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Kalamazoo Comp Grp. (KLMZ)

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Wednesday 19 December, 2001

Kalamazoo Comp Grp.

Proposed Disposal, etc

Kalamazoo Computer Group PLC
19 December 2001


FOR IMMEDIATE RELEASE                                          19 December 2001



                         KALAMAZOO COMPUTER GROUP PLC



                         PROPOSED PENSION SETTLEMENT



                 PROPOSED DISPOSAL OF THE KALAMAZOO BUSINESS



                   PROPOSED CHANGE OF NAME TO KCG 2001 PLC



                   PROPOSED MEMBERS' VOLUNTARY LIQUIDATION



                       PROPOSED CANCELLATION OF LISTING



-     The board of Kalamazoo Computer Group plc ('Kalamazoo' or 'the Company
'), the West Midlands based supplier of specialist computer solutions,
announces that it has entered into a pension settlement agreement, conditional
on Shareholder approval, which will involve the payment by the Group of £5.2
million to the trustees of the Pension Scheme.



-          The Board also announces that, following completion of the Pension
Settlement, it proposes to dispose of its trading activities to UCS, one of
the largest suppliers of in-house dealership computer systems in the US, for a
total consideration of £14.1 million, being cash consideration of £8.2 million
and the assumption by UCS of estimated net Group indebtedness of £5.9 million
at Completion, after payment by the Group of the Pension Settlement.



-          Following completion of the Disposal, the Board intends that
Kalamazoo be placed into members' voluntary liquidation and consequently that
the listing of Kalamazoo's Ordinary Shares on the Official List be cancelled.
It is currently anticipated that Shareholders will receive total distributions
from the liquidation of around 10 pence per Issued Share.



-          In view of the size of the Pension Settlement and the Disposal,
each is conditional on Shareholders' approval.  Three separate Extraordinary
General Meetings have been convened at which Shareholder approval will be
sought for the Pension Settlement, the Disposal and the placing of the Company
into members' voluntary liquidation.



-          The Board believes that the Pension Settlement and the Disposal are
fundamental to delivering Shareholder value and enabling the Kalamazoo
Business to continue to trade.  If the Pension Settlement or the Disposal are
not approved by Shareholders, the Directors are of the opinion that the
Continuing Group will not have sufficient working capital for its present
requirements.



-     The Company has received irrevocable undertakings to vote in favour of
the resolutions to be proposed at the Extraordinary General Meetings,
representing in aggregate 57.64 per cent. of the issued share capital.



-          Bob Jordan, Chairman, commented:



'The Group has suffered trading losses for a number of years. This, coupled
with a substantial statutory liability under the pension scheme and the future
investment required to see the Kalamazoo business through to profitability has
meant that the Group's banking arrangements have been under considerable
pressure for some time.



UCS is a significant player in the US DMS market and has indicated that it is
committed to investing in the growth of the Kalamazoo business.  Not only will
this deal provide for the immediate funding needs of the Kalamazoo business
and allow the Group to settle its pension scheme liability, it will also
permit a return of value to Shareholders, anticipated to be around 10 pence
per issued share.  The proposed deal has the irrevocable support of our two
largest Shareholders, representing 57.64 per cent. of the issued shares.'



Enquiries:


Kalamazoo Computer Group                   +44 (0) 121 411 3216
Bob Jordan, Chairman

KPMG Corporate Finance                     +44 (0) 121 232 3000
Charles Cattaneo

Buchanan Communications                    +44 (0) 20 7466 5000
Richard Darby
Suzanne Dunne



Introduction



The board of Kalamazoo announces today that it has entered into a conditional
pension settlement agreement which will involve the payment by the Group of £
5.2 million in respect of the funding of the Pension Scheme.  This payment
will be financed out of a loan from Southwest Bank of Texas.  In view of its
size, the Pension Settlement is conditional on Shareholders' approval which is
being sought at the First Extraordinary General meeting to be held on 4
January 2002.



