Acquisition

Severn Trent PLC
20 June 2003


20 June 2003

Not for release, publication or distribution in or into Australia, Canada, Japan
or the United States of America

                                SEVERN TRENT PLC

                            ACQUISITION OF HALES FOR

                                  £141 MILLION

Severn Trent Plc announces that Biffa, its UK waste management subsidiary, has
acquired Hales from RMC (UK) Limited for £126m and paid £15m (exclusive of VAT)
to ING to purchase vehicles and equipment used in the Hales business. The total
consideration of £141m (excluding transaction costs) is equivalent to a multiple
of approximately 5.6x Hales' proforma 2002 PBITDA (which includes anticipated
synergies).

Hales accounts for approximately 2% of the UK waste market. Its solid waste
operations include industrial and commercial collection services, transfer
stations, materials recycling facilities and operational landfills. In the
financial year to 31 December 2002, based on its management accounts, Hales had
turnover of approximately £112m and profit before tax of approximately £9m.

The acquisition of Hales complements Biffa's established operations of
collection, landfill and special waste and enhances its ability to capitalise on
opportunities from the implementation of future legislation.

In collection, Biffa's national coverage is further enhanced by Hales'
industrial/commercial depot network and its transfer stations, particularly in
London and East Anglia where Biffa has been keen to build up its presence.

In addition, Hales is expected to bring to Biffa around 13m cubic metres of void
in operating landfill sites located in areas where Biffa is currently not well
represented.

Biffa believes that it should deliver pre-tax synergies of around £7.5m per
annum, principally from the enlarged collection infrastructure, improved vehicle
utilisation and the integration of IT, regional management and head office
costs. The synergies are expected to be fully delivered (in terms of run rate)
by the end of December 2004. The cost of achieving these synergies is estimated
at approximately £10m.

Following realisation of the synergy benefits, the acquisition of Hales is
expected to enhance earnings before goodwill amortisation in the financial year
2004/05. The acquisition is being funded from new borrowings.

Commenting on the acquisition, Robert Walker, Group Chief Executive of Severn
Trent said:


        'Acquisition of Hales represents another step in growing Biffa's UK
        waste business and further contributes towards Severn Trent's goal of
        becoming the UK's leading integrated environmental services business.'

Martin Bettington, Managing Director of Biffa said:


        'Hales consolidates Biffa's position as one of the leading players in
        the UK and expands our operations into some new geographical areas. I am
        delighted that we have the opportunity to build on the successful
        acquisition of UK Waste.'

DETAILS OF CONFERENCE CALL

An analyst and investor conference call on the acquisition with Robert Walker,
Severn Trent Group Chief Executive; Martin Bettington, Biffa Managing Director
and Alan Perelman, Severn Trent Group Finance Director will be held at 8.30am on
20 June 2003. Slides to accompany the call can be found on the Severn Trent Plc
website (www.severntrent.com). To view the slides click on the 'Biffa new
acquisition' link on the home page.

Dial in numbers are as follows:

Dial in number:  01452 561 263

Chairperson:      Peter Gavan

A playback facility will be available for 7 days following the announcement on
0845 245 5205 (from outside the UK: [phone]); access code: 256633#.

Enquiries and further information:

Robert Walker                              Severn Trent               020 7404 5959 (on the day)
Group Chief Executive                                                 0121 722 4775

Martin Bettington                          Biffa                      020 7404 5959 (on the day)
Managing Director                                                     01494 556422

Alan Perelman                              Severn Trent               020 7404 5959 (on the day)
Group Finance Director                                                0121 722 4176

Peter Gavan                                Severn Trent               020 7404 5959 (on the day)
Director of Corporate Affairs                                         0121 722 4310

Neil Goldie-Scot                           HSBC                       020 7991 8888
Clive Rates

Simon Holberton                            Brunswick Group            020 7404 5959



This summary should be read in conjunction with the full text of the following
announcement.

Nothing in this press release should be construed as a profit forecast or be
interpreted to mean that the future earnings per share of Severn Trent will
necessarily be the same as, or greater than, the earnings per share for
completed financial periods.

This document contains certain 'forward-looking statements' with respect to
Severn Trent's financial condition, results of operations and business and
certain of Severn Trent's plans and objectives with respect to these items.

