Acquisition

Vertu Motors PLC
27 February 2007

27th February 2007





                                Vertu Motors plc



 Proposed acquisition of Bristol Street Group for a total consideration of £40m



Vertu Motors (Property) Limited, a wholly owned subsidiary of Vertu Motors plc
('Vertu'), has conditionally agreed to acquire the entire issued share capital
of Bristol Street Group Limited ('Bristol Street Group') for a total
consideration estimated at £31m in cash plus up to £9m in shares.



It is anticipated that the cash consideration will be paid from a combination of
new bank facilities, existing cash reserves and the proceeds of a placing of new
shares.  Completion is expected to take place (subject, inter alia, to
shareholder approval) on 27th March 2007.



In accordance with the AIM Rules, trading in the Existing Ordinary Shares of the
Company on AIM remain suspended pending publication of the AIM admission
document to Shareholders.





                                   Highlights



The Acquisition



  • Bristol Street Group was the 13th largest motor dealer group in the UK in
    2005 (AM100: 2006).
  • Bristol Street Group offers new and used car sales, commercial vehicle
    sales and aftersales services.
  • 32 franchised sites and three used car hypermarkets are operated by
    Bristol Street Group across England.
  • Marques offered by Bristol Street Group include Ford, Vauxhall, Citroen,
    Hyundai, Iveco, Peugeot and Renault.
  • For the year ended 31 December 2006 Bristol Street Group made an operating
    profit of £5.1 million on a turnover of £576.7 million.
  • The Directors believe that the acquisition of Bristol Street Group fits
    well with the original Vertu strategy through:
    -   the business opportunities it presents;
    -   the potential for performance improvement it provides;
    -   the property portfolio it owns; and
    -   the platform it delivers in terms of brand and infrastructure from
        which Vertu Motors can pursue further acquisitions.
  • It is intended that Paul Williams (CEO of Bristol Street Group) will
    become a Director and Non-Executive Chairman of Vertu on Completion. William
    Teasdale will step down as Chairman but will remain on the Board as a
    Non-Executive Director.



The Opportunity



  • The acquisition of Bristol Street Group represents a significant step in
    Vertu's strategy of acquiring and consolidating UK motor retail businesses.
  • Vertu intends to pursue a strategy of organic growth of Bristol Street
    Group, identifying and capitalising upon performance improvement
    opportunities. Opportunities include increasing used car sales, development
    of fleet and contract hire businesses, further development of the Bristol
    Street Group internet retail presence and centralisation of procurement and
    marketing.
  • Vertu will continue to focus on identifying and acquiring additional UK
    motor retail businesses in order to benefit from additional economies of
    scale and to achieve further geographical concentration.
  • The £40.3bn UK motor retail sector is fragmented; in 2005 there were over
    5,400 motor dealerships in the UK, of which the ten largest motor retail
    groups represented less than 19 per cent. (Source: AM100, 2006)



The Placing



  • It is anticipated that the cash consideration for the Acquisition will be
    funded through a combination of new bank facilities, existing cash reserves
    and the proceeds of a placing of new ordinary shares. Vertu is currently
    engaged in a fundraising exercise and will update the market at a later
    stage.
  • Completion of the acquisition is conditional, amongst other things, on the
    Placing, approval of shareholders at the EGM and re-admission of the
    Enlarged Group to AIM.
  • Brewin Dolphin is the nominated advisor and broker to Vertu Motors plc and
    is conducting the fundraising.



Commenting on the acquisition, Robert Forrester, Chief Executive of Vertu Motors
plc said:



'This is an excellent platform acquisition for Vertu which we have delivered to
our shareholders within three months of IPO. Bristol Street is a great business
and brand in the UK marketplace with strong manufacturer relationships and an
excellent management team. It provides an ideal opportunity for growth both
organically and through acquisition as we look to build Vertu within the UK
motor retail marketplace.



'We are also delighted that Paul Williams will be joining the Board as our
Non-Executive Chairman. He brings a wealth of experience in the motor industry
and is a highly respected figure in the sector.'