The Board also announces that, following completion of the Pension Settlement,
it proposes to dispose of all of the trading activities of the Kalamazoo Group
together with the Group's shareholding in IT 2000, the Northfield Property,
all lease obligations and other trading assets and liabilities of the Group to
UCS for a cash consideration of £8.2 million, to be satisfied on Completion.
UCS is one of the largest suppliers of in-house dealership computer systems in
the US. The Board estimates that, on completion of the Disposal, net Group
indebtedness being assumed by UCS, after payment by the Group of the Pension
Settlement, will be approximately £5.9 million. For the purposes of the
Listing Rules, therefore, the total consideration for the Disposal is
estimated to be £14.1 million which comprises £8.2 million cash consideration
and estimated net Group indebtedness being assumed at Completion of £5.9
million.  Following the Disposal, there will be no trading entities within the
Group and the principal asset of the Group will be cash held on deposit. On
Completion, all employees of the Group including the Executive Directors
(except for Robert Jordan) will transfer to the UCS group of companies.



In view of its size, the Disposal is conditional on Shareholders' approval
which is being sought at the Second Extraordinary General Meeting to be held
on 7 January 2002.



The Board intends that, following completion of the Disposal, Kalamazoo be
placed into members' voluntary liquidation and consequently that the listing
of Ordinary Shares on the Official List and trading in the Ordinary Shares on
the London Stock Exchange will be cancelled. Accordingly, the Directors have
convened the Third Extraordinary General Meeting to be held on 16 January 2002
to consider and, if thought fit, approve resolutions to place Kalamazoo into
members' voluntary liquidation and appoint the Liquidators, subject to the
Disposal having been completed. It is currently anticipated that Shareholders
will receive total distributions from the liquidation of around 10 pence per
Issued Share. Whilst the amount and timing of any return of cash to
Shareholders is uncertain, the proposed Liquidators have indicated to the
Board that they would hope to complete any such distributions expeditiously.



In addition, at the Third Extraordinary General Meeting a resolution will be
proposed to change the name of the Company to KCG 2001 plc.



The Company has received irrevocable undertakings to vote in favour of the
resolutions to be proposed at the Extraordinary General Meetings, representing
in aggregate 57.64 per cent. of the issued share capital.  The Directors
believe that the Pension Settlement and the Disposal are fundamental to
delivering Shareholder value and enabling the Kalamazoo Business to continue
to trade.  If the Pension Settlement or the Disposal are not approved by
Shareholders, the Directors are of the opinion that the Group will not have
sufficient working capital for its present requirements.  Your attention is
drawn to the paragraph headed 'Working capital and the importance of the
Disposal' below.



The Pension Settlement and the First Extraordinary General Meeting



The introduction of the Minimum Funding Requirement ('MFR') by the Government
in 1995 and the abolition of reclaims of advanced corporation tax credits on
UK dividends in 1997, together with the low level of dividend growth on UK
equities and low yields on UK equities and gilts experienced in recent years,
have had an adverse effect on the funding position of the Pension Scheme.
Whilst this scheme has been closed to new members since 1993, the burden of
any scheme shortfall rested with the Kalamazoo Group and the Board has been
concerned about the significant potential future cash requirements of the
Pension Scheme.  According to the latest actuarial valuation, the market value
of the Pension Scheme's assets as at 31 January 2001 was £85.9 million which
represented 91.6 per cent. of the liabilities on an MFR basis.  Given the
significant volatility surrounding the future cash requirements of the Pension
Scheme, the Board confirmed that it would cease future service contributions
to the Pension Scheme from 31 August 2001, save for periodic payments towards
the MFR shortfall.



As discussed in more detail in the section headed 'Background to and reasons
for the Disposal',  the Board announced on 14 November 2001 that it was
examining proposals which might lead to a significant disposal of
substantially all of the business and assets of the Group as a continuing
business.  The Board has held discussions with other parties which may have
led to an offer for the Group.  However, the potentially significant future
liabilities relating to the Pension Scheme impacted on interested parties'
views of the value of the share capital of the Group.  It became evident to
the Board that in order to dispose of the Kalamazoo Business and return cash
to Shareholders, it was necessary to reach agreement with the trustees of the
Pension Scheme to settle the funding requirements of the Pension Scheme
liability.



Kalamazoo and KI have therefore entered into an agreement, conditional on
Shareholder approval, with the trustees of the Pension Scheme which involves
the payment of £5.2 million in respect of the funding of the Pension Scheme.
The payment of the Pension Settlement, which will be accounted for as an
exceptional charge in the second half of the current financial year, will be
financed out of a US$12.5 million loan from the Southwest Bank of Texas which
will only be drawn down in the event that the resolution approving the Pension
Settlement is passed at the First Extraordinary General Meeting.



