Offer for Novar PLC

Melrose PLC 11 November 2004 For immediate release Not for release or publication in or into the United States, Canada, Japan or Australia Offers by Rothschild on behalf of Melrose PLC for Novar plc 11 November 2004 Summary The Offers â€¢ The Melrose Board announces the terms of offers for the entire issued and to be issued ordinary and preference share capital of Novar. The Offers will be made by Rothschild on behalf of Melrose. â€¢ The Ordinary Offer will be one New Melrose Ordinary Share and 45 pence in cash for each Novar Ordinary Share. The cash element of the Ordinary Offer represents 36 per cent. of the closing price per Novar Ordinary Share on 3 November 2004 (being the last business day prior to the commencement of the Offer Period). There will be a Mix and Match Facility in respect of the Ordinary Offer. â€¢ In order to fund the cash element of the Ordinary Offer, Melrose has successfully arranged an underwritten cash placing with leading institutional investors to raise Â£232 million. â€¢ On the basis of the Placing Price of 100 pence per New Melrose Ordinary Share, the Ordinary Offer values the entire issued ordinary share capital of Novar at approximately Â£625 million and each Novar Ordinary Share at 145 pence, representing a premium of approximately 17 per cent. to the closing price of 123.75 pence per Novar Ordinary Share on 3 November 2004 (being the last business day prior to the commencement of the Offer Period). â€¢ The Preference Offer will be one New Melrose Preference Share for each Novar Preference Share. â€¢ Melrose's current intention is to maintain the aggregate Novar Ordinary Share dividend for the financial year ended 31 December 2003 of Â£39 million for ordinary shareholders of the Enlarged Group. Background and rationale Melrose was floated on AIM on 28 October 2003 with the stated strategy of acquiring companies and businesses whose performance the Melrose Directors believe can be improved to create shareholder value. Melrose's management team is drawn from the former team at Wassall. During their tenure at Wassall, nearly Â£500 million of value was created for shareholders with a compound total shareholder return of over 18 per cent. per annum over a 12 year period. Conversely, Novar has delivered to its shareholders: â€¢ Poor share price performance â€¢ Poor management â€¢ Poor strategy and value destructive acquisitions â€¢ Poor and declining margins Christopher Miller, the Chairman of Melrose, commented: "We are very pleased with the enthusiastic support of major institutions for our proposal. There is clearly serious appetite for this structure and this deal. We look forward to discussing this proposal with Novar Shareholders. We believe we are offering a better alternative, with 45 pence of cash now and the ability to hold shares in a newly invigorated company with a proven team and excellent prospects." Enquiries: M:Communications: Nick Miles 020 7153 1535 Nick Fox 020 7153 1540 Tom Hampson 020 7153 1522 Rothschild: Philip Swatman 020 7280 5000 Meyrick Cox 020 7280 5000 Ravi Gupta 020 7280 5000 Investec: Keith Anderson 020 7597 5000 Rupert Krefting 020 7597 5000 This summary should be read in conjunction with the full text of the following announcement. Appendix 4 to the following announcement contains definitions of certain expressions used in this summary and the following announcement. The bases and sources of certain information used in this announcement are set out in Appendix 3. The laws of the relevant jurisdictions may affect the availability of the Offers to persons not resident in the United Kingdom. Persons who are not resident in the United Kingdom, or who are subject to the laws of any jurisdiction other than the United Kingdom, should inform themselves about, and observe, any applicable requirements. Further details in relation to overseas shareholders will be contained in the Offer Document. Rothschild, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting only for Melrose and no-one else in connection with the Offers and Admission and will not regard any other person as its client or be responsible to any person other than Melrose for providing the protections afforded to clients of Rothschild, nor for giving advice in relation to the Offers, Admission or the contents of this announcement. Investec, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting only for Melrose and no-one else in connection with the Offers and Admission and will not regard any other person as its client or be responsible to any person other than Melrose for providing the protections afforded to clients of Investec or for giving advice in relation to the Offers, Admission or the contents of this announcement. This announcement does not constitute, or form part of, any offer for, or any solicitation of any offer for, securities. Any acceptance or other response to the Offers should be made only on the basis of information referred to in the Offer Document which Melrose intends to despatch to Novar Shareholders and, for information only, to holders of options under the Novar Employee Share Schemes. Subject to the possible extension of the Offers into the United States referred to below, the Offers will not be made, directly or indirectly, in or into or by use of the mails of, or by any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of, the United States, Canada, Australia or Japan and the Offers will not be capable of acceptance by any such use, means or instrumentality or otherwise from within the United States, Canada, Australia or Japan. Accordingly, copies of this announcement, the Admission Document, the Offer Document, the Circular or the Form(s) of Acceptance, and any related documents are not being (unless determined otherwise by Melrose in its sole discretion), and must not be, mailed or otherwise distributed or sent in, into or from the United States, Canada, Australia or Japan including to Novar Shareholders or participants in the Novar Employee Share Schemes with registered addresses in the United States, Canada, Australia or Japan or to persons whom Melrose, Rothschild or Investec know to be custodians, trustees or nominees holding Novar Shares for persons with registered addresses in the United States, Canada, Australia or Japan. Persons receiving those documents (including, without limitation, custodians, nominees and trustees) should not distribute, mail or send them in, into or from the United States, Canada, Australia or Japan or use such mails or any such means, instrumentality or facility for any purpose directly or indirectly in connection with the Offers, and so doing may invalidate any purported acceptance of the Offers. Subject to Melrose obtaining, on terms satisfactory to it, all regulatory and other consents, authorisations, assurances, confirmations and/or rulings which it considers necessary or desirable in connection therewith, Melrose may elect at its absolute discretion to extend the Offers into the United States at such time as the Offers are formally made by way of the Offer Document. This announcement is not an offer, or solicitation, of securities, or solicitation of offers to purchase, the New Melrose Ordinary Shares or the New Melrose Preference Shares in the United States, Canada, Australia or Japan. Neither the New Melrose Ordinary Shares nor the New Melrose Preference Shares have been, nor will they be, registered under the US Securities Act or under the securities laws of any state, district or other jurisdiction of the United States, or of Canada, Australia or Japan and no regulatory clearances in respect of the New Melrose Ordinary Shares and New Melrose Preference Share have been, or will be, applied for in any jurisdiction other than in the UK. Accordingly, unless an exemption under the US Securities Act or other relevant securities laws is applicable, the New Melrose Ordinary Shares and New Melrose Preference Shares are not being, and may not be, offered, sold, resold, delivered or distributed, directly or indirectly, in or into the United States, Canada, Australia or Japan or to, or for the account or benefit of, any US Person or person resident in Canada, Australia or Japan. This document contains statements about members of the Novar Group and Melrose that are or may be forward looking statements. All statements other than statements of historical facts included in this document may be forward looking statements. Any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates" or similar expressions or the negative thereof are forward-looking statements. Forward-looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, economic performance, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Novar's or Melrose's operations; and (iii) the effects of government regulation on Novar's or Melrose's business. These forward-looking statements involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such person and the environment in which each will operate in the future. All subsequent oral or written forward-looking statements attributable to Melrose or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. Except as required by law, neither Melrose nor any other party intends to update these forward-looking statements, even though the affairs of Melrose and Novar will change from time to time. Any person who, alone or acting together with any other person(s) pursuant to an agreement or understanding (whether formal or informal) to acquire or control securities of Novar or Melrose, owns or controls, or becomes the owner or controller, directly or indirectly, of one per cent. or more of any class of securities of Novar or Melrose, is generally required under the provisions of Rule 8 of the City Code to notify a Regulatory Information Service and the Panel of every dealing in such securities during the Offer Period. Please consult your financial adviser immediately if you believe this rule may be applicable to you. Not for release, publication or distribution, in whole or in part, in or into the United States of America, Canada, Australia or Japan For immediate release 11 November 2004 Offers by Rothschild on behalf of Melrose PLC for Novar plc 11 November 2004 1. Introduction Further to its announcement on 4 November 2004, the Melrose Board announces the terms of its offers, to be made by Rothschild on behalf of Melrose, for the entire issued and to be issued ordinary and preference share capital of Novar, other than any such shares held, or which become held, in treasury by Novar. The Ordinary Offer will be one New Melrose Ordinary Share and 45 pence in cash for each Novar Ordinary Share. There will be a Mix and Match Facility in respect of the Ordinary Offer. The Preference Offer will be one New Melrose Preference Share for each Novar Preference Share. The cash element of the Ordinary Offer represents 36 per cent. of the closing price per Novar Ordinary Share on 3 November 2004 (being the last business day prior to the commencement of the Offer Period). Melrose's current intention is to maintain the aggregate Novar Ordinary Share dividend for the financial year ended 31 December 2003 of Â£39 million for ordinary shareholders of the Enlarged Group (as detailed in Appendix 2 to this announcement). Melrose will apply for admission of the Enlarged Share Capital of Melrose to the Official List as soon as practicable following completion of the Offers. 