                                   -  Ends  -





For further information please contact:



Robert Forrester, CEO, Vertu Motors plc,  Tel: [phone]



Andrew Kitchingman, Brewin Dolphin Securities,  Tel: [phone]



Jonathon Brill/Billy Clegg/Edward Westropp, Financial Dynamics,  
Tel: [phone]





Certain definitions apply throughout this announcement and your attention is
drawn to the table at the end of this announcement where those definitions are
set out.







INTRODUCTION



On 26 February, Vertu Motors (Property) Limited, a wholly owned subsidiary of
Vertu Motors, agreed conditionally to acquire the entire issued share capital of
Bristol Street Group for a total consideration estimated at £31m in cash plus up
to £9m in shares. In order to fund the Acquisition, which is payable in cash and
Loan Notes on and after Completion, the Company is seeking to raise additional
funds by way of a Placing by Brewin Dolphin. Some of the Loan Notes payable as
part of the Consideration for Bristol Street Group will be acquired by Vertu
Motors in consideration of the issue of New Ordinary Shares at 87.5p per share.
The remainder of the cash consideration will be funded from the Company's other
cash resources.



In accordance with the AIM Rules, trading in the Existing Ordinary Shares of the
Company on AIM remain suspended pending publication of the circular (the AIM
admission document) to Shareholders.



In view of the size of the Acquisition, which is classified as a reverse
takeover under the AIM Rules, approval of Shareholders is needed and so an EGM
of the Company is being convened for this purpose to be held on 26 March 2007.
Shareholders will also be asked at the EGM, inter alia, to grant the appropriate
authorities required to effect the Placing and to grant share issue
authorisation to the Directors to enable them to react to further market
opportunities. If the Resolution is passed by Shareholders, trading in the
Existing Ordinary Shares of the Company will be cancelled. It is expected that
Completion of the Acquisition and Admission of the Enlarged Group will take
place and that trading in the New Ordinary Shares will commence and in the
Existing Ordinary Shares will recommence on AIM on 27 March 2007.



Further details of the agreements relating to the Acquisition and the notice of
the EGM will be set out in the circular (the AIM admission document) which will
be issued in due course.





BACKGROUND TO AND REASONS FOR THE ACQUISITION AND PLACING



Vertu Motors was admitted to AIM in December 2006 with the objective of
acquiring and consolidating UK motor retail businesses with the potential for
performance improvement and which may also contain freehold property portfolios.
It was envisaged by the Directors that performance improvement opportunities
would arise in acquired dealerships from increasing sales in new and used cars,
improving aftersales services, through improving the efficiency of the business
processes, introducing economies of scale and providing exceptional customer
service. In seeking out opportunities to build shareholder value, the Directors
entered into discussions with the management team of Bristol Street Group.
Bristol Street Group was the 13th largest dealer group in the UK in 2005
(Source: AM100, 2006) with a nationwide network of branded franchised
dealerships and car hypermarkets across England, offering new and used car
sales, commercial vehicle sales and aftersales services.



The Directors believe that the acquisition of Bristol Street Group fits well
with the original Vertu Motors strategy in terms of the business opportunities,
the potential for performance improvement it represents, the property portfolio
and the platform it provides from which Vertu Motors can pursue further
acquisitions.





KEY TERMS OF THE ACQUISITION



The consideration is estimated at £31m in cash plus up to £9m in shares. In
order to fund the Acquisition, which is payable in cash and Loan Notes on and
after Completion, the Company is seeking to raise additional funds by way of a
Placing by Brewin Dolphin. Some of the Loan Notes payable as part of the
Consideration for Bristol Street Group will be acquired by Vertu Motors in
consideration of the issue of New Ordinary Shares at 87.5p per share. The
remainder of the cash consideration will be funded from the Company's other cash
resources. The Company will also assume Bristol Street Group's debt of c. £29
million, refinanced by a new group facility with Barclays Bank plc.