Information on the Kalamazoo Business



The Kalamazoo Group is a leading pan-European provider of specialist computer
software and solutions predominantly to the automotive retail market. The
Disposal, as proposed, will comprise all of the trading activities of the
Group, as follows:



-          the Group's DMS business, software support, hardware maintenance
and business services operations in the UK, all of which it is proposed will
be hived down from KI to Kalamazoo Limited prior to the holding of the Second
Extraordinary General Meeting to be held on 7 January 2002;



-          Coin, which provides computer software for financial and insurance
based applications in the retail motor trade in the UK and parts of
continental Europe;



-          KCGIBV and its subsidiaries which comprise Kalamazoo's continental
European DMS businesses, and operate in Belgium, France, Germany, Holland,
Spain and Switzerland; and



-          Autodata, a subsidiary specialising in the statistical analysis of
data to formulate and distribute electronically second hand car valuations to
customers in Finland, Sweden and Holland.



In addition to the trading activities of the Group, the Disposal, as proposed,
will also comprise the 34.2 per cent. holding in IT 2000, a provider of DMS
software to the retail motor trade in Denmark, Norway and Sweden; the
Northfield Property; and the other trading assets and liabilities of the
Group, including all rights and obligations under the Group's property leases.



The recent trading record of the Kalamazoo Business is summarised below:


                                         Years ended 31 March
                                                 1999         2000         2001
                                                 £000         £000         £000

Turnover                                       56,679       59,199       48,276

Operating (loss)/profit
            Normal items                        (932)          523      (2,441)
            Exceptional items                 (1,493)      (2,877)      (1,572)

                                              (2,425)      (2,354)      (4,013)

Loss on ordinary activities before            (2,362)      (2,304)      (4,287)
taxation



The table below also sets out the Group's recent net cash outflow and net
asset position which has been extracted without adjustment from the Group's
published audited accounts for the relevant years.


                             Years ended 31 March
                                       1999              2000              2001
                                       £000              £000              £000

Net cash outflow in period            (900)           (3,183)           (2,760)

Net assets at the year end           11,564             9,251             5,064




The Kalamazoo Group also announced today its interim results for the six
months to 30 September 2001.  During this period the Kalamazoo Group reported
turnover of £23.6 million (30 September 2000: £22.6 million), operating loss
of £1.5 million (30 September 2000: £2.0 million) after exceptional charges of
£0.8 million (30 September 2000: £0.3 million) and a loss per share after
exceptional items of 4.0 pence (30 September 2000: 3.5 pence loss). As at 30
September 2001, the net assets of the Kalamazoo Group were £2.5 million (30
September 2000: £7.0 million, 31 March 2001: £5.1 million) and net cash was £
1.7 million (30 September 2000: £1.7 million net debt). Kalamazoo has not
declared an interim dividend for the current financial year (30 September
2000: Nil).



Of the £1.7 million net cash balance at 30 September 2001, £1.0 million was
held in the Group's continental European subsidiaries.  The Group's net cash
position has further deteriorated to a net debt position of £0.08 million at
18 December 2001 (the latest practicable date prior to the publication of this
Announcement) as a result of adverse working capital movements and losses
incurred in the UK since 30 September 2001.



Information on the UCS group of companies



The UCS group of companies is a group of related private companies under
common ownership that operate together and are generally referred to by the
name of UCS.



The original UCS company was founded by Robert T (Bob) Brockman, in Houston,
Texas. Initially, UCS' services were limited to batch processing of automotive
dealership parts inventory information. In the early 1980s, subsequent UCS
companies developed software for the other key areas of automotive
dealerships, including the accounting, service and vehicle sales departments.
In 1982, UCS installed its first IBM mainframe computer in a dealership site.
By 1987, UCS had installed more than 100 in-dealership computers and the
company had grown to more than 250 employees. A division of Ford Motor
Company, DCS, was acquired in January 1992.



UCS is the third largest supplier of in-house automotive dealership computer
systems in the US.



UCS is headquartered in a 32-acre, 180,000 square foot facility in Houston,
Texas. DCS also has facilities in Southfield, Michigan, a suburb of Detroit.
Additionally, UCS maintains a 284,000 square foot facility in College Station,
Texas. Offices outside the US include Brackley (England), Mexico City (Mexico)
and Santiago (Chile). The UCS group of companies currently employs more than
1,700 people.