2. The Offers The Ordinary Offer The Ordinary Offer, which will be on the terms and subject to the conditions set out below and in Appendix 1 and to be set out in the Offer Document and in the Blue Form of Acceptance, will be made on the following basis: for each Novar Ordinary one New Melrose Ordinary Share and 45 pence in Share cash On the basis of the Placing Price of 100 pence per New Melrose Ordinary Share, the Ordinary Offer values the entire issued ordinary share capital of Novar at approximately Â£625 million and each Novar Ordinary Share at 145 pence, representing a premium of 17 per cent. to the closing price of 123.75 pence per Novar Ordinary Share on 3 November 2004 (the last business day prior to the commencement of the Offer Period). The Novar Ordinary Shares will be acquired by Melrose, pursuant to the Ordinary Offer, fully paid and free from all liens, equities, charges, encumbrances, rights of pre-emption and any other interests of any nature whatsoever and together with all the rights now or hereafter attaching thereto, including voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid after the date of this announcement. The New Melrose Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with the Existing Melrose Ordinary Shares, including the right to receive in full all dividends and other distributions (if any) declared, made or paid after the date of this announcement. The Ordinary Offer will be conditional upon, inter alia, approval of the Resolution by Melrose Shareholders at the EGM and the admission of the Enlarged Ordinary Share Capital to trading on AIM. Further information on the EGM is provided in section 10 of this announcement. The Preference Offer The Preference Offer, which will be on the terms and subject to the conditions set out below and in Appendix 1 and to be set out in the Offer Document and in the Pink Form of Acceptance, will be made on the following basis: for each Novar Preference Share one New Melrose Preference Share The Novar Preference Shares will be acquired by Melrose, pursuant to the Preference Offer, fully paid and free from all liens, equities, charges, encumbrances, rights of pre-emption and any other interests of any nature whatsoever and together with all the rights now or hereafter attaching thereto, including voting rights and the right to receive and retain in full all dividends and other distributions (if any) declared, made or paid after the date of this announcement, save for the dividend payable in respect of Novar Preference Shares on 1 December 2004 in respect of the period from 2 June 2004 to 1 December 2004 (inclusive). The New Melrose Preference Shares will be issued credited as fully paid and will carry substantially the same rights as those attached to the Novar Preference Shares, save that they will not be convertible into Melrose Ordinary Shares. The rights to be attached to the New Melrose Preference Shares will be set out in the Offer Document and the Admission Document. The Preference Offer will be conditional only upon the Ordinary Offer becoming or being declared unconditional in all respects. Application will be made for the New Melrose Preference Shares to be admitted to trading on AIM at the same time as the New Melrose Ordinary Shares. Melrose will use its reasonable endeavours to ensure that such admission becomes effective. Melrose has secured committed debt facilities to finance, in accordance with their terms, the redemption of the New Melrose Preference Shares and the Novar Preference Shares (to the extent required), which are, or will be, due for redemption in August 2005. Furthermore, Melrose intends to procure that the Novar Preference Shares and the Novar Ordinary Shares are delisted from the Official List following the Offers becoming unconditional in all respects. Melrose will apply for admission of the Enlarged Share Capital of Melrose to the Official List as soon as practicable following completion of the Offers. 3. Mix and Match Facility relating to the Ordinary Offer Novar Ordinary Shareholders (other than certain overseas shareholders) may elect, under the terms of the Ordinary Offer, subject to availability, to vary the proportions in which they receive New Melrose Ordinary Shares and cash consideration under the Ordinary Offer in respect of their holdings of Novar Ordinary Shares. However, the total number of New Melrose Ordinary Shares to be issued and the maximum aggregate amount of cash to be paid under the Ordinary Offer will not be varied as a result of elections made under the Mix and Match Facility. Accordingly, satisfaction of elections made by Novar Ordinary Shareholders under the Mix and Match Facility will depend on the extent to which other Novar Ordinary Shareholders make offsetting elections. Satisfaction of elections under the Mix and Match Facility will be effected on the basis of 100 pence (being an amount equal to the Placing Price) in cash for each New Melrose Ordinary Share (and vice versa). To the extent that elections cannot be satisfied in full, they will be scaled down on a pro rata basis. As a result, Novar Ordinary Shareholders who make an election under the Mix and Match Facility will not necessarily know the exact number of New Melrose Ordinary Shares or the amount of cash they will receive until settlement of the consideration under the Ordinary Offer. Elections under the Mix and Match Facility will not affect the entitlements of those Novar Ordinary Shareholders who do not make any such elections. The Mix and Match Facility will remain open until the first closing date of the Ordinary Offer. If the Ordinary Offer is not then unconditional as to acceptances, Melrose may extend the Mix and Match Facility to a later date. If the Mix and Match Facility has been closed, Melrose reserves the right to reintroduce a Mix and Match Facility, subject to the rules of the City Code. The Mix and Match Facility is conditional on the Ordinary Offer becoming or being declared unconditional in all respects. 4. Financing the Offers Equity The cash consideration payable under the Ordinary Offer will be financed from the proceeds of a cash placing with leading institutional investors of New Melrose Ordinary Shares fully underwritten by Investec. Investec, as agent for Melrose, has conditionally placed the Placing Shares with institutional investors at the Placing Price. The Placing will raise approximately Â£232 million. The Placing is conditional, amongst other things, upon the Ordinary Offer becoming or being declared unconditional in all respects. Under the terms of the Placing Agreement, Melrose is permitted to declare the Ordinary Offer unconditional as to acceptances once it has received valid acceptances of the Ordinary Offer representing over 50 per cent. of the voting share capital of Novar. Melrose is not permitted to revise, or waive any other condition of, the Offers without the consent of Investec. Further details of the Placing will be set out in the Offer Document and the Admission Document. Debt Debt facilities are not being used to finance the Offers. However, following completion of the Offers, Melrose expects some or all of the current debt facilities of Novar to become re-payable in full, as a result of the Offers. In anticipation of this, Melrose has obtained committed facilities sufficient to refinance Novar's existing debt facilities, including the future redemption of the New Melrose Preference Shares and the Novar Preference Shares. In addition, in the unlikely event that Novar Preference Shares are converted into Novar Ordinary Shares, Melrose has arranged for a committed standby facility sufficient to acquire any Novar Ordinary Shares arising from such conversion. Under the terms of the committed debt facilities, Melrose is permitted to declare the Ordinary Offer unconditional as to acceptances once it has received valid acceptances of the Ordinary Offer representing over 50 per cent. of the voting share capital of Novar. Under the terms of the committed standby facility, Melrose is permitted to waive any condition of the Ordinary Offer without the consent of the lender unless such waiver is reasonably expected to have a material impact on the likelihood of the facility being utilised or on the level of utilisation of the facility. 5. Background to and reasons for the Offers Melrose was floated on AIM on 28 October 2003 with the stated strategy of acquiring companies and businesses whose performance the Melrose Directors believe can be improved to create shareholder value. Melrose's management team is drawn from the former team at Wassall. During their tenure at Wassall, nearly Â£500 million of value was created for shareholders with a compound total shareholder return of over 18 per cent. per annum over a 12 year period. The Melrose Board believes it can create substantial shareholder value for the benefit of shareholders of the Enlarged Group. The Melrose management team has demonstrated a successful track record of unlocking value in similar industrial companies. 