The Acquisition is conditional, inter alia, upon Shareholder approval at the EGM
and upon the Placing. Subject to those conditions being satisfied, Completion
will take effect on the Admission of the Enlarged Group to AIM, which is
expected to take place on 27 March 2007.





MARKET OVERVIEW



The UK market for motor vehicles



The motor retail sector comprises mainly franchised and non-franchised
dealerships selling new and used vehicles through retail and corporate fleet
channels. In addition, aftersales services are also provided in the form of
mechanical and body repairs through service outlets and bodyshops respectively
and also the supply of parts to retail and trade customers. The UK market for
cars in 2005 was estimated to be worth £40.3 billion. The performance of the UK
motor retail sector is heavily dependent on the health of the UK economy. Key
economic measures such as gross domestic product, inflation and employment all
have an effect on the market, influencing consumer demand for vehicles. (Source:
Key Note Limited)



New car market



The 2003 new car market was the highest in the last ten years with 2.6 million
new car registrations (Source: SMMT). Since then, the market has declined, in
part due to growing pressure on consumer spending.


                           2001            2002            2003            2004            2005            2006
Private               1,212,964       1,236,766       1,254,927       1,200,066       1,076,513       1,033,722
Fleet                 1,031,429       1,090,448       1,068,174       1,093,494       1,184,874       1,156,274
Business                214,376         236,417         255,949         273,709         178,330         154,868


Total                 2,458,769       2,563,631       2,579,050       2,567,269       2,439,717       2,344,864
Growth                      11%              4%              1%              0%             -5%             -4%



Annual new car registrations for 2007 are forecast to be around 2.3 million,
representing a year on year decline of 1.3 per cent. However, the rate of
decline is forecast to reduce to 0.0 per cent. in 2008. (Source: SMMT)



The new car market can broadly be split into the 'volume' brands market (e.g.
Ford, Vauxhall, Renault, Peugeot, Citroen and Volkswagen) and the 'prestige'
brands market (e.g. BMW, Audi and Mercedes-Benz). Volume brands dominate new car
sales with Ford, Vauxhall, Volkswagen and Peugeot together representing 42 per
cent. of new car sales in 2006. The Ford Focus represented the most popular new
car registration in 2006, with 6 per cent. of the market. (Source: SMMT)



Used car market



The UK volume of used car sales is substantially higher than the new car market,
representing 7.6 million vehicle sales in 2005, accounting for 76 per cent. of
all cars sold. Used car sales to the end of September 2006 are in-line with the
same period in 2005. (Source: SMMT)


                                2001              2002              2003              2004              2005
Used Car Sales             6,747,419         7,142,779         7,527,176         7,731,609         7,576,724
Growth                                              6%                5%                3%               -2%



There has been a modest rise in rates of used car depreciation in 2005 and 2006,
although at a reducing rate in 2006. This has partly arisen from a slowdown in
sales of new and used cars, coupled with an increase in the supply of 'nearly
new' vehicles entering the used market. The reduced supply of one to four year
old used cars could reduce in-line with the fall in demand, making significant
increases in rates of used car depreciation less likely. (Source: Glass) The
decline in sales of new cars shown in 2006 and forecast for 2007, although
slowing, is expected to have a negative impact on used car prices. Price falls
are also expected as a result of the growing supply of nearly-new cars. (Source:
Glass) This oversupply results in excess unsold stock being registered and then
retailed as 'used' after three/six months, having been held in the interim by
short cycle users, such as daily rental or credit hire operators.



Aftersales and servicing market



The UK aftersales and servicing market provides significant revenue to the motor
retail industry. The market is fragmented with provision through franchised and
non-franchised dealerships and specialist service centres. The market for
servicing has remained relatively stable with increased vehicle service
intervals being offset by an increase in the number of vehicles in use. The core
market for franchised dealerships is for the servicing of vehicles under three
years old which are still under manufacturer warranties.