Background to and reasons for the Disposal and the Second Extraordinary
General Meeting



During 1996 and 1997, the Kalamazoo Group reorganised its operations to enable
it to focus its activities as a leading supplier of automotive dealer
management systems in Europe. The steps taken included the acquisition of the
continental European DMS business from Datapoint Corporation and the sale of
the security print division.



At the time of this reorganisation, the Kalamazoo Group recognised the need to
develop a leading DMS product on a pan-European basis to maximise the return
from the infrastructure investment. The DMS development programme, originally
called Elite IV and subsequently renamed Evolution, has however taken
significantly longer and cost more than was ever anticipated.



Whilst progressing toward the launch of the Evolution product, the Kalamazoo
Group focused on its 'year 2000' activities, consolidating its legacy range of
products, rationalising its operations and disposing of a number of small
non-core businesses. The Kalamazoo Group has also changed the majority of its
senior management team over the period.



The audited accounts of the Group for the three years ended 31 March 2001 and
the unaudited interim results of Kalamazoo for the six months ended 30
September 2001, show that in the three years and 6 months to 30 September
2001, the Kalamazoo Group has invested £16.1 million in product development
and reported cumulative losses of £10.5 million (excluding the effect of
goodwill previously written off). In the same period, net assets have reduced
from £13.4 million to £2.5 million and net cash (cash at bank and in hand less
bank overdraft) has reduced from £6.8 million to £1.7 million, including £1.0
million of cash balances in continental Europe which are not available for
offset against indebtedness elsewhere in the Group.  The Directors estimate
that at Completion the comparable (excluding the Pension Settlement) net Group
indebtedness (bank overdraft less cash at bank and in hand), will be
approximately £0.5 million, comprising £1.4 million of debt in the UK and £0.9
million of cash in continental Europe.  In this period, market conditions have
been particularly difficult in the UK automotive dealer sector.



The Kalamazoo Group has imposed significantly tighter working capital controls
over the business to ensure it continued to operate within its banking
facilities. The Group's bankers have been unwilling to provide additional
facilities to the Group which caused the Board to seek an alternative method
of financing its return to profitability.



On 30 July 2001, the Board requested a temporary suspension of the listing of
its Ordinary Shares because the Company was unable to publish its preliminary
results for the year ended 31 March 2001 in the timescale set out in the
Listing Rules.  This was due to the Company not being able to finalise the
statutory accounts because of a lack of certainty of receipt of the proceeds
from the sale of part of the Northfield property. Upon receipt of these funds,
the Board announced its preliminary results on 31 July 2001 and the suspension
of its Ordinary Shares was lifted.



Given the difficulties experienced by the Kalamazoo Group over a long period
and the potential liability relating to the Pension Scheme, the directors of
Kalamazoo undertook a strategic review of the Group's corporate options
earlier this year. Discussions were held with third parties, which proceeded
to an advanced stage and would have involved the disposal of a significant
profit making division of the Group. Whilst the disposal would have provided
some funding for the Group, it would have had an adverse impact on Group
earnings and considerable uncertainty would have remained as to the continuing
adequacy of funding for the Group.  On 14 November 2001, the Board announced
that it was examining proposals which might lead to a significant disposal of
substantially all of the business and assets of the Group as a continuing
business.  The Board has held discussions with other parties which may have
led to an offer for the Group. However, the pressure on bank facilities and
the potentially significant future liabilities relating to the Pension Scheme
impacted on interested parties' views of the value of the share capital of the
Company. UCS approached the Board on the basis that they were willing to
acquire the Kalamazoo Business.



In considering the proposed Pension Settlement, the proposed sale of the
Kalamazoo Business, the proposed members' voluntary liquidation and proposed
cancellation of listing, the Directors have taken into account the following
factors:



-          the disappointing financial performance of the Kalamazoo Group,
reflected in a substantial decline in the Kalamazoo share price, particularly
since February 2000;



-          the decline in the Kalamazoo Group's net worth and cash position,
together with the fact that the Group's banking facilities are unlikely to be
adequate to fund the return to profitability.  The working capital position of
the Group is set out in the paragraph headed 'Working capital and the
importance of the Disposal' below;



-          the absence of a dividend from Kalamazoo since the financial year
ended 31 March 1997;



-     the significant risks associated with returning the Kalamazoo Group to
profitability.  The prospects for the Group remain challenging and there is no
certainty that Evolution and Edge will deliver the anticipated results within
the required time frame;



-          the Board's belief that the Group needs to be part of a larger
software group in order to be able to make the significant further investment
it believes is required in the development of its products and services and to
realise fully the investment made to date in the Group's products; and



-          the ability of Kalamazoo, following the Disposal, to go through a
members' voluntary liquidation and distribute cash to Shareholders.



