Acquisition

Berkeley Group Holdings (The) PLC
20 September 2006


                        THE BERKELEY GROUP HOLDINGS PLC


                      
 THE BERKELEY GROUP HOLDINGS PLC ('BERKELEY') ANNOUNCES THE Acquisition of the
  OUTSTANDING 50 per cent interest in ST JAMES GROUP LIMITED ('St JaMES') not
    already owned by BERKELEY FROM THAMES WATER (THE 'PROPOSED ACQUISITION')





Introduction and Summary of Proposed Acquisition


The Board of Berkeley announces that its wholly owned subsidiary, The Berkeley
Group plc, has entered into a sale and purchase agreement with RWE Thames Water
plc ('Thames') to acquire from Thames the 50% interest in St James that is does
not already own. Berkeley will make payments of approximately £97.5 million to
complete the Proposed Acquisition. Of this:


   •£68.6 million relates to the purchase of the ordinary share capital of St
    James owned by Thames; and
   •£28.9 million relates to the settlement and refinancing of shareholder
    loans owed by St James to Thames.


In addition, at the same time as the Proposed Acquisition, St James will settle
outstanding land creditors with, and acquire six previously identified and
negotiated development sites from, a subsidiary of Thames, for a total value of
approximately £93.5 million.


Consequently, on completion of the Proposed Acquisition, Thames' group will
receive, in aggregate, £191 million: £97.5 million from Berkeley and St James in
respect of the Proposed Acquisition and £93.5 million from St James from the
acceleration of the payment of land creditors and the six new development sites.


Due to its size and the fact that it is with a related party, the Proposed
Acquisition requires the approval of Berkeley shareholders. Further details will
be published shortly in a shareholder circular that will include a Notice of the
Extraordinary General Meeting at which the ordinary resolution that is required
to approve the Proposed Acquisition will be tabled.

Background to and Reasons for the Proposed Acquisition


St James was established as a 50:50 joint venture company by the Thames and
Berkeley groups in May 1996 to develop residential St James sites and sites
acquired on the open market.


Since it was established, St James has proved a highly successful joint venture
for its shareholders completing some 5,000 unit sales, with its operating profit
increasing from £2 million in its first full year of trading to £34.8 million in
its statutory accounts for the year ended 31st December 2005.


The Proposed Acquisition is a further significant step in the execution of the
strategy which was put in place by the Board in June 2004. This strategy focuses
Berkeley primarily on mixed-use large scale urban regeneration in London and the
South-East of England. It recognises that Berkeley operates in a cyclical
industry and that this, combined with the nature and complexity of urban
regeneration, means that the business is not scaleable in the traditional sense.
This is due to the availability of appropriate land opportunities, the planning
system in which we operate and the complexity of delivering large urban
regeneration schemes, all of which require intensive management from experienced
entrepreneurial teams.


The working capital requirement of this focused business has enabled Berkeley to
put in place, through a Scheme of Arrangement and Reduction of Capital approved
by Berkeley shareholders and the Courts in October 2004, a return of £12 per
share in cash to Berkeley shareholders by January 2011. The first £5 was
returned in December 2004 and the remaining three tranches of £2, £2 and £3 per
share are on target for payment in January 2007, 2009 and 2011 respectively.


On 8th July 2005 Berkeley completed the disposal of the Crosby Group, a division
based in the Midlands and North of England, realising £250.7 million of cash, a
transaction that fully complemented Berkeley's strategy. It accelerated the
returns from Crosby, leaving a more focused development portfolio based around
Berkeley's core markets of London and the South-East of England thus giving
Berkeley increased financial flexibility to take advantage of opportunities in
these core markets as they arise.


The Proposed Acquisition represents such an opportunity. As a joint venture
partner, Berkeley has an intimate knowledge of St James' business and, in
particular, its land bank which includes an increasing proportion of third party
land. St James is now an established business in its own right and has a strong
management team, a number of whom were transferred from Berkeley. St James
operates under the same management philosophy and on the same operating systems
and procedures as Berkeley's 100% owned divisions. For these reasons there is
only limited integration risk associated with the Proposed Acquisition. In
essence, this is an opportune time for Berkeley to acquire the remaining 50% of
a business to which it is fully committed and in which it already invests a
significant degree of management time and expertise.


Information on St James


Like Berkeley, St James is a residential-led property development company
focusing on urban regeneration in London and the South-East of England. It has
become renowned for its high quality design-led developments which have become
exemplars of brownfield regeneration, refurbished buildings and sustainable
communities.


St James operates from four offices; its head office in Hampton Hill and its
three regional offices in Finchley, Worcester Park and Reading.


The major sites St James is developing are Grosvenor Waterside, Pimlico
(London); The Hamptons, Worcester Park (Surrey); New River Village, Hornsey
(London); OneSE8, Deptford (London); Kennett Island, Reading (Berkshire); The
Manor, Lower Earley (Berkshire); Kingsway Square, Battersea (London), The
Pumphouse, Hammersmith (London); and Raeburn House, Harrow (Middlesex);


Recently acquired major sites include Roehampton Hospital, Roehampton (London),
Connington Road Lewisham (London), SIRA Institute, Chiselhurst (Kent) and
Qwarterside, Enfield (Essex). The first three of these four sites were acquired
from third parties with only Qwarterside being a Thames site.


In its statutory accounts for the year ended 31st December 2005 (which are
prepared under UK GAAP), St James reported operating profit of £34.8 million on
turnover of £319.5 million. This was from gross assets of £348.2 million and net
assets of £73.6 million, or £133.4 million when shareholders' loans are
included, at 31st December 2005. Following the acquisition of the six new sites,
which contain approximately 700 plots, St James' land bank will total some 5,000
plots on 23 sites.


Since 31st December 2005, trading has continued to be satisfactory for St James.


Financial Effects of the Proposed Acquisition


On completion of the Proposed Acquisition, Thames' group will receive £191
million from the enlarged Berkeley Group; £97.5 million from Berkeley and St
James and £93.5 million from St James.


Berkeley is able to meet the £97.5 million required for the Proposed Acquisition
from its existing cash resources and bank facilities. In its last two financial
years Berkeley has generated £718 million of cash before payments to
shareholders. This performance is the result of both the strength of the cash
generation in the ongoing business as well as the acceleration of cash flow from
the disposal of Crosby. It enables Berkeley to take advantage of opportunities
in its core markets, such as the Proposed Acquisition, whilst not affecting its
ability to meet the remaining three B share payments.


At 30th April 2006, Berkeley held cash balances of £220.6 million and had
undrawn available facilities of £375 million which are in place until August
2011. The cost of the 2006 B share payment which is scheduled for January 2007
is £242 million.


The £93.5 million required for St James to settle its outstanding land creditors
with, and acquire the six additional development sites from, Thames will be met
from St James' existing financial resources and bank facilities. At 31st
December 2005, St James had drawn £66.8 million of its £200 million bank
facilities.


                                      END



For further information please contact:


The Berkeley Group Holdings plc                     Cardew Group

A W Pidgley                                         Tim Robertson

R C Perrins                                         Sofia Rehman

T: 01932 868555                                     T: 0207 930 0777




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