The Directors believe that opportunities exist to focus on the retention of
customers after expiration of their warranty and to increase the penetration of
the used vehicle market.



Market opportunities



The UK motor retail sector is fragmented; in 2005 there were over 5,400 motor
dealerships in the UK, of which the ten largest motor retail groups represented
less than 19 per cent. (Source: AM100, 2006)



The period since 2000 has witnessed a series of acquisitions within the car
dealership sector. (Source: Key Note Limited) Despite the consolidation in the
market to date, the Directors are confident that there remain a significant
number of attractive acquisition opportunities within the motor dealership
network (both franchised and unfranchised).





INFORMATION ON BRISTOL STREET GROUP



History and background



Bristol Street Group has its origins in the early 1920s as a single Ford
dealership located on Bristol Street in central Birmingham. Bristol Street Group
was acquired through a management buy-out in 1997, which was led by Paul
Williams, the chief executive officer of Bristol Street Group, amongst others.
Bristol Street Group was the 13th largest dealer group in the UK in 2005
(Source: AM100, 2006) with a network of dealerships around England offering new
and used car and commercial vehicle sales and aftersales services. In addition,
Bristol Street Group operates three used car hypermarkets under the Motor Nation
brand and a Ford parts wholesale business.



Bristol Street Group operates franchises from 32 sites under the Bristol Street
Motors brand, currently representing seven marques: Ford, Vauxhall, Citroen,
Hyundai, Iveco, Peugeot and Renault. The Bristol Street Group has also agreed
recently to enter into a new franchise for Fiat Van sales. In addition there are
three Motor Nation used car hypermarkets located in Widnes, Birmingham and
Coventry.



Operationally, each market area is headed by a market area managing director,
with an operational board. The market area managing directors report to two
group managing directors who, in turn, report to the chief executive officer of
Bristol Street Group, Paul Williams who also has the Commercial and Motor Nation
divisions reporting to him directly. Certain functions are centralised in the
Bristol Street Group head office in Droitwich, Worcestershire.





STRATEGY OF THE ENLARGED GROUP



Vertu Motors was admitted to AIM with the objective of acquiring and
consolidating UK motor retail businesses. The acquisition of Bristol Street
Group represents a significant step in the Vertu Motors strategy.



The Directors and Proposed Director believe that the culture of Bristol Street
Group fits closely with that of Vertu Motors and will seek to motivate and fully
utilise the knowledge and experience of the employees within the Enlarged Group.



The Board intends to pursue a strategy of organic growth of Bristol Street Group
and other businesses acquired in the future and will give focus,
post-Completion, to identifying and capitalising upon:



  • improvement of used car sales to improve the new to used car ratio



  • development of fleet and contract hire opportunities



  • further development of the internet retail presence



  • centralisation of procurement and marketing



In addition, the Board will continue to focus on identifying and acquiring
additional UK motor retail businesses in appropriate franchises and locations to
complement the operations of the Enlarged Group and benefit from further cost
synergies.



Vertu Motors has negotiated banking facilities totalling up to £41.9 million
which, together with the funds raised in December last year and the proceeds of
the Placing will be utilised to fund the Acquisition and to provide additional
resources to enable further acquisitions. The Company is also negotiating
appropriate hedging arrangements in order to minimise interest rate risk going
forward. The Directors are currently in discussions with the owners of a number
of motor retail businesses and are hopeful that this will lead to further
acquisitions.



The Board intends that, following Completion the Bristol Street Group will
continue to trade under its existing names ''Bristol Street Motors'' and ''Motor
Nation''.





DIRECTORS AND PROPOSED DIRECTOR



It is intended that, following Completion, the Board of the Enlarged Group will
comprise the Directors and Proposed Director as outlined below.



