBOCo in the 12 months following
completion (for example, accounting, IT and human resources) for which no
separate charge will be made. In the event that MBOCo makes a profit before
taxation in the accounting period to 30 June 2006, then MBOCo will pay to the
Gleeson Group an amount equal to 50% of such profit, subject to a maximum
payment of £2 million.

Furthermore, the Gleeson Group may be required to make annual payments to MBOCo
up to a maximum of £500,000 in aggregate over five years in relation to a supply
agreement with a subsidiary of Speedy Hire Plc.

5. Financial effects of the Transaction

The Board believes that the results of the Gleeson Building Division will be
classified as a discontinued activity in the Gleeson Group accounts for the year
ended 30 June 2005 and, as such, will be reported separately from the Gleeson
Group's continuing operations.

In summary, the Gleeson Group has committed to make the following payments in
relation to the Transaction:

  • a maximum of £7.1 million to MBOCo by way of debt and equity investment,
    being £3.6 million in cash at completion and £3.5 million in respect of
    potential future payments under the partly paid shares;

  • a £14.7 million cash payment to MBOCo relating to the transfer of net
    current liabilities at completion subject to adjustment as noted in Section
    4 above;

  • a management charge of £1.7 million to MBOCo, split into four quarterly
    payments starting on 30 September 2005;

  • a maximum payment of £0.5 million over five years relating to a supply
    agreement with a subsidiary of Speedy Hire Plc; and

  • a maximum payment of £2.9 million to MBOCo in relation to particular
    ongoing contracts.

Furthermore, the Gleeson Group also retains liability as follows:

  • for all aspects of retained contracts;

  • for work undertaken on ongoing contracts prior to 30 June 2005 (or 1
    January 2005 for some more recent contracts); and

  • in respect of certain employment matters covered by warranties and
    indemnities in the Business Purchase Agreement.

Based on past experience, the Board believes that the potential exposure of the
Gleeson Group under the retained contracts is not likely to be material.

6. Significant change

Save as set out below there has been no significant change in the financial or
trading position of the Gleeson Group since 31 December 2004, the date to which
the unaudited interim financial statements of M J Gleeson for the six months
ended on that date were prepared.

Trading performance in Gleeson Group's core operations - housebuilding, civil
engineering and property - remained strong in the second half of the year to 30
June 2005.

In the interim statement of 22 March 2005, it was reported that the losses in
the Gleeson Building Division for the first half of the year were £16.6 million.
However, as announced on 1 July 2005 in a pre-close statement, further
substantial potential losses have been identified on a number of recently
completed contracts for which the final accounts have not been settled. The
division's losses are now expected to exceed £34 million and will be provided
for in the Gleeson Group results for the year to 30 June 2005.

Gleeson Group profit, excluding losses attributable to the Gleeson Building
Division, is expected to be well ahead of market expectations, but the inclusion
of these losses and the related restructuring and transaction costs is likely to
result in a loss for the year ended 30 June 2005 of between £5 million and £10
million.

7. Circular and Extraordinary General Meeting

A circular is being posted to shareholders today including further details of
the Transaction and a notice convening the Extraordinary General Meeting of the
Company to be held at 10 a.m. on 29 July 2005 at Haredon House, London Road,
North Cheam, Sutton, Surrey SM3 9BS.

ENQUIRIES:
M J Gleeson Group plc                                            020 8644 4321
Dermot Gleeson (Chairman)
Terry Massingham (Chief Executive)
Colin McLellan (Finance Director)

Close Brothers                                                   020 7655 3100
Peter Alcaraz
Gareth Davies

Bankside Consultants Limited                                     020 7367 8851
Charles Ponsonby

Close Brothers Corporate Finance Limited which is regulated in the United
Kingdom for the conduct of investment business by the Financial Services
Authority, is acting for M J Gleeson as financial adviser in connection with the
matters described herein and no-one else and will not be responsible to anyone
other than M J Gleeson for providing the protections afforded to customers of
Close Brothers Corporate Finance Limited, nor for providing advice in relation
to the matters described herein.



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