6. The need for a new management team at Novar The facts speak for themselves... Long term value destruction â€¢ Over Â£1 billion of market capitalisation destroyed over the last ten years â€¢ A corresponding reduction of over 50 per cent. in the Novar Ordinary Share price from 266 pence to 124 pence â€¢ Negative Total Shareholder Returns: Â£100 invested in Novar ten years ago would be worth Â£89 today...versus Â£209 if invested in the FTSE All Share Continued operational underperformance: 5 year review â€¢ EBITDA margin erosion from 17 per cent. to 11 per cent. â€¢ Continuing group operating profit margin erosion from 13 per cent. to 7 per cent. â€¢ Exceptional and restructuring charges of almost Â£300 million...approximately 50 per cent. of Novar's market capitalisation Grossly overpaid for acquisitions that delivered unacceptable returns â€¢ Â£762 million spent on acquisitions over the last 5 years... â€¢ ...whilst profit for continuing operations has declined from Â£119 million to Â£106 million ...In summary, Novar has consistently delivered to its shareholders: â€¢ Poor share price performance â€¢ Poor management â€¢ Poor strategy and value destructive acquisitions â€¢ Poor and declining margins New Novar management...or more of the same? Melrose notes the sudden appointment of Stephen Howard with at best limited consultation with Novar Shareholders. Stephen Howard has been a member of the Novar Board since 2000 and was CEO at Cookson between 1 October 1997 and 19 July 2004. Under his leadership: â€¢ The Cookson share price declined from 175 pence to 36 pence â€¢ Despite spending over Â£670 million on acquisitions since 1998, the operating profit for continuing operations declined from Â£188 million to Â£79 million â€¢ The company launched a rescue rights issue â€¢ Shareholders have not been paid a dividend since October 2001 A better alternative... Melrose intends to*: â€¢ Improve operating business performance â€¢ Cease value destroying acquisitions â€¢ Address the capital structure of the Security Printing Services division of Novar â€¢ Create, realise and return value to shareholders over time 7. Novar and its activities Novar, a UK listed holding company, operates internationally in three different businesses: â€¢ Security Printing Services: this division operates a security printing business which prints cheques and business forms in the United States. In 2003, this division achieved sales of Â£347 million and adjusted operating profit of Â£62 million. â€¢ Intelligent Building Systems: this division specialises in fire detection, security alarm systems and cabling systems, with its main operations in the UK and Germany. In 2003, this division achieved sales of Â£604 million and adjusted operating profit of Â£36 million. â€¢ Indalex Aluminum Solutions: this division manufactures and sells aluminium extruded products principally in the North American market. In 2003, this division achieved sales of Â£480 million and adjusted operating profit of Â£8 million. Summary financial information of Novar is set out below: Year ended 31 December 2001 2002 2003 -------------------------- ------- ------- ------- Turnover Â£1,482m Â£1,448m Â£1,431m (Loss) / profit on ordinary activities after taxation Â£(31)m Â£39m Â£(62)m (Loss) / earnings per ordinary share (basic) (9.6)p 6.7p (17.9)p Net assets Â£461m Â£443m Â£309m 8. Employees In the event that the Offers become or are declared unconditional in all respects, the existing employment rights of the employees of Novar will be fully safeguarded. * Further detail of Melrose's strategy is set out in paragraphs 16 and 17 of Appendix 3 to this announcement. The Melrose Directors have carefully considered the publicly available information in relation to the Novar Pension Schemes, including the current level of company contributions and the disclosed pension deficit. Melrose believes that under its management, Novar will be better positioned to safeguard the interests of the members of the Novar Pension Schemes and has structured its Offers to ensure that they are not being financed by bank borrowings (other than in the unlikely event of the conversion of the Novar Preference Shares). Further details in relation to the Novar Pension Schemes are set out in paragraph 14 of Appendix 3 to this document. 9. Novar Employee Share Schemes The Ordinary Offer will extend to any Novar Ordinary Shares transferred or sold from treasury or unconditionally allotted or issued prior to the date on which the Ordinary Offer closes (or such earlier date as Melrose decides), including Novar Ordinary Shares issued or transferred from treasury pursuant to the options and awards granted under the Novar Employee Share Schemes. Appropriate proposals will be made in due course to participants in the Novar Employee Share Schemes. 10. Extraordinary General Meeting In view of the size of the acquisition and in order to implement the Offers and the Placing, it will be necessary for the shareholders of Melrose to approve: the Offers, an increase in the share capital of Melrose, the creation of the New Melrose Preference Shares, the amendment of the articles of association of Melrose and the allotment of the New Melrose Ordinary Shares and the New Melrose Preference Shares. Pre-emption rights will also need to be disapplied in respect of the allotment of the Placing Shares. An Extraordinary General Meeting will be convened for this purpose. The Circular convening the EGM will be sent to Melrose Shareholders in due course. 11. Delisting of Novar Shares, re-registration and compulsory acquisition After the Offers become or are declared unconditional in all respects, Melrose intends to procure the making of an application by Novar to delist the Novar Ordinary Shares and Novar Preference Shares from the Official List and the cancellation of trading on the London Stock Exchange's market for listed securities. It is anticipated that cancellation of listing and trading will take effect no earlier than 20 business days after the Offers become unconditional in all respects. Delisting would significantly reduce the liquidity and marketability of any Novar Ordinary Shares and Novar Preference Shares not assented to the Offers. If Melrose receives acceptances under the Offers in respect of, and/or otherwise acquires, 90 per cent. or more of the Novar Ordinary Shares to which the Ordinary Offer relates and/or 90 per cent. or more of the Novar Preference Shares to which the Preference Offer relates, Melrose intends to exercise its rights pursuant to the provisions of sections 428 to 430F (inclusive) of the Act to acquire compulsorily the remaining Novar Ordinary Shares and/or Novar Preference Shares. It is also proposed that, following the Offers becoming unconditional in all respects, and after the Novar Ordinary Shares and Novar Preference Shares are delisted, Novar will be re-registered as a private limited company under the relevant provisions of the Act. 12. Listings, dealings and settlement The Melrose Ordinary Shares are currently admitted to trading on AIM. The successful completion of the Offers would be treated as a reverse takeover under the AIM Rules. This requires both cancellation of Melrose's existing trading facility on AIM and a new application to be made for the Enlarged Share Capital to be admitted to trading on AIM. Cancellation of Melrose's existing trading facility will not occur until the Ordinary Offer is declared unconditional in all respects (save for any condition relating to Admission). Simultaneously with the making of the Offers, application will be made to the London Stock Exchange for the Enlarged Share Capital of Melrose to be admitted to trading on AIM. It is expected that admission to trading will become effective and that dealings will commence in the Enlarged Share Capital of Melrose on the first dealing day following the day on which the Offers become or are declared unconditional in all respects (save for any condition relating to Admission). Certificates for New Melrose Ordinary Shares and/or New Melrose Preference Shares to be issued to Novar Shareholders under the terms of the Offers will be despatched, or the appropriate stock accounts in CREST of the Novar Shareholders will be credited, no later than 14 days after the Offers become or are declared unconditional in all respects or 14 days after receipt of a valid acceptance of the Offers, whichever is the later. Melrose will apply for admission of the Enlarged Share Capital of Melrose to the Official List as soon as practicable following completion of the Offers. 13. General The Offers will comply with the applicable rules and regulations of the London Stock Exchange and the City Code. The Offers will be governed by English law and will be subject to the conditions set out herein and in Appendix 1 and to be set out in the Offer Document and the relevant Form of Acceptance. The Offer Document, together with the Admission Document, giving financial and other information in relation to Melrose will be sent to Novar Shareholders in due course. As at 10 November 2004 (the last business day prior to this announcement), neither Melrose nor any of its directors, nor any person acting in concert with it, owns or controls any Novar Shares or has any option to acquire any Novar Shares or had entered into any derivative referenced to Novar Shares. Enquiries: M:Communications: Nick Miles 020 7153 1535 Nick Fox 020 7153 1540 Tom Hampson 020 7153 1522 Rothschild: Philip Swatman 020 7280 5000 Meyrick Cox 020 7280 5000 Ravi Gupta 020 7280 5000 Investec: Keith Anderson 020 7597 5000 Rupert Krefting 020 7597 5000 The laws of the relevant jurisdictions may affect the availability of the Offers to persons not resident in the United Kingdom. Persons who are not resident in the United Kingdom, or who are subject to the laws of any jurisdiction other than the United Kingdom, should inform themselves about, and observe, any applicable requirements. Further details in relation to overseas shareholders will be contained in the Offer Document. Rothschild, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting only for Melrose and no-one else in connection with the Offers and Admission and will not regard any other person as its client or be responsible to any person other than Melrose for providing the protections afforded to clients of Rothschild, nor for giving advice in relation to the Offers, Admission or the contents of this announcement. Investec, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting only for Melrose and no-one else in connection with the Offers and Admission and will not regard any other person as its client or be responsible to any person other than Melrose for providing the protections afforded to clients of Investec or for giving advice in relation to the Offers, Admission or the contents of this announcement. This announcement does not constitute, or form part of, any offer for, or any solicitation of any offer for, securities. Any acceptance or other response to the Offers should be made only on the basis of information referred to in the Offer Document which Melrose intends to despatch to Novar Shareholders and, for information only, to holders of options under the Novar Employee Share Schemes. Subject to the possible extension of the Offers into the United States referred to below, the Offers will not be made, directly or indirectly, in or into or by use of the mails of, or by any means or instrumentality (including, but not limited to, facsimile, e-mail or other electronic transmission, telex or telephone) of interstate or foreign commerce of, or of any facility of a national, state or other securities exchange of, the United States, Canada, Australia or Japan and the Offers will not be capable of acceptance by any such use, means or instrumentality or otherwise from within the United States, Canada, Australia