William Teasdale, Non-Executive Chairman, proposed Non-Executive Director



William (64) was appointed Non-Executive Chairman of Vertu Motors plc in
December 2006. Prior to this he was non-executive director and chairman of the
audit committee at Reg Vardy plc between 2002 and 2006. Prior to this he was the
senior partner at the Newcastle upon Tyne office of PricewaterhouseCoopers.
William has substantial experience of corporate transactions and within the
quoted company environment. It is anticipated that upon Completion William will
stand down as Chairman, remaining as a Non-Executive Director.



Robert Forrester, Chief Executive Officer



Robert (37) was appointed Chief Executive Officer of Vertu Motors plc in
December 2006. Prior to this he was a director of Reg Vardy plc between 2001 and
2006, appointed as finance director in 2001 and managing director in 2005, until
the sale of Reg Vardy plc to Pendragon plc in February 2006. During this time
Reg Vardy plc moved from 65 to 100 car dealerships and provided a significant
return to shareholders from the sale. Prior to this he was a director of
Brookhouse Group Limited, a substantial private property investment company in
the North West of England, where he was responsible for development, investment
and financing of the portfolio. Robert qualified as a chartered accountant with
Arthur Andersen. He is also a member of the Economic Affairs Committee of the
Confederation of British Industry.



Karen Anderson, Finance Director



Karen (35) was appointed Finance Director of Vertu Motors plc in January 2007.
Prior to this she joined Reg Vardy plc in 2002 and was appointed group financial
controller in 2004. Karen was responsible for financial management issues and
acquisition due diligence over this period. Following the sale of Reg Vardy plc
to Pendragon plc, Karen was involved in forming the financial management
structure of the enlarged group. Karen qualified as a chartered accountant with
Arthur Andersen.



Paul Williams, proposed Non-Executive Chairman



It is intended that Paul (60) will become a Director and Non-Executive Chairman
of Vertu Motors plc on Completion. Paul joined Bristol Street Group in 1970. In
1997 he led the successful management buy-out of Bristol Street Group from BSG
Holdings Limited as joint chief executive officer, assuming the position of sole
chief executive officer in 2005. During 2006, Paul accepted the position of
chairman of the National Franchised Dealer Association and became a board member
of the Retail Motor Industry Federation.



The Board will look to appoint a further independent Non-Executive Director
following Completion to strengthen the Board and to ensure sufficient corporate
governance measures are in place. The Board is actively seeking to identify
appropriate candidates with a view to making an appointment in due course.





SENIOR MANAGEMENT



The strategy of the Board is to attract high quality, experienced directors and
senior managers. To date the Board has appointed the following to the Vertu
Motors' operational board.



Tom Fairgrieve, Operations Director



Tom (54) was appointed operations director of Vertu Motors (Retail) Limited in
February 2007. He has over 30 years industry experience and was regional
operations director of Reg Vardy plc between 2004 and June 2006, responsible for
over 20 dealer operations in the West of Scotland covering Ford, Vauxhall,
Mercedes-Benz, Fiat and Alfa Romeo. Prior to this he was a franchise director at
CD Bramall plc and Quicks plc with responsibility for the group's Ford
dealerships in Scotland, the North West of England and the South East of
England.



David Crane, Commercial Director



David (39) was appointed commercial director of Vertu Motors (Retail) Limited in
February 2007. He joined Reg Vardy plc in 1999 and was commercial director of
Reg Vardy plc between 2004 and 2006, until the sale of Reg Vardy plc to
Pendragon plc in February 2006, at which point he was appointed group services
director of Pendragon plc. During his time as commercial director, David was
responsible for aftersales strategy, relationships with vehicle manufacturers
and commercial relationships with key corporate customers. Prior to his
employment with Reg Vardy plc he was aftersales operations manager at Renault UK
between 1991 and 1999.



It is the current intention of the Board to appoint Nick Plevey and Mark Hamer,
two group managing directors of Bristol Street Group to the Vertu Motors
operational board on Completion. It is intended that the Board will look to
appoint further senior managers to provide capacity to expand the Enlarged Group
following the Acquisition.





BRISTOL STREET GROUP EMPLOYEES



The existing rights of the Bristol Street Group employees will be fully
safeguarded upon the completion of the Proposals.





