Sportech PLC 07 November 2007 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS IN THAT JURISDICTION SPORTECH PLC ("Sportech" or the "Company") Proposed Placing and Open Offer to raise £41.4 million Acquisition of Vernons Football Pools Business for £51 million One for Ten Consolidation of Existing Ordinary Shares The Board of Sportech PLC announces that the Company has conditionally agreed to acquire the Vernons football pools business from Ladbrokes plc for a total consideration of £51 million. The consideration will be satisfied by the payment of £45 million in cash on Completion with the balance paid in two amounts of £3 million on each of the first and second anniversaries of Completion. The Company is proposing a Placing and Open Offer of New Ordinary Shares to raise approximately £41.4 million gross of expenses to part fund the Acquisition. The balance of the purchase price is to be met through new banking facilities provided by Bank Of Scotland ("BoS"). Highlights • Ownership of Vernons will enable Sportech to control all three major football pools brands in the UK - representing approximately 99% of the total football pools market. The Acquisition was cleared by the Competition Commission in October 2007 • The Acquisition will create a significantly increased customer pool with a combined base of over 700,000 weekly players • The Acquisition also provides enhanced distribution opportunities through a distribution agreement with Ladbrokes plc which will see movement into retail channels and a physical marketing and transactional presence in a minimum of 1,750 Ladbrokes licensed betting offices • Acquisition fits with the Company's existing strategy of regenerating the football pools through a major re-brand and re-launch in 2008 • Acquisition is expected to deliver synergies from reduced costs and increased revenues - expected to be earnings enhancing in 2009 • Total cash consideration for the Acquisition is £51 million, representing 9x Vernons 2006 operating profit, of which £6 million is deferred • A one for ten share consolidation is being proposed, so that for every ten existing Ordinary Shares of 5 pence each holder will hold one 50 pence Ordinary Share. The Open Offer takes place on a post consolidation basis • The consideration will be funded through a Placing and Open Offer of 41,445,189 New Ordinary Shares at an Issue Price of 100 pence per share to raise approximately £41.4 million gross of expenses. Except for the shares to be taken up by Newby Manor Limited, the Placing is fully underwritten by Investec • An irrevocable undertaking has been received from Newby Manor Limited to take up Open Offer entitlements for, in aggregate, 11,846,284 Open Offer Shares, representing approximately 28.6 per cent of the New Issue • In addition, Directors have indicated that they will take up a total of 100,000 shares under the Open Offer • The balance of the consideration will be provided by BoS as part of renewed bank facilities of in aggregate up to £124 million • The Placing and Open Offer together with increased new bank facilities will provide additional working capital for the Company to invest in the Enlarged Group • The Acquisition, the Placing and Open Offer and the proposed new bank facilities are subject to Shareholders' approval at an Extraordinary General Meeting ("EGM") scheduled for 10.00am on 30 November 2007 • The Company has also entered into an agreement with the FA Premier League, the Football League, the Scottish Premier League, the Scottish Football League and Football DataCo for marketing and data rights • Investec is acting as Financial Adviser, Underwriter, Sponsor and Joint Broker to the Company. Arbuthnot is acting as Joint Broker A circular will shortly be posted to Shareholders comprising a Prospectus containing details of the Placing and Open Offer and notice of an EGM of the Company (the "Circular"). Copies of the Circular have been submitted to the UK Listing Authority and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at: The Financial Services Authority 25 The North Colonnade Canary Wharf London E14 5HS Ian Penrose, Chief Executive of Sportech PLC, commented: "The Acquisition of Vernons, our number one strategic target, and associated fund raising together with the agreement for distribution of pool games through Ladbrokes' retail estate represents another major step forward for our strategy of repositioning Sportech that commenced two years ago. This is part of a continuing strategy of change that will widen the franchise of the pools and associated sports-related gaming products to new players across all age ranges, utilising the raft of direct, retail and digital routes to market that are available today. "The agreement announced today with the English and Scottish professional football leagues is testament to the unique position that pool betting enjoys within the sport of football. "The enlarged Sportech group will offer an enhanced combination of two of the world's favourite pastimes - football and gaming. This is a further significant step towards Sportech becoming a larger, broad-based sports, leisure and football gaming business with international reach." - ends - For further information please contact: Sportech PLC Ian Penrose, Chief Executive 0151 288 3561 Steve Cunliffe, Finance Director 0151 288 3561 Investec James Grace / Patrick Robb 0207 597 5180 Arbuthnot Neil Kirton / Nick Marsh 0207 012 2000 Bell Pottinger Corporate & Financial David Rydell / Emma Kent / Rosanne Perry 0207 861 3232 This summary should be read in conjunction with the full text of this announcement. This announcement does not constitute, or form any part of, an offer or an invitation to purchase any securities. Civil liability attaches to the Company and the Directors who are responsible for the contents of this summary, including any translation of this summary, but only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of this document. Where any claim relating to information contained in this document is brought before a court, the plaintiff investor might, under the national legislation of the EEA States, have to bear the costs of translating this document before any legal proceedings are initiated. This announcement does not constitute an offer of, or the solicitation of any offer to buy, any Ordinary Shares to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful. The distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdiction. Investec Investment Banking, a division of Investec Bank (UK) Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company as sponsor, joint broker and underwriter and for no one else in relation to the matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Investec Investment Banking or for providing advice in relation to the subject matter or contents of this announcement. SPORTECH PLC ("Sportech" or the "Company") Proposed Placing and Open Offer to raise £41.4 million Acquisition of Vernons Football Pools Business for £51 million One for Ten Consolidation of Existing Ordinary Shares PART I 1. Introduction The Company announced on 7 March 2007 that it had entered into exclusive negotiations with Ladbrokes for the Acquisition of Vernons. On 3 May 2007 the Office of Fair Trading announced that it had decided to refer the proposed Acquisition to the Competition Commission under the provisions of the Enterprise Act 2002. The Competition Commission issued its preliminary findings on 31 August 2007, concluding that the Acquisition was not expected to result in a substantial lessening of competition, and this conclusion was confirmed in the final Competition Commission report issued on 11 October 2007. Since the announcement of the Competition Commission's preliminary findings, the Company has been in negotiations with Ladbrokes to agree the final terms for the Acquisition of Vernons. The Company today announces that an agreement has been entered into with Ladbrokes for the Acquisition of Vernons for a total price of £51 million, payable as to £45 million in cash on Completion with the remaining £6 million to be paid in two instalments of £3 million each, payable on the first and second anniversaries of Completion. Due to the size of the Acquisition in relation to the Group, it constitutes a Class 1 transaction under the Listing Rules and, accordingly, the Company is required to obtain the prior approval of Shareholders in a general meeting before completing the Acquisition, for which purpose the Company proposes to convene an EGM to be held on 30 November 2007. The Acquisition is conditional, inter alia, upon such approval being obtained. In order to provide finance for the Acquisition, the Company is proposing to raise approximately £41.4 million (before expenses), subject, inter alia, to Shareholders' approval, through the issue of the New Ordinary Shares by means of the Placing and Open Offer. Newby Manor Limited has agreed to subscribe for the 11,846,284 New Ordinary Shares to which it is entitled under the Open Offer, representing approximately 28.6 per cent. of the New Issue. The balance of the New Issue has been underwritten by Investec. The Company has received an irrevocable undertaking from BoS not to take up any of the 11,779,786 New Ordinary Shares to which it is entitled under the Open Offer, representing approximately 28.4 per cent. of the New Issue. These New Ordinary Shares, being the Firm Placed Shares, have been placed firm by Investec on behalf of the Company at the Issue Price with institutional investors. In addition, certain of the Directors have indicated that they intend to take up a total of 100,000 New Ordinary Shares under the Open Offer. Qualifying Shareholders are being offered the right to subscribe for New Ordinary Shares at the Issue Price in accordance with the terms of the Open Offer. The Issue Price, when adjusted to take account of the Consolidation, represents a discount of approximately 2.4 per cent to the middle market quotation for the Existing Ordinary Shares of 10.25 pence, as derived from The Daily Official List of the London Stock Exchange on 6 November 2007. It is intended that the proceeds of the New Issue of approximately £39.4 million (net of expenses of the New Issue) will be used to finance the Acquisition. The balance of the consideration for the Acquisition is to be provided by BoS pursuant to the £110 million New Facility Agreement. The New Working Capital Facility Agreement with BoS will provide an additional £14 million of finance for the working capital requirements of the Enlarged Group. Both the New Facility Agreement and the New Working Capital Facility Agreement will be secured over the property, assets and undertaking of all companies within the Enlarged Group (limited in the case of non-UK companies to security over the shares of such company and any subsidiary of such company) and the provision of guarantees by them. As BoS is a substantial shareholder of the Company, the New BoS Funding Arrangements will constitute a related party transaction for the purposes of Chapter 11 of the Listing Rules and will require Shareholders' approval at the EGM. The Company is also taking the opportunity presented by the EGM to put forward proposals for a consolidation of the Company's Shares and the adoption of a new share incentive scheme, the PSP. 2. Vernons Vernons began offering football pools in 1925. Today, it provides football pools and lottery and other games to its customers via the post, telephone and the internet. Vernons has approximately 230,000 weekly customers and remains the second largest football pools business in the UK behind Sportech's Littlewoods Pools. The customers are predominantly UK based and are served from Vernons' head office in Liverpool. Vernons was purchased by Ladbrokes in 1989 and its product base is very similar to that of Sportech, being focused primarily on the football pools, whilst offering various other games, including fixed odds betting on the Irish Lottery. Ladbrokes is one of the world's leading bookmakers with over 2,500 licensed betting shops in the UK, Jersey, Ireland and Belgium, telephone betting via three call centres and e-gaming operations offering a range of betting and gaming services. For the year ended 31 December 2006, Vernons reported gross win revenue of £18.6 million (2005: £19.6 million) and operating profit of £5.7 million (2005: £5.9 million). The historical profit and loss accounts and balance sheets detailed below represent a combined account for the Vernons business: Year ended Profit and loss accounts 31 December 31 December 31 December 2006 2005 2004 £m £m £m Gross win revenue 18.6 19.6 20.1 Cost of sales (5.6) (6.4) (7.0) Gross profit 13.0 13.2 13.1 Distribution costs - - - Administrative expenses (7.3) (7.3) (7.3) Operating profit 5.7 5.9 5.8 As at Balance sheets 31 December 31 December 31 December 2006 2005 2004 £m £m £m ASSETS Non Current Assets Other intangible assets 0.1 0.1 0.1 Property, plant and equipment 0.3 0.4 0.2 0.4 0.5 0.3 Current Assets Inventories 0.1 0.1 0.2 Trade and other receivables 0.7 0.7 0.7 Cash and cash equivalents 0.5 0.5 1.4 1.3 1.3 2.3 LIABILITIES Current Liabilities Trade and other payables (8.4) (8.9) (9.8) (8.4) (8.9) (9.8) Net Current Assets (7.1) (7.6) (7.5) Non Current Liabilities Deferred tax liabilities (0.3) (0.1) (0.3) NET ASSETS (