Forward-looking statements are sometimes but not always, identified by their use
of a date in the future or such words as 'anticipates', 'aims', 'due', 'could',
'may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal' or
'estimates'. By their very nature forward-looking statements are inherently
unpredictable, speculative and involve risk and uncertainty because they relate
to events and depend on circumstances that will occur in the future.

There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include but are not limited to, changes in the markets
in which the Group operates; changes in the regulatory frameworks in which the
Group operates; the impact of legal or other proceedings against or which affect
the Group; and changes in interest and exchange rates.

All subsequent written or verbal forward-looking statements attributable to
Severn Trent or any other member of the Group or persons acting on their behalf
are expressly qualified in their entirety by the factors referred to above.
Severn Trent does not intend to update these forward-looking statements.

HSBC, which is regulated in the United Kingdom for the conduct of investment
business by The Financial Services Authority, is acting for the Severn Trent
Group and no one else in connection with the acquisition and will not be
responsible to anyone other than Severn Trent for providing the protections
afforded to customers of HSBC nor for providing advice in relation to the
acquisition.



SEVERN TRENT PLC

                     Acquisition of Hales for £141 million

Introduction

Severn Trent announces that Biffa, its UK waste management subsidiary, has
acquired Hales from RMC (UK) Limited for £126m and paid £15m (exclusive of VAT)
to ING to purchase vehicles and equipment used in the Hales business. The total
consideration is £141m (excluding transaction costs). The acquisition is being
funded from new borrowings.

Following on from the successful integration of UK Waste in 2000, Biffa believes
that the acquisition represents a good opportunity to participate further in the
consolidation of the waste management sector in the UK by acquiring a major and
complementary waste operator.

Background to and reasons for the Acquisition

As stated at the time of the UK Waste acquisition, existing and planned
legislation is driving the UK to reduce the amount of waste that is sent to
landfill. This has led to Government proposals to increase the proportion of
waste in each of the recovered, incinerated and composted segments whilst the
proportion of waste deposited in landfill is targeted to decline. No matter the
method by which an eventual reduction of waste sent to landfill is achieved, the
separation and transportation of waste streams is expected to become the common
denominator providing a growth opportunity for efficient collection operators.

Despite consolidation over the last decade the waste market in the UK remains
fragmented. Biffa is a leading supplier of waste services in the UK. This
position will be enhanced by the acquisition of Hales.

Currently, Biffa operates some 1,200 collection vehicles and some 30 landfill
sites. In addition, Biffa operates a variety of transfer stations and recycling
facilities and has special waste capabilities.

Biffa's growth in profits over the last seven years has been largely as a result
of growth in its collection activities and the acquisition of UK Waste. Biffa's
continued success has been driven by a strong sales force, customer service
development, operating skills and strong management. This acquisition will allow
Biffa to apply these skills across Hales' business. These factors should give
Biffa the potential to achieve further sustainable growth.

Biffa believes that it should deliver pre-tax synergies, of around £7.5m per
annum across the combined UK businesses of Biffa and Hales, principally by:


  • merging the collection depot networks and vehicle fleets, which should
    result in increased efficiency and route density.

  • achieving savings from the integration of Hales' and Biffa's IT and
    financial systems, regional management and head offices.

The synergies are expected to be fully delivered (in terms of run rate) by the
end of December 2004. The cost of achieving the synergies is estimated at
approximately £10m.

Information on Hales

Hales, a part of RMC Group plc, is one of the ten largest waste operators in the
UK and has operations in all the major cities in England (including London,
Birmingham, Manchester, Newcastle and Leeds). Its solid waste operations include
industrial and commercial collection services, transfer stations, materials
recycling facilities and operational landfills.

Hales' assets include 8 operational landfill sites, with operational void space
of around 13m cubic metres, and a fleet of some 450 vehicles. However, the
acquisition excludes closed landfill sites.

In the financial year to 31 December 2002, based on its management accounts,
Hales had turnover of approximately £112m and profit before tax of approximately
£9m. Based on its management accounts, the net assets of Hales, as at 31
December 2002, were approximately £29m.

Financial effects of the Acquisition

The acquisition of Hales for a total consideration of £141m is equivalent to a
multiple of approximately 5.6x Hales' proforma 2002 PBITDA (which includes
anticipated synergies). The basis for Hales' proforma 2002 PBITDA is set out
below.

Following realisation of the synergy benefits, the acquisition of Hales is
expected to enhance earnings before goodwill amortisation in the financial year
2004/05.

The acquisition is being funded from new borrowings.