DEFINITIONS


''Acquisition''                                         the proposed acquisition of Bristol Street Group by
                                                        Vertu Motors (Property) Limited pursuant to the
                                                        Acquisition Agreement and the Ancillary Acquisition
                                                        Agreements

''Acquisition Agreement''                               the conditional agreement dated 27 February 2007 and
                                                        made between (i) Vertu Motors (Property) Limited (ii)
                                                        the three principal Vendors and (iii) Vertu Motors

''Admission''                                           together the admission of the New Ordinary Shares and
                                                        readmission of the Existing Ordinary Shares to trading
                                                        on AIM and such admission becoming effective pursuant
                                                        to paragraph 6 of the AIM Rules

''AlM''                                                 a market operated by the London Stock Exchange

''AIM Rules''                                           the rules for AIM companies and their nominated
                                                        advisers as issued by the London Stock Exchange, as
                                                        amended from time to time

''Ancillary Acquisition Agreements''                    the ancillary acquisition agreements on substantially
                                                        the same terms as the Acquisition Agreement dated 23
                                                        February 2007 and made between Vertu Motors (Property)
                                                        Limited, Vertu Motors and each of the Vendors not party
                                                        to the Acquisition Agreement

''Board'' or ''Directors''                              the directors of the Company from the date of this
                                                        document, or a duly authorised committee thereof,

''Brewin Dolphin''                                      the corporate finance division of Brewin Dolphin
                                                        Securities Limited

''Bristol Street Group''                                Bristol Street Group Limited and its subsidiaries

''Circular''                                            the circular to shareholders including notice of the
                                                        EGM and comprising an AIM admission document

''Company'' or ''Vertu Motors''                         Vertu Motors plc, or the business of the Company as the
                                                        context requires

''Completion''                                          completion of the Acquisition

''EGM''                                                 the extraordinary general meeting of the Company
                                                        expected to be held on 26 March 2007 at which the
                                                        Resolution will be proposed

''Enlarged Group''                                      Vertu Motors as enlarged by the Acquisition

''Existing Ordinary Shares''                            the 46,750,000 existing Ordinary Shares in issue at the
                                                        date of this document

''Loan Notes''                                          the A, B, C, D and E loan notes that form part of the
                                                        consideration payable by Vertu Motors (Property)
                                                        Limited in respect of the purchase by it of the entire
                                                        issued share capital of Bristol Street Group Limited
                                                        from the Vendors

''London Stock Exchange''                               London Stock Exchange plc

''New Ordinary Shares''                                 the new Ordinary Shares to be issued pursuant to the
                                                        Placing and the Acquisition

''Ordinary Shares''                                     ordinary shares of 10 pence each in the capital of the
                                                        Company (ISIN: GB00B1GK4645)

''Placing''                                             the conditional placing by Brewin Dolphin of the New
                                                        Ordinary Shares pursuant to the Placing Agreement

''Placing Agreement'                                    the conditional agreement relating to the Placing
                                                        proposed to be entered into between the Company, Brewin
                                                        Dolphin and the Directors

''Proposals''                                           the Acquisition, the Admission, the Placing and the
                                                        other proposals set out in this document

''Proposed Director''                                   the proposed director of the Company, Paul Williams

''Resolution''                                          the resolution to approve the Proposals be set out in
                                                        the notice of EGM

''Shareholders''                                        holders of Existing Ordinary Shares

''UK'' or ''United Kingdom''                            the United Kingdom of Great Britain and Northern
                                                        Ireland

''Vendors''                                             the shareholders of Bristol Street Group Limited





Copies of the circular (the AIM admission document) will be available free of
charge to the public at the offices of Brewin Dolphin at 12 Smithfield Street,
London EC2A 9BD and at Commercial Union House, 39 Pilgrim Street, Newcastle upon
Tyne NE1 6RQ from the date of issue until one month from admission of the
Enlarged Group to trading on AIM.






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