Current trading and prospects



The following is an extract from the Group's Interim Results for the six
months ended 30 September 2001 which were announced today:



'Short-term growth continues to be impacted by difficult trading conditions
and is not helped by the economic climate in the automotive market in
particular and the marketplace in general. We remain dependent upon our new
and upgraded products to return the automotive DMS business to an acceptable
level of operating performance but continue to be satisfied with the
performance of Coin and KSS.'



Following Completion, there will be no trading entities within the Group and
the principal asset of the Group will be cash held on deposit.



Management and employees



On Completion, all employees of the Group including the Executive Directors
(except Robert Jordan) will transfer to the UCS group of companies. Following
the passing of the resolutions at the Third Extraordinary General Meeting, all
the Directors will resign. Under the terms of the Sale and Purchase Agreement,
UCS has agreed that the Executive Directors will be available to provide
assistance to the Liquidators in the liquidation process. Robert Jordan has
entered into a severance agreement with the Company under the terms of which
he will (conditional upon completion of the Disposal) receive contractual
compensation of £87,394 for loss of office. He will also remain available to
provide assistance to the Liquidators for a period not exceeding one year.



Principal terms and conditions of the Disposal



Kalamazoo and its subsidiaries, KI and KIL, propose to enter into agreements
following the passing of the resolution at the Second Extraordinary General
Meeting, which is expected to take place on 7 January 2002, to sell the
Kalamazoo Business, including estimated net debt of £5.9 million, to the UCS
group of companies for a consideration of £8.2 million to be satisfied in cash
on Completion,.  For the purposes of the Listing Rules, therefore, the total
consideration for the Disposal is estimated to be £14.1 million.



Under the terms of the Disposal:



-          The Kalamazoo Limited Shares, the KCGIBV Shares, the Autodata
Shares and IT 2000 Shares will be sold to the UCS group of companies with full
title guarantee free from all claims, liens, charges, encumbrances and
equities and all other third party rights, and with all rights attached to
them, including the right to all dividends and other distributions declared,
paid or made after Completion.



-          UCS Systems will acquire the Northfield Property and assume the
other trading assets and liabilities of the Group, including all rights and
obligations under the Group's property leases.



-          DCS will acquire the Kalamazoo Inc Shares.



-          The contracts of employment of all employees of Kalamazoo and KI
(other than Robert Jordan) will transfer to the UCS group of companies on
Completion. However, no rights or obligations under the Pension Scheme will
transfer to the UCS group of companies and UCS will have no obligation to take
on any such rights or obligations.



UCS Systems and DCS have delivered to Kalamazoo a signed Sale and Purchase
Agreement and Stock Purchase Agreement to be held in escrow pending the
passing of all resolutions set out in the notices of the First and Second
Extraordinary General Meetings, when they shall be delivered to Kalamazoo.
Following such delivery, it is proposed that Kalamazoo will execute and
complete these documents.



Exclusivity agreement



Kalamazoo has entered into an exclusivity agreement with DCS under the terms
of which Kalamazoo has undertaken, inter alia, not to engage in any
discussions with any party other than DCS or its advisers concerning an offer
for the entire issued share capital of the Group or in respect of the sale of
a material part of the assets of the Group.



In the event any party approaches the Group concerning an offer for the entire
issued share capital of the Group or in respect of the sale of a material part
of the assets of the Group, Kalamazoo has undertaken to promptly inform DCS
and advise that third party of the existence of the exclusivity agreement.
Kalamazoo has also undertaken that in the event that the Board becomes aware
of matters which may prevent it from proceeding with the Disposal, it will not
draw down the loan from the Southwest Bank of Texas and the loan facility will
be terminated.