or Japan. Accordingly, copies of this announcement, the Admission Document, the Offer Document, the Circular or the Form(s) of Acceptance, and any related documents are not being (unless determined otherwise by Melrose in its sole discretion), and must not be, mailed or otherwise distributed or sent in, into or from the United States, Canada, Australia or Japan including to Novar Shareholders or participants in the Novar Employee Share Schemes with registered addresses in the United States, Canada, Australia or Japan or to persons whom Melrose, Rothschild or Investec know to be custodians, trustees or nominees holding Novar Shares for persons with registered addresses in the United States, Canada, Australia or Japan. Persons receiving those documents (including, without limitation, custodians, nominees and trustees) should not distribute, mail or send them in, into or from the United States, Canada, Australia or Japan or use such mails or any such means, instrumentality or facility for any purpose directly or indirectly in connection with the Offers, and so doing may invalidate any purported acceptance of the Offers. Subject to Melrose obtaining, on terms satisfactory to it, all regulatory and other consents, authorisations, assurances, confirmations and/or rulings which it considers necessary or desirable in connection therewith, Melrose may elect at its absolute discretion to extend the Offers into the United States at such time as the Offers are formally made by way of the Offer Document. This announcement is not an offer, or solicitation, of securities, or solicitation of offers to purchase, the New Melrose Ordinary Shares or the New Melrose Preference Shares in the United States, Canada, Australia or Japan. Neither the New Melrose Ordinary Shares nor the New Melrose Preference Shares have been, nor will they be, registered under the US Securities Act or under the securities laws of any state, district or other jurisdiction of the United States, or of Canada, Australia or Japan and no regulatory clearances in respect of the New Melrose Ordinary Shares and New Melrose Preference Shares have been, or will be, applied for in any jurisdiction other than the UK. Accordingly, unless an exemption under the US Securities Act or other relevant securities laws is applicable, the New Melrose Ordinary Shares and New Melrose Preference Shares are not being, and may not be, offered, sold, resold, delivered or distributed, directly or indirectly, in or into the United States, Canada, Australia or Japan or to, or for the account or benefit of, any US Person or person resident in Canada, Australia or Japan. This document contains statements about members of the Novar Group and Melrose that are or may be forward looking statements. All statements other than statements of historical facts included in this document may be forward looking statements. Any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "will", "may", "anticipates" or similar expressions or the negative thereof are forward-looking statements. Forward-looking statements include statements relating to the following (i) future capital expenditures, expenses, revenues, economic performance, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of Novar's or Melrose's operations; and (iii) the effects of government regulation on Novar's or Melrose's business. These forward-looking statements involve known and unknown risk, uncertainties and other factors which may cause the actual results, performance or achievements of any such person, or industry results, to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of such person and the environment in which each will operate in the future. All subsequent oral or written forward-looking statements attributable to Melrose or any persons acting on its behalf are expressly qualified in their entirety by the cautionary statement above. Except as required by law, neither Melrose nor any other party intends to update these forward-looking statements, even though the affairs of Melrose and Novar will change from time to time. Any person who, alone or acting together with any other person(s) pursuant to an agreement or understanding (whether formal or informal) to acquire or control securities of Novar or Melrose, owns or controls, or becomes the owner or controller, directly or indirectly, of one per cent. or more of any class of securities of Novar or Melrose, is generally required under the provisions of Rule 8 of the City Code to notify a Regulatory Information Service and the Panel of every dealing in such securities during the Offer Period. Please consult your financial adviser immediately if you believe this rule may be applicable to you. APPENDIX 1 CONDITIONS AND FURTHER TERMS OF THE OFFERS The Offers, which will be made by Rothschild on behalf of Melrose, will comply with the applicable rules and regulations of the London Stock Exchange and the City Code, will be governed by English law and will be subject to the jurisdiction of the courts of England. In addition, the Offers will be subject to the terms and conditions set out in the Offer Document and related Forms of Acceptance. 1. Conditions of the Ordinary Offer The Ordinary Offer will be subject to the following conditions: (a) valid acceptances of the Ordinary Offer being received (and not, where permitted, withdrawn) by not later than 3.00 p.m. (London time) on the first closing date of the Ordinary Offer (or such later time(s) and/or date(s) as Melrose may, subject to the rules of the City Code or with the consent of the Panel, decide) in respect of not less than 90 per cent. (or such lesser percentage as Melrose may decide) in nominal value of the Novar Ordinary Shares to which the Ordinary Offer relates, provided that this condition will not be satisfied unless Melrose shall have acquired or agreed to acquire (whether pursuant to the Ordinary Offer or otherwise) Novar Ordinary Shares carrying in aggregate more than 50 per cent. of the voting rights then normally exercisable at a general meeting of Novar, including for this purpose (except to the extent otherwise agreed by the Panel) any such voting rights attaching to Novar Ordinary Shares that are unconditionally allotted or issued before the date on which the Ordinary Offer becomes or is declared unconditional as to acceptances whether pursuant to the exercise of any outstanding subscription or conversion rights or otherwise. For the purposes of this condition: (i) Novar Ordinary Shares which have been unconditionally allotted shall be deemed to carry the voting rights they will carry upon issue; (ii) Novar Ordinary Shares that cease to be held in treasury are Novar Ordinary Shares to which the Ordinary Offer relates; and (iii) the expression "Novar Ordinary Shares to which the Ordinary Offer relates" shall be construed in accordance with sections 428 to 430F of the Act; (b) the passing at the Extraordinary General Meeting of Melrose (or at any adjournment of the meeting) of all resolutions as may be necessary or desirable to approve, fund, effect or implement the Offers and the acquisition of any shares in Novar, including the passing of the Resolution; (c) the admission of the Enlarged Ordinary Share Capital to trading on AIM becoming effective in accordance with the AIM Rules or (if Melrose so determines and subject to the consent of the Panel) the London Stock Exchange agreeing to admit such shares to trading on AIM subject only to: (i) the allotment of such shares and/or (ii) the Ordinary Offer becoming or being declared unconditional in all respects; (d) no Third Party having decided to take, institute, implement or threaten any action, proceeding, suit, investigation, enquiry or reference, or having required any action to be taken or otherwise having done anything or having enacted, made or proposed any statute, regulation, decision, order or change to published practice and there not continuing to be outstanding any statute, regulation, decision or order which would or might: (i) make the Offers or their implementation or the acquisition or proposed acquisition of any shares or other securities in, or control of, Novar by Melrose void, illegal and/or unenforceable under the laws of any jurisdiction, or otherwise directly or indirectly prohibit, or restrain, restrict, delay or otherwise interfere with the implementation of, or impose additional conditions or obligations with respect to, or otherwise challenge or require amendment of the Offers or the acquisition of any such shares or securities by Melrose; (ii) require, prevent or delay the divestiture or alter the terms envisaged for such divestiture by Melrose or by any member of the Wider Novar Group of all or any part of its businesses, assets or property or impose any limitation on the ability of any of them to conduct their businesses (or any part thereof) or to own any of their assets or properties (or any part thereof); (iii) impose any limitation on, or result in a delay in, the ability of Melrose directly or indirectly to acquire or hold or to exercise effectively all or any rights of ownership in respect of shares or other securities in Novar or on the ability of any member of the Wider Novar Group or Melrose directly or indirectly to hold or exercise effectively any rights of ownership in respect of shares or other securities (or the equivalent) in, or to exercise management control over, any member of the Wider Novar Group; (iv) require Melrose or the Wider Novar Group to acquire or offer to acquire any shares, other securities (or the equivalent) or interest in any member of the Wider Novar Group or any asset owned by any third party (other than in the implementation of the Offers); (v) require, prevent or delay a divestiture by Melrose of any shares or other securities (or the equivalent) in Novar; (vi) result in any member of the Wider Novar Group ceasing to be able to carry on business under any name under which it presently does so; (vii) impose any limitation on the ability of Melrose or any member of the Wider Novar Group to integrate or co-ordinate all or any part of its business with all or any part of the business of Melrose and/or the Wider Novar Group; or (viii) otherwise affect the business, assets, profits or prospects of Melrose or any member of the Wider Novar Group, and all applicable waiting and other time periods during which any such Third Party could decide to take, institute, implement or threaten any such action, proceeding, suit, investigation, enquiry or reference or take any other step under the laws of any jurisdiction in respect of the Offers or the acquisition or proposed acquisition of any Novar Shares or otherwise intervene having expired, lapsed, or been terminated; (e) no undertakings or assurances being sought