Principal terms of the Acquisition

Biffa has acquired Hales from RMC (UK) Limited for £126m and paid £15m
(exclusive of VAT) to ING to purchase vehicles and equipment used in the Hales
business. The total consideration is £141m. In addition, Biffa expects to incur
transaction costs provisionally estimated at around £6m (exclusive of VAT),
which includes stamp duty appropriate to an asset transaction. Following
completion, there will be a settlement of a net amount representing various
minor assets and liabilities (as at the completion date) where the values cannot
be reliably determined prior to completion.

The Acquisition Agreement contains certain warranties and indemnities both given
by, and in favour of Biffa, as is normal for a transaction of this size and
nature.

Hales' proforma 2002 PBITDA

The estimate of Hales' proforma 2002 PBITDA (which includes anticipated
synergies) is based on the PBITA of Hales for the financial year to 31 December
2002, as taken from its management accounts, adjusted to reflect the following:


 i. the exclusion of non specific RMC Group charges to Hales;

ii. the purchase from ING of vehicles and equipment used in the Hales business;

iii. an increase in Hales' pension charge to a provisionally estimated regular
    pension cost;

iv. the treatment of cell costs as a fixed asset and depreciated (to reflect
    Biffa's existing accounting policies) rather than as a prepayment being
    amortised;

 v. an increase in the charge for provisions for environmental costs;

vi. the inclusion of the full amount of synergies that are anticipated to arise
    as a result of the transaction;

vii. the add back of depreciation.

On this basis, Hales' proforma 2002 PBITDA (which includes anticipated
synergies) is estimated at around £25m.

On the same basis, but excluding item (vii) above, Hales' proforma 2002 PBITA
(which includes anticipated synergies) is estimated at around £17m.

Nothing in this press release should be construed as a profit forecast or be
interpreted to mean that the future earnings per share of Severn Trent will
necessarily be the same as, or greater than, the earnings per share for
completed financial periods.

This document contains certain 'forward-looking statements' with respect to
Severn Trent's financial condition, results of operations and business and
certain of Severn Trent's plans and objectives with respect to these items.

Forward-looking statements are sometimes but not always, identified by their use
of a date in the future or such words as 'anticipates', 'aims', 'due', 'could',
'may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal' or
'estimates'. By their very nature forward-looking statements are inherently
unpredictable, speculative and involve risk and uncertainty because they relate
to events and depend on circumstances that will occur in the future.

There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include but are not limited to, changes in the markets
in which the Group operates; changes in the regulatory frameworks in which the
Group operates; the impact of legal or other proceedings against or which affect
the Group; and changes in interest and exchange rates.

All subsequent written or verbal forward-looking statements attributable to
Severn Trent or any other member of the Group or persons acting on their behalf
are expressly qualified in their entirety by the factors referred to above.
Severn Trent does not intend to update these forward-looking statements.

HSBC, which is regulated in the United Kingdom for the conduct of investment
business by The Financial Services Authority, is acting for the Severn Trent
Group and no one else in connection with the acquisition and will not be
responsible to anyone other than Severn Trent for providing the protections
afforded to customers of HSBC nor for providing advice in relation to the
acquisition.



                            APPENDIX I - Definitions

'Acquisition Agreement'                    the agreement dated 19 June 2003 and entered into between
                                           RMC (UK) Limited, RMC Environmental Services Limited, Hales
                                           Waste Control Limited, RMC Group plc, Biffa and Biffa plc
                                           pursuant to which RMC (UK) Limited has agreed to sell and
                                           Biffa has agreed to purchase Hales

'Biffa'                                    Biffa Waste Services Limited

'Hales'                                    most of the assets and trade of the waste business (but
                                           excluding closed landfill sites) carried on by RMC (UK)
                                           Limited through its agents Hales Waste Control Limited and
                                           RMC Environmental Services Limited

'HSBC'                                     HSBC Bank plc

'PBITA'                                    profit before interest, tax, goodwill amortisation,
                                           non-operating items and exceptional items

'PBITDA'                                   profit before interest, tax, depreciation, goodwill
                                           amortisation, non-operating items and exceptional items

'RMC'                                      RMC (UK) Limited

'Severn Trent' or 'Company'                Severn Trent Plc

'Severn Trent Group' or 'Group'            Severn Trent Plc and its subsidiaries




ENDS


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            The company news service from the London Stock Exchange