The Sellers have also undertaken to DCS to carry on the Kalamazoo Business in
consultation with them during the period up to 4 January 2002 and have
undertaken in respect of the same period not to take certain steps that could
have the effect of altering the nature or value of the assets of the Kalamazoo
Business.



Financial effects of the Disposal



The net proceeds of the Disposal are expected to amount to approximately £6.1
million after payment of estimated costs and remaining liabilities of the
Continuing Group of £2.1 million. These proceeds, together with £0.2 million
of residual cash balances within the Group, making a total of £6.3 million,
will be held on deposit pending appointment of the Liquidators, after which
the cash will be under the control of the Liquidators. This sum will be used
by the Liquidators to fund future returns of cash to Shareholders.
Shareholders should note that the amount and timing of any return of cash to
Shareholders is uncertain, although the Liquidators have indicated to the
Board that they would hope to complete any such distributions expeditiously.



The Disposal is expected to give rise to an exceptional loss on sale for the
Company of approximately £24.6 million after reinstating goodwill previously
written off to reserves of £33.7 million in the year ending 31 March 2002. The
Disposal is not expected to give rise to a liability to pay any corporation
tax for the Kalamazoo Group.



The Disposal includes the Northfield Property which is a material asset under
the Listing Rules as its book value at 30 September 2001 was £3,037,543.



Intentions following the Disposal and the Third Extraordinary General Meeting



Following Completion, the Group will not have any operating businesses and the
Company will be a cash shell.  The Directors believe that the best way of
returning cash to Shareholders is to liquidate the Company. Accordingly,
subject to completion of the Disposal having occurred, at the Third
Extraordinary General Meeting four resolutions relating to the proposed
liquidation and a further resolution relating to the change of the Company's
name will be proposed and are summarised below:



(i)                  The first resolution, which will be proposed as a special
resolution, relates to the  change of name of the Company to KCG 2001 plc.



(ii)                The second resolution, which will be proposed as a special
resolution, will, if duly passed, have the effect of placing Kalamazoo in
members' voluntary liquidation with immediate effect and appointing as joint
liquidators Jeremy Simon Spratt and Roger Smith of KPMG, both of whom are
licensed insolvency practitioners. The joint liquidators will take control of
the Company immediately upon the passing of this special resolution.



(iii)       The third resolution, which will be proposed as an extraordinary
resolution, relates to the authorisation of the joint liquidators to exercise
powers to make compromises with those parties who may have claims against the
Company and those against whom the Company has claims.



(iv)              The remaining two resolutions, which will be proposed as
ordinary resolutions, concern the terms of the joint liquidators' remuneration
and the retention of the Company's books and records.



The liquidation of Kalamazoo will proceed as a members' voluntary liquidation,
the Directors having made, prior to the Third Extraordinary General Meeting,
the requisite statutory declaration to the effect that the Company will be
able to pay its debts in full within twelve months from the commencement of
the liquidation.



If the second resolution to be proposed at the Third Extraordinary General
Meeting is duly passed, the Directors will all resign as directors of
Kalamazoo with effect from the close of that meeting.



Return of capital to Shareholders



The Board currently anticipates that the amount of capital available to return
to holders of Issued Shares (taking into account the expected costs of the
liquidation) will be around 10 pence per share. The amount and timing of
payments to Shareholders will be dependent primarily upon the absence of any
significant claims being notified to the Liquidators. The Board is not
currently aware of any such claims which would adversely impact upon the
distribution.



Working capital and the importance of the Disposal



If the Pension Settlement and the Disposal are approved by Shareholders, the
Directors are of the opinion that, taking into account the net proceeds of the
Disposal, the Continuing Group will have sufficient working capital for its
present requirements, that is for at least 12 months from the date of this
Announcement.



In the event that the Disposal is not approved by Shareholders at the Second
Extraordinary General Meeting, the loan from Southwest Bank of Texas becomes
an 'on call' facility which expires on 30 September 2002, and accordingly the
Directors are of the opinion that the Group will not have sufficient working
capital for its present requirements, that is for at least 12 months from the
date of this Announcement. For the Group to continue trading, additional
longer term facilities or an equity fundraising would be required but the
Board does not believe that, given the significant uncertainty surrounding the
Group's prospects as a stand alone entity, either of these options would be
deliverable. The Group would then be forced to take immediate steps to reduce
its debt such as the sale of parts of the Kalamazoo Business or the
significant rationalisation of its business operations to reduce its debt. If
such steps were unsuccessful in reducing the Group's debt, it is likely that
the Group would cease to trade.