from Melrose or any member of the Wider Novar Group by the Secretary of State for Trade and Industry or any other third party, except on terms satisfactory to Melrose; (f) all necessary or appropriate notifications, filings or applications having been made in connection with the Offers and all necessary waiting periods (including any extensions thereof) under any applicable legislation or regulation of any jurisdiction having expired, lapsed or been terminated (as appropriate) and all statutory and regulatory obligations in any jurisdiction having been complied with and all Authorisations necessary or appropriate in any jurisdiction for or in respect of the Offers and the acquisition or the proposed acquisition of any shares or other securities in, or control of, Novar by Melrose having been obtained in terms and in a form satisfactory to Melrose from all appropriate Third Parties (including, without limitation, any under the relevant provisions of the UK Enterprise Act 2002, the Hart-Scott-Rodino Antitrust Improvements Act 1976, the Competition Act (Canada) and the Spanish Law 16/1989) or (without prejudice to the generality of the foregoing) from any person or bodies with whom Melrose or any member of the Wider Novar Group has entered into contractual arrangements and all such Authorisations necessary or appropriate to carry on the business of any member of the Wider Novar Group in any jurisdiction having been obtained and all such Authorisations remaining in full force and effect at the time at which the Ordinary Offer becomes otherwise unconditional and there being no notice or intimation of an intention to revoke, suspend, restrict, modify or not to renew such Authorisations; (g) except as fairly disclosed in the Annual Report and Accounts of Novar or the Interim Results of Novar or as publicly announced to a Regulatory Information Service by or on behalf of Novar prior to the date of this announcement, there being no provision of any arrangement, agreement, licence, permit, lease or other instrument to which any member of the Wider Novar Group is a party or by or to which any such member or any of its assets is or may be bound or be subject or any event or circumstance which, as a consequence of the Offers or the acquisition or the proposed acquisition by Melrose of any shares or other securities in Novar or because of a change in the control or management of any member of the Wider Novar Group or otherwise, could or might reasonably be expected to result in: (i) any monies borrowed by, or any other indebtedness, actual or contingent, of any member of the Wider Novar Group being or becoming repayable, or capable of being declared repayable, immediately or prior to its or their stated maturity date or repayment date, or the ability of any such member to borrow monies or incur any indebtedness being withdrawn or inhibited or being capable of becoming or being withdrawn or inhibited; (ii) the rights, liabilities, obligations, interests or business of any member of the Wider Novar Group or Melrose under any such arrangement, agreement, licence, permit, lease or instrument or the interests or business of any member of the Wider Novar Group or Melrose in or with any other firm or company or body or person (or any agreement or arrangement relating to any such business or interests) being terminated or adversely modified or affected or any onerous obligation or liability arising or any adverse action being taken thereunder; (iii) any member of the Wider Novar Group ceasing to be able to carry on business under any name under which it presently does so; (iv) any assets or interests of, or any asset the use of which is enjoyed by, any member of the Wider Novar Group being or falling to be disposed of or charged or any right arising under which any such asset or interest could be required to be disposed of or charged or could cease to be available to any member of the Wider Novar Group; (v) the creation or enforcement of any mortgage, charge or other security interest over the whole or any part of the business, property or assets of any member of the Wider Novar Group; (vi) the value of, or the financial or trading position or prospects of, any member of the Wider Novar Group being prejudiced or adversely affected; (vii) the creation of any liability (actual or contingent) by any member of the Wider Novar Group; or (viii) any liability of any member of the Wider Novar Group to make any severance, termination, bonus or other payment to any of the directors or other officers of any member of the Wider Novar Group; (h) except as fairly disclosed in the Annual Report and Accounts of Novar or the Interim Results of Novar or as publicly announced to a Regulatory Information Service by or on behalf of Novar prior to the date of this announcement, no member of the Wider Novar Group having, since 31 December 2003: (i) issued or agreed to issue or authorised or proposed the issue of additional shares of any class, or securities or securities convertible into, or exchangeable for, or rights, warrants or options to subscribe for or acquire, any such shares or convertible securities or transferred or sold or agreed to transfer or sell or authorised or proposed the transfer or sale of Novar Shares out of treasury (save, where relevant, as between Novar and wholly-owned subsidiaries of Novar and save for the issue or transfer out of treasury of Novar Shares on the exercise of options granted before the date of this announcement in the ordinary course); (ii) save for the dividend payable in respect of Novar Preference Shares on 1 December 2004 in respect of the period from 2 June 2004 to 1 December 2004 (inclusive), recommended, declared, paid or made or proposed to recommend, declare, pay or make any bonus, dividend or other distribution (whether payable in cash or otherwise) other than to Novar or one of its wholly-owned subsidiaries; (iii) merged with or demerged from or acquired any body corporate, partnership or business or acquired or disposed of, or, other than in the ordinary course of business, transferred, mortgaged or charged or created any security interest over, any assets or any right, title or interest in any asset (including shares and trade investments) or authorised, proposed or announced any intention to do so; (iv) made, authorised, proposed or announced an intention to propose any change in its loan capital; (v) issued, authorised or proposed the issue of any debentures or (save as between Novar and its wholly-owned subsidiaries or between such wholly-owned subsidiaries) incurred or increased any indebtedness or become subject to any contingent liability; (vi) entered into or varied or authorised, proposed or announced its intention to enter into or vary any contract, transaction, arrangement or commitment (whether in respect of capital expenditure or otherwise); (vii) entered into or varied the terms of any service agreement with any director or senior executive of the Wider Novar Group; (viii) proposed, agreed to provide or modified the terms of any share option scheme, incentive scheme, or other benefit relating to the employment or termination of employment of any employee of the Wider Novar Group; (ix) made or agreed or consented to any significant change to the terms of the trust deeds constituting the pension schemes established for its directors, employees or their dependants or the benefits which accrue, or to the pensions which are payable, thereunder, or to the basis on which qualification for, or accrual or entitlement to, such benefits or pensions are calculated or determined or to the basis on which the liabilities (including pensions) of such pension schemes are funded or made, or agreed or consented to any change to the trustees involving the appointment of a trust corporation; (x) implemented, effected or authorised, proposed or announced its intention to implement any composition, assignment, reconstruction, amalgamation, commitment, scheme or other transaction or arrangement (other than the Offers); (xi) purchased, redeemed or repaid or announced any proposal to purchase, redeem or repay any of its own shares or other securities or reduced or, save in respect of the matters mentioned in sub-paragraph (i) above, made any other change to any part of its share capital; (xii) waived or compromised any claim otherwise than in the ordinary course of business; (xiii) made any alteration to its memorandum or articles of association or other incorporation documents; (xiv) taken or proposed any steps, corporate action or had any legal proceedings instituted or threatened against it in relation to the suspension of payments, a moratorium of any indebtedness, its winding-up (voluntary or otherwise), dissolution, reorganisation or for the appointment of any administrator, receiver, manager, administrative receiver, trustee or similar officer of all or any of its assets or revenues or any analogous proceedings in any jurisdiction or appointed any analogous person in any jurisdiction or had any such person appointed; (xv) been unable, or admitted in writing that it is unable, to pay its debts or commenced negotiations with one or more of its creditors with a view to rescheduling or restructuring any of its indebtedness, or having stopped or suspended (or threatened to stop or suspend) payment of its debts generally or ceased or threatened to cease carrying on all or a substantial part of its business; or (xvi) entered into any contract, commitment, agreement or arrangement otherwise than in the ordinary course of business or passed any resolution or made any offer (which remains open for acceptance) with respect to or announced an intention to, or to propose to, effect any of the transactions, matters or events referred to in this condition; (i) since 31 December 2003, and except as fairly disclosed in the Annual Report and Accounts of Novar or the Interim Results of Novar or as publicly announced to a Regulatory Information Service by or on behalf of Novar prior to the date of this announcement: (i) there having been no adverse change in the business, assets, financial or trading position or profits or prospects or operational performance of any member of the Wider Novar Group; (ii) no litigation, arbitration proceedings, prosecution or other legal proceedings having been threatened, announced or instituted by or against or remaining outstanding against any member of the Wider Novar Group or to which any member of the Wider Novar Group is or may become a party (whether as claimant or defendant or otherwise) and no enquiry or investigation by, or complaint or reference to, any Third Party against or in respect of any member of the Wider Novar Group having been threatened, announced or instituted by or against, or