Cancellation of listing



The Board intends, having given in the Circular the required 20 business days'
notice, to cancel the Company's listing of the Ordinary Shares on the Official
List and the trading in the Ordinary Shares on the London Stock Exchange. The
Ordinary Shares are expected to be suspended from the Official List after
notification by the Company of the passing of the special resolution at the
Third Extraordinary General Meeting to place the Company in liquidation. It is
anticipated that, with the consent of the UK Listing Authority, the
cancellation of the listing of the Company's Ordinary Shares will take effect
at 8.00 am on 22 January 2002, being 20 business days from the date of this
document. In the meantime, trading in the Ordinary Shares of the Company will
continue on a normal market basis until the suspension or cancellation of
listing.



If the special resolution to place the Company in liquidation is not passed at
the Third Extraordinary General Meeting, the Company will retain its listing
on the Official List.



Extraordinary General Meetings



The notices convening the Extraordinary General Meetings to be held at 9.00 am
on  4 January 2002, 9.00 am on  7 January 2002 and at 10.00 am on 16 January
2002, at the offices of Wragge & Co, 55 Colmore Row, Birmingham B3 2AS, are
set out in the Circular which has been sent to Shareholders today.



General



The Directors of Kalamazoo accept responsibility for the information contained
in this Announcement.  To the best of the knowledge and belief of the
Directors (who have taken all reasonable care to ensure that such is the
case), the information contained in this Announcement is in accordance with
the facts and does not omit anything likely to affect the import of such
information.



KPMG Corporate Finance is acting exclusively for Kalamazoo as financial
adviser in relation to the Disposal. KPMG Corporate Finance is not acting for
any other person (including any recipient of this Announcement) and KPMG
Corporate Finance will not be responsible to any person other than Kalamazoo
for providing the protections afforded to clients of KPMG Corporate Finance or
for providing advice in relation to the Disposal or in relation to the
contents of this Announcement or any transaction or arrangement referred to
herein.  KPMG Corporate Finance is a division of KPMG.  The principal place of
business is 8 Salisbury Square, London EC4Y 8BB, where a list of the partners'
names is open to inspection.



DEFINITIONS



The following definitions apply throughout this Announcement unless the
context requires otherwise:


'Act'          the Companies Act 1985 (as amended)
'Announcement' this press release issued today on the Regulatory News Service
               by the board of Kalamazoo
'Autodata'     Suomen Autoalan Tietopalveluverkko Oy, a wholly owned subsidiary
               of Kalamazoo based in Finland
'Autodata      the entire issued share capital of Autodata
Shares'
'Circular'     the circular which has been sent to Shareholders today which
               provides details of the resolutions and which convenes the
               Extraordinary General Meetings at which the Shareholders will be
               asked to consider and their approval sought for the resolutions
'Coin'         Coin Financial Systems Limited, a wholly owned subsidiary of the
               Group which provides computer systems for financial and
               insurance based applications in the retail motor trade
'Completion'   completion of the Disposal
'Continuing    Kalamazoo Group but excluding the Kalamazoo Business
Group'
'DCS'          Dealer Computer Services, Inc., a member of the UCS group of
               companies
'Directors' or the directors of Kalamazoo
'Board'
'Disposal'     the proposed disposal of the Kalamazoo Business to UCS Systems
               and DCS on the terms set out in the Sale and Purchase Agreement
               and the Stock Purchase Agreement
'DMS'          automotive dealer management systems
'Edge'         the Group's customer relationship management offering
'Executive     Margaret Elizabeth Ashworth, Christopher Malcolm Bill,
Directors'     Michael Farley, and Frederick Allan Wright
'Extraordinary the First Extraordinary General Meeting, the Second
General        Extraordinary General Meeting and the Third Extraordinary
Meetings'      General Meeting
'First         the extraordinary general meeting to be held at 9.00 am on 4
Extraordinary  January 2002 to approve the Pension Settlement
General
Meeting'
'issued share  Ordinary Shares and Trust Shares in issue
capital' or '
Issued Shares'
'IT 2000'      IT 2000 A/S, an associated company of Kalamazoo based in Denmark
'IT 2000       the 34.2 per cent. shareholding held by the Kalamazoo Group in
Shares'        IT 2000
'Kalamazoo' or Kalamazoo Computer Group plc
the 'Company'
'Kalamazoo     the shares and business proposed to be disposed of by the
Business'      Kalamazoo Group, namely the Kalamazoo Limited Shares, the
               Kalamazoo Inc Shares, the KCGIBV Shares, the IT 2000 Shares, the
               Autodata Shares, the Northfield Property and the other assets
               and liabilities which together comprise the whole of the trading
               activities of the Kalamazoo Group
'Kalamazoo     Kalamazoo and its subsidiaries
Group' or the
'Group'
'Kalamazoo Inc the entire issued share capital of Kalamazoo, Inc
Shares'
'Kalamazoo     Kalamazoo Limited, a newly incorporated wholly-owned subsidiary
Limited'       of KI which it is proposed will acquire the trading assets and
               liabilities of KI prior to the holding of the Second
               Extraordinary Meeting on 7 January 2002
'Kalamazoo     the entire issued share capital of Kalamazoo Limited
Limited Shares
'
'KCGIBV'       Kalamazoo Computer Group (International) BV, a wholly owned
               subsidiary of KIL
'KCGIBV Shares the entire issued share capital of KCGIBV
'
'KI'           Kalamazoo International plc, a wholly owned subsidiary of
               Kalamazoo
'KIL'          Kalamazoo Investment Limited, a wholly owned subsidiary of
               Kalamazoo
'KSS'          the support services division of KI
 'Liquidators'  the proposed joint liquidators, namely Jeremy Simon Spratt and
                Roger Smith, both of KPMG, PO Box 695, 8 Salisbury Square,
                London, EC4Y 8BB
'Listing Rules' the listing rules of the UK Listing Authority
'London Stock   London Stock Exchange plc
Exchange'
'Northfield     the remaining freehold site of around 5.5 acres and the
Property'       building known as '72 Building' at Northfield, Birmingham which
                constitutes Kalamazoo's head office
'Official List' the official list of the UK Listing Authority
'Ordinary       ordinary shares of 10p each in the capital of Kalamazoo
Shares'
'Pension Scheme the Kalamazoo Pension and Life Assurance Plan, the UK final
'               salary pension scheme previously operated by the Group
'Pension        the conditional settlement agreement between (1) Kalamazoo, (2)
Settlement'     KI and (3) the trustees of the Pension Scheme dated 19 December
                2001
'the Purchasers UCS Systems and DCS, both members of the UCS group of companies
'
'Sale and       the proposed sale and purchase agreement relating to the
Purchase        Disposal proposed to be entered into following the passing of
Agreement'      the resolution at the Second Extraordinary General Meeting
'Second        the extraordinary general meeting to be held at 9.00 am on 7
Extraordinary  January 2002 to approve the entering into of the Sale and
General        Purchase Agreement and the Stock Purchase Agreement and
Meeting'       completion of the Disposal
'Sellers'       Kalamazoo, KI and KIL
'Shareholders'  holders of Ordinary Shares and Trust Shares
'Southwest Bank Southwest Bank of Texas, N.A.
of Texas'
'Stock Purchase the proposed stock purchase agreement relating to the Disposal
Agreement'      proposed to be entered into following the passing of the
                resolution at the Second Extraordinary General Meeting
'Third          the extraordinary general meeting to be held at 10.00 am on 16
Extraordinary   January 2002 to approve, inter alia, a members' voluntary
General Meeting liquidation of the Company
'
'Thrift Plan'   Kalamazoo Thrift Plan
'Trust Shares'  19,623,670 Kalamazoo Trust shares of 10p each in the capital of
                Kalamazoo, representing 31.29 per cent. of the issued share
                capital
'Trust' or '    the Kalamazoo Trust, formed in 1948 to allow past and present
Kalamazoo Trust employees to participate in the profits of the Group
'
'UCS' or 'UCS   a group of related companies under common ownership that
group of        operate together and are generally referred to by the name of
companies'      UCS
'UCS Systems'   UCS Systems Limited, a member of the UCS group of companies
'UK Listing     the Financial Services Authority acting in its capacity as the
Authority'      competent authority for the purposes of Part VI of the
                Financial Services and Markets Act 2000
'US'            United States of America



                                                                                
                                                                                
                                                          

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