remaining outstanding in respect of, any member of the Wider Novar Group; (iii) no contingent or other liability having arisen or become known to Melrose in respect of any member of the Wider Novar Group; and (iv) no steps having been taken and no omissions having been made which are likely to result in the withdrawal, cancellation, termination or modification of any licence held by any member of the Wider Novar Group, which is necessary for the proper carrying on of its business and the withdrawal, cancellation, termination or modification of which is material and likely adversely to affect the Novar Group taken as a whole; (j) except as fairly disclosed in the Annual Report and Accounts of Novar or the Interim Results of Novar or as publicly announced to a Regulatory Information Service by or on behalf of Novar prior to the date of this announcement, Melrose not having discovered: (i) that any financial, business or other information concerning the Wider Novar Group publicly disclosed or disclosed to Melrose at any time by or on behalf of any member of the Wider Novar Group is misleading, contains a misrepresentation of fact or omits to state a fact necessary to make that information not misleading; (ii) that any member of the Wider Novar Group is subject to any liability, contingent or otherwise, which is not disclosed in the Annual Report and Accounts of Novar or the Interim Results of Novar; or (iii) any information which affects the import of any information disclosed to Melrose at any time by or on behalf of any member of the Wider Novar Group; and (k) Melrose not having discovered: (i) that any past or present member of the Wider Novar Group has not complied with all applicable legislation or regulations of any jurisdiction or any Authorisations relating to the storage, carriage, disposal, discharge, spillage, leak or emission of any waste or hazardous substance or any substance likely to impair the environment (including property) or harm human health or otherwise relating to environmental matters or the health and safety of humans, which non-compliance would be likely to give rise to any liability including any penalty for non-compliance (whether actual or contingent) on the part of any member of the Wider Novar Group; or (ii) that there has been a disposal, discharge, spillage, accumulation, leak, emission, release or the migration, production, supply, treatment, storage, transport or use of any waste or hazardous substance or any substance likely to impair the environment (including any property) or harm human health which (whether or not giving rise to non-compliance with any law or regulation) would be likely to give rise to any liability (whether actual or contingent) on the part of any member of the Wider Novar Group; or (iii) that there is or is likely to be any liability (whether actual or contingent) or requirement to make good, remediate, repair, re-instate or clean up any property or asset now or previously owned, occupied or made use of by any past or present member of the Wider Novar Group (or on its behalf), or in which any such member may now or previously have had or be deemed to have had an interest, under any environmental legislation, common law, regulation, notice, circular, Authorisation, other legally binding requirement or order of any Third Party or to contribute to the cost thereof or associated therewith or indemnify any person in relation thereto; or (iv) that circumstances exist (whether as a result of the making of the Offers or otherwise) (1) which would be likely to lead to any Third Party instituting; or (2) whereby any member of the Wider Novar Group or any present or past member of the Wider Novar Group would be likely to be required to institute, an environmental audit or take any other steps which would in any such case be likely to result in any liability (whether actual or contingent) to improve, modify existing or install new plant, machinery or equipment or carry out changes in the processes currently carried out or make good, remediate, repair, re-instate or clean up any land or other asset now or previously owned, occupied or made use of by any past or present member of the Wider Novar Group (or on its behalf or for which a member of the Wider Novar Group would be responsible), or in which any such member may now or previously have had or be deemed to have had an interest; or (v) that circumstances exist whereby a person or class of persons would be likely to have any claim or claims in respect of any product or process of manufacture or materials used therein now or previously manufactured, sold or carried out by any past or present member of the Wider Novar Group which claim or claims would be likely to affect any member of the Wider Novar Group. Melrose reserves the right to waive in whole or in part all or any of conditions (d) to (k) inclusive. Conditions (b) to (k) inclusive must be satisfied as at, or waived (where possible) on or before, the 21st day after the later of the first closing date of the Ordinary Offer and the date on which condition (a) is fulfilled (or, in each case, such later date as the Panel may agree). Melrose shall be under no obligation to waive, to determine to be or treat as fulfilled any of conditions (d) to (k) inclusive by a date earlier than the date specified above for the fulfilment thereof notwithstanding that the other conditions of the Ordinary Offer may at such earlier date have been waived or fulfilled and that there are at such earlier date no circumstances indicating that any of such conditions may not be capable of fulfilment. If Melrose is required by the Panel to make an offer for Novar Ordinary Shares under the provisions of Rule 9 of the City Code, Melrose may make such alterations to the terms and conditions of the Ordinary Offer as are necessary to comply with the provisions of that Rule. 2. Conditions of the Preference Offer The Preference Offer will be subject only to the Ordinary Offer becoming or being declared unconditional in all respects. 3. Further Terms of the Offers The Offers will lapse if they are referred to the UK Competition Commission before the later of 3 p.m. (London time) on the first closing date of the Offers and the date on which the Ordinary Offer becomes or is declared unconditional as to acceptances. If the Offers so lapse, the Offers will cease to be capable of further acceptance and persons accepting the Offers and Melrose will cease to be bound by any Forms of Acceptance submitted on or before the time when the Offers lapse. APPENDIX 2 The following table, together with the accompanying notes, sets out an estimate of the Enlarged Ordinary Share Capital and the pro forma dividend that would be payable to Melrose Ordinary Shareholders of the Enlarged Group, based on the aggregate ordinary dividend of Â£39 million paid by Novar for the year ended 31 December 2003: Notes Shares (million) Share capital of the Enlarged Group Existing Melrose Ordinary Shares 13.1 New Melrose Ordinary Shares to be issued pursuant to the Placing (i) 232.0 New Melrose Ordinary Shares to be issued for Novar Ordinary Shares (ii) 444.0 -------- Total issued Melrose Ordinary Shares in the Enlarged Group 689.1 -------- Pro forma dividend per ordinary share for the Enlarged Group Aggregate cost of Novar's 2003 full year ordinary dividend (iii) Â£39.1m Total issued Melrose Ordinary Shares in Enlarged Group 689.1 Pro forma dividend per Melrose Ordinary Share for the Enlarged Group 5.7 pence Notes: (i) Based on the Placing Price of 100 pence per New Melrose Ordinary Share. (ii) Assumes that New Melrose Ordinary Shares are issued on a one-for-one basis for Novar Ordinary Shares under the terms of the Ordinary Offer. It is assumed that no Novar Preference Shares are converted into Novar Ordinary Shares. The calculation is as follows: Shares Notes (million) Novar issued share capital Novar Ordinary Shares currently in issue (iv) 431.4 Plus Executive Share Options with an exercise price at or below 145 pence (v) 25.8 Plus Savings Related Share Options with an exercise price at or below 145 pence (vi) 4.3 Less Novar Ordinary Shares held by Novar Employee Trust in ESOP reserve (vii) (17.5) -------- Total Novar Ordinary Shares outstanding 444.0 -------- (iii) As stated in the Annual Report and Accounts of Novar and comprising an interim declared dividend of 2.90 pence (Â£11.9 million) and a final declared dividend of 6.60 pence (Â£27.2 million) (iv) As stated in the announcement issued by Novar on 5 November 2004 pursuant to Rule 2.10 of the City Code (v) Executive Share Options with an exercise price at or below 145 pence calculated as follows: Novar Executive Share Total Exercise price Options (million) at or below 145 pence(million) As at 31 December 2003 36.3 17.2 Plus those estimated to have been issued from 31 December 2003 to date (based on the number granted in the year ended 31 December 2003) (viii) (ix) 10.2 10.2 Less those estimated to have been exercised from 31 December 2003 to date (x) (1.7) (1.7) -------- ---------- Total 44.9 25.8 -------- ---------- (vi) Savings Related Options with an exercise price at or below 145 pence calculated as follows: Novar Savings Related Share Total Exercise price Options (million) at or below 145 pence(million) As at 31 December 2003 4.3 4.3 Plus those issued from 31 December 2003 to date 0.0 0.0 -------- ---------- Total 4.3 4.3 -------- ---------- (vii) The ESOP reserve as at 31 December 2003 represented 20.7 million Novar Ordinary Shares (as stated in the Annual Report and Accounts of Novar). However, it is assumed that the 1.5 million Novar Ordinary Shares held by the Novar Performance Partnership Plan Share Trust (in the ESOP reserve) cannot be used to satisfy the Savings Related Options. Since 31 December 2003, the remaining 19.2 million Novar Ordinary Shares are calculated to have been reduced by the exercise of 1.7 million options resulting in 17.5 million Novar Ordinary Shares currently being held by the Novar Employee Trust. (viii) Assumes that the number of Executive Share Options granted to persons other than members of the Novar Board from 31 December 2003 to the date of this announcement is the same as the number granted to such persons in the year ended 31 December 2003. (ix) Assumes that all options have been granted at an exercise price of 132 pence, being the exercise price of Novar Executive Share Options granted to management since 31 December 2003. (x) Assumes that the number of Executive Share Options exercised from 31 December 2003 to the date of this announcement is the same as the number of Novar Ordinary Shares transferred from the Novar Employee Trust APPENDIX 3 SOURCES AND BASES Save as otherwise stated, the following constitute the sources and bases of certain information referred to in this announcement: 1. The financial information relating to Novar has been extracted from its audited annual accounts for the relevant periods and the interim unaudited financial statements for the relevant periods as published by Novar, all of which are prepared in accordance with UK GAAP. 2. The value placed on the entire issued ordinary share capital of Novar by the Ordinary Offer is based on (i) 431,364,766 Novar Ordinary Shares in issue, such number being derived from the announcement issued by Novar on 5 November 2004 pursuant to Rule 2.10 of the City Code; and (ii) a value of 100 pence per New Melrose Ordinary Share, being the Placing Price. 3. Save as provided hereafter, all share prices quoted are closing prices, taken from Datastream, which have been adjusted for subsequent capital actions. Closing prices for a Novar Ordinary Share and a Melrose Ordinary Share for 3 November 2004 have been derived from the Daily Official List 4. The reference to the compound shareholder return of over 18 per cent. per annum over a 12 year period in respect of Wassall PLC refers to the period from 16 September 1988 (being the date that members of the Melrose Board were appointed to the board of Wassall PLC) to 14 April 2000 (being the date that members of the Melrose Board resigned from the board of Wassall PLC) and is based on the Total Return Index for Wassall, taken from Datastream, for these dates. 5. The reference to over Â£1 billion of market capitalisation destroyed in respect of Novar has been calculated using the difference between the market capitalisation of Novar of Â£1,592 million on 3 November 1994 (based on a closing price of 266.24 pence per Novar Ordinary Share and 598,000,000 Novar Ordinary Shares in issue at that date, such number being derived from Datastream) and the market capitalisation of Novar of Â£534 million on 3 November 2004 (based on a closing price of 123.75 pence per Novar Ordinary Share and 431,364,766 Novar Ordinary Shares in issue at that date, such number being derived from the announcement issued by Novar on 5 November 2004 pursuant to Rule 2.10 of the City Code). 6. The reference to the reduction of over 50 per cent. in the Novar Ordinary Share price is based on the difference between the closing price of 266.24 pence per Novar Ordinary Share on 3 November 1994 and the closing price of 123.75 pence per Novar Ordinary Share on 3 November 2004. 7. The Total Shareholder Return on Â£100 invested in Novar is based on the decrease in the Total Return Index, as taken from Datastream, for a Novar Ordinary Share between 3 November 1994 (175.3) and 3 November 2004 (155.9), representing a decrease of approximately 11 per cent. The difference in the Total Return Index for the FTSE All Share index on 3 November 1994 (1,216.06) and 3 November 2004 (2,541.85) represents an increase of 109 per cent. 8. The EBITDA margin erosion from 17 per cent. to 11 per cent. is calculated from the figures disclosed in the Annual Report and Accounts of Novar: EBITDA of Â£160 million on group continuing sales of Â£1,431 million (see page 12 of the Annual Report and Accounts of Novar) implies a margin of 11.2 per cent. and, for 1999, EBITDA of Â£155 million on group continuing sales of Â£914 million (see page 12 of the Novar annual report and accounts for 2002) implies a margin of 17.0 per cent. 9. The continuing group operating profit margin erosion from 13 per cent. to 7 per cent. is based on the figures for group operating profit before goodwill amortisation, exceptional items and restructuring costs, as disclosed on page 46 of the Annual Report and Accounts of Novar. For 2003, continuing operating profit of Â£106 million on continuing group sales of Â£1,431 implies a margin of 7.4 per cent. For 1999, continuing operating profit of Â£119 million on continuing group sales of Â£914 million implies a margin of 13.0 per cent. 10. Exceptional and restructuring charges of almost Â£300 million is based on the aggregate exceptional and restructuring charges for the five year period ended 31 December 2003 of Â£298.3 million, as disclosed on page 46 of the Annual Report and Accounts of Novar. 11. The figure of Â£762 million spent by Novar on acquisitions over the last five years is based on the aggregate cost of acquisitions for this period as disclosed in Novar's accounts for the five year period ended 31 December 2003. 12. The reference to the decline in the Cookson share price is based on the closing prices of 175.24 pence per Cookson Ordinary Share on 1 October 1997 and 36.25 pence per Cookson Ordinary Share on 19 July 2004. 13. The reference to over Â£670 million spent on acquisitions by Cookson since 1998 is sourced from the aggregate cost of acquisitions taken from the Cookson accounts for the years 1998 to 2003. The decrease in operating profit for continuing operations (before goodwill amortisation) from Â£188 million to Â£79 million is sourced from the Cookson accounts for the years 1997 and 2003. 14. Melrose has considered the financial position of the pension arrangements. As at 31 December 2003, an FRS17 deficit of Â£210.7 million in respect of UK pension arrangements was disclosed in the notes to the Novar's accounts. The financial assumptions disclosed were at the median of those allowable under FRS17. The Interim Results of Novar show that the combined cash funding of the pension arrangements across all territories will amount to Â£32 million during 2004. Based on the split of costs shown in the December 2003 accounts, it is estimated that approximately Â£20 million is in respect of the UK arrangements. It would therefore appear that the assessed deficit for funding purposes is likely to have been determined on more optimistic assumptions than the FRS17 assessment, i.e. the deficit for funding purposes is likely to be lower than the more conservative FRS17 assessment. In addition, it is likely that the deficit is being spread over the long term (perhaps 12-15 years). Although the trustees of the Novar UK pension schemes could have the power to wind-up such schemes, the Melrose Board believes that, in the context of the Offers, this is unlikely. KPMG People Services have reported on a number of example scenarios. Details of these illustrative examples are set out below. Accuracy of calculations - The analysis carried out has been based on information in the Annual Report and Accounts of Novar and the Interim Results of Novar only. All of the analysis has been carried out as at 1 October 2004. It is not possible to carry out accurate analysis based on this information alone. Illustrative figures have been produced on the following example assumptions: â€¢ the split of liabilities in the UK arrangements is 25 per cent.: 75 per cent. between current pensioner and non-pensioner liabilities; and â€¢ the average term to retirement of non-pensioner members of the UK arrangements is 12 years. The results of the analysis are sensitive to these assumptions. Analysis based on alternative assumptions would produce different results. The starting point of the analysis has been to illustrate what the FRS17 deficit in the UK arrangements might be as at 1 October 2004. For the purpose of this illustration, the example profile of liabilities as above was assumed, and allowance was made for general market movements. In addition, assumptions at 1 October 2004 that would be appropriate for an FRS17 assessment given economic conditions at that date were adopted. Current financial position of the UK arrangements on ongoing funding bases - The assumptions that are used to assess the ongoing funding position of the UK arrangements are determined by the Scheme Actuary. There is a very wide range of assumptions that could be adopted, and the assessed surplus or deficit in the arrangements is very sensitive to the assumptions adopted. Examples of key assumptions are: â€¢ the assumed investment return that will be achieved pre-retirement; â€¢ the assumed investment return that will be achieved post-retirement; â€¢ the rate of future inflation; â€¢ the rate at which salaries will increase in the future; and â€¢ the longevity of members of the arrangements. To illustrate this point by way of an example, the level of sensitivity to the assumptions has been illustrated by considering the change in deficit that might result from changing the pre-retirement discount rate for non-pensioners. Based on the example profile of the UK arrangements shown above, it is estimated that the FRS17 deficit might be of the order of Â£220 million at 1 October 2004 and that for the following illustrative scenarios: â€¢ this deficit might be approximately Â£154 million if the pre-retirement discount rate were increased to gilts +2% pa; and â€¢ this deficit might be approximately Â£110 million if the pre-retirement discount rate were increased to gilts +3% pa. The buyout debt - Analysis has been carried out to estimate the deficit in the UK arrangements in the event that the arrangements are wound-up. The debt in such circumstances is determined by the Scheme Actuary, based on what the Actuary considers to be a reasonable estimate of the cost of securing all benefits with an insurer. There is a high level of uncertainty regarding the assumptions that would be adopted by the Scheme Actuary for this purpose. Furthermore, the difference in the value of the debt on this basis and the deficit as assessed on FRS17 is sensitive to the liability profile of the Scheme. As set out above, this information has not been available in carrying out the analysis. In order to illustrate the possible deficit by way of an example, analysis has been carried out using the following assumptions: â€¢ that the liability profile is as assumed in the previous funding example above; and â€¢ that the Scheme Actuary would adopt a real pre- and post-retirement discount rate of 0.5 per cent. per annum. Based on the above illustrative assumptions, it is estimated that the deficit in the UK arrangements would be of the order of Â£550 million. Analysis based on different assumptions to those set out above might produce significantly different results. 15. The effects of the Novar strategy have been as follows: In the Intelligent Building Systems division, Novar has enlarged the global coverage through expensive acquisitions in both Security and Controls Systems and Datacoms & Electrical Accessories, which compete against larger global players. Novar has failed to improve operating performance and has incurred continuous restructuring charges. The Indalex Aluminum Solutions division has been built through expensive and value destructive acquisitions. Despite incurring significant restructuring costs since 2000, profitability has declined and the business underperformed a key competitor over the last five years. Security Printing Services operates in a long term declining market. This trend has been partly countered by investments in shifting sales channels unit sales towards the Internet and call centres, improving market share and reducing overhead. The business has historically underperformed its two key competitors. 16. Melrose intends to improve the operating business performance of the Novar businesses by, inter alia, focusing on improving margins, reducing overheads, controlling investments and capital expenditure, managing brands and reviewing product offering, customer base and outsourcing of components. 17. Melrose intends to address the optimal capital structure of the Security Printing Services division of Novar by considering applying leverage on a non-recourse basis. APPENDIX 4 DEFINITIONS The following definitions apply throughout this document unless the context otherwise requires: "Act" the Companies Act 1985, as amended "Admission" the re-admission of the Existing Melrose Ordinary Shares and the admission of the New Melrose Ordinary Shares and the New Melrose Preference Shares to trading on AIM becoming effective in accordance with the AIM Rules "Admission the AIM admission document to be issued by Melrose in Document" connection with Admission "AIM" the Alternative Investment Market of the London Stock Exchange "AIM Rules" the rules applicable to companies whose shares are traded on AIM published by the London Stock Exchange "Annual Report and the annual report and audited accounts of Novar for the Accounts of Novar" year ended 31 December 2003 "Authorisations" authorisations, orders, grants, recognitions, confirmations, consents, licences, clearances, certificates, permissions and approvals "Blue Form of the blue Form of Acceptance, Authority and Election for use Acceptance" by Novar Shareholders in connection with the Ordinary Offer "business day" any day on which banks are generally open in England and Wales for the transaction of normal banking business other than a Saturday or Sunday or public holiday "certificated" or in relation to a share or other security, a share or other "certificated security title to which is recorded in the relevant form" register of the share or other security as being held in certificated form (that is, not in CREST) "Circular" the circular to be sent to Melrose Shareholders convening the EGM "City Code" or the City Code on Takeovers and Mergers "Code" "Cookson" Cookson Group plc "Cookson Ordinary ordinary shares of 1 pence each in the capital of Cookson Shares" "CREST" the computerised settlement system to facilitate the transfer of the title to shares in uncertificated form, operated by CRESTCo Limited "Daily Official the Daily Official List of the London Stock Exchange List" "EGM" or the extraordinary general meeting of Melrose to be convened "Extraordinary to vote, inter alia, on the Resolution General Meeting" "Enlarged Group" Melrose and its subsidiaries, following successful implementation of the Offers "Enlarged Ordinary the issued ordinary share capital of Melrose as it will be Share Capital" following the issue of the New Melrose Ordinary Shares "Enlarged Share the issued ordinary and (if any) preference share capital Capital" of Melrose as it will be following the issue of the New Melrose Ordinary Shares and (if any) the New Melrose Preference Shares "Existing Melrose the existing Melrose Ordinary Shares Ordinary Share(s)" "Forms of the Blue Form of Acceptance and/or the Pink Form of Acceptance" Acceptance, as the context requires "Interim Results of the interim results of Novar for the six months ended 30 Novar" June 2004 "Investec" Investec Investment Banking, a division of Investec Bank (UK) Limited "London Stock the London Stock Exchange plc or its successor Exchange" "Melrose" Melrose PLC "Melrose Board" or " the board of directors of Melrose Melrose Directors" "Melrose Ordinary ordinary shares of 0.1 pence each in the capital of Melrose Shares" "Melrose holders of Melrose Ordinary Shares Shareholders" "Mix and Match the right of Novar Ordinary Shareholders (other than Facility" certain overseas shareholders) to elect, subject to availability, to vary the proportions in which they receive New Melrose Ordinary Shares and cash under the Ordinary Offer "New Melrose the new Melrose Ordinary Shares to be issued as Ordinary Shares" consideration to Novar Shareholders pursuant to the Ordinary Offer and/or the Placing Shares to be issued to placees pursuant to the Placing "New Melrose the new cumulative redeemable preference shares in the Preference Shares" capital of Melrose to be issued as consideration to the Novar Shareholders pursuant to the Preference Offer "Novar" Novar plc "Novar Board" the board of directors of Novar "Novar Employee the Novar plc Performance Partnership Plan, the Novar plc Share Schemes" Executive Share Option Scheme, the Novar plc 1996 Executive Share Option Scheme, the Novar plc Savings Related Share Option Scheme and the Novar plc 1999 Savings Related Share Option Scheme "Novar Group" Novar and its subsidiary undertakings and, where the context permits, each of them "Novar Ordinary the existing unconditionally allotted or issued and fully Share(s)" paid ordinary shares of 277/9 pence each in the capital of Novar and any further ordinary shares which are unconditionally allotted or issued and fully paid before the date on which the Ordinary Offer closes (or such earlier date or dates, not being earlier than the date on which the Ordinary Offer becomes or is declared unconditional as to acceptances or, if later, the first closing date of the Ordinary Offer, as Melrose, subject to the Code, may decide) but excluding in both cases any such shares held or which become held in treasury "Novar Preference the existing issued and fully paid convertible cumulative Shares" redeemable preference shares of 162/3 pence each in the capital of Novar "Novar Shareholder holders of Novar Shares (s)" "Novar Shares" Novar Ordinary Shares and/or Novar Preference Shares, as the context requires "Offers" the Ordinary Offer and/or the Preference Offer "Offer Document" the document to be posted to Novar Shareholders and others containing and setting out the terms and conditions of the Offers "Offer Period" the period commencing on (and including) 4 November 2004 and ending on whichever of the following dates shall be the latest: (i) 3.00 p.m. on the first closing date of the Offers; (ii) the date on which the Offers lapse; and (iii) the date on which the Ordinary Offer becomes or is declared unconditional as to acceptances "Official List" the Official List of the UK Listing Authority "Ordinary Offer" the offer to be made by Rothschild on behalf of Melrose to acquire all the Novar Ordinary Shares on the terms and subject to the conditions set out in the Offer Document and the Blue Form of Acceptance including, where the context so requires, any subsequent revision, variation, extension or renewal of such offer and any election available in connection with it "Panel" the Panel on Takeovers and Mergers "Pink Form of the pink Form of Acceptance and Authority for use by Novar Acceptance" Shareholders in connection with the Preference Offer "Placing" the placing by Investec of the Placing Shares at the Placing Price on the terms of the Placing Agreement "Placing the agreement dated 10 November 2004 entered into between Agreement" Melrose and Investec in relation to the Placing "Placing Price" 100 pence per Melrose Ordinary Share "Placing Shares" 232 million New Melrose Ordinary Shares which are to be issued pursuant to the Placing "Preference Offer" the offer to be made by Rothschild on behalf of Melrose to acquire all the Novar Preference Shares on the terms and subject to the conditions set out in the Offer Document and the Pink Form of Acceptance including, where the context so requires, any subsequent revision, variation, extension or renewal of such offer "Regulations" the Uncertificated Securities Regulations 2001 "Regulatory any information service authorised from time to time by the Information UK Listing Authority for the purpose of dissemination of Service" regulatory announcements required by the Listing Rules of the UK Listing Authority "Resolution" the special resolution numbered 1 to be proposed at the EGM (and set out in the notice of EGM to be contained in the Circular) to approve the Offers, increase the share capital of Melrose, create the New Melrose Preference Shares, amend Melrose's articles of association, authorise the Melrose Directors to allot the New Melrose Ordinary Shares and the New Melrose Preference Shares and to dis-apply pre-emption rights in relation to the allotment of the Placing Shares "Rothschild" N M Rothschild & Sons Limited "subsidiary", shall be construed in accordance with the Act (but for this "subsidiary purpose ignoring paragraph 20(1)(b) of Schedule 4A of the undertaking", Act) "associated undertaking" and "undertaking" "Third Party" any government or governmental, quasi- governmental, supranational, statutory, regulatory, environmental, administrative, fiscal or investigative body, court, trade agency, association, institution or any other body or person whatsoever in any jurisdiction "UK" or "United United Kingdom of Great Britain and Northern Ireland Kingdom" "UK GAAP" generally accepted accounting principles in the United Kingdom "UK Listing the Financial Services Authority acting in its capacity as Authority" or the competent authority for listing under Part VI of the "UKLA" Financial Services and Markets Act 2000 "uncertificated" or a share or other security title to which is recorded in the "in uncertificated relevant register of the share or security as being held in form" uncertificated form, in CREST, and title to which, by virtue of the Regulations may be transferred by means of CREST "United States" or the United States of America (including the states of the "US" United States and the District of Columbia), its possessions and territories and all areas subject to its jurisdiction "US Person" a US person as defined in Regulation S under the US Securities Act "US Securities the US Securities Act of 1933, as amended and the rules and Act" regulations promulgated thereunder "Wassall" Wassall PLC "Wider Novar Novar and associated undertakings and any other body Group" corporate, partnership, joint venture or person in which Novar and such undertakings (aggregating their interests) have an interest of more than 20 per cent. of the voting or equity capital or the equivalent All times referred to are London time unless otherwise stated. This information is provided by RNS The company news service from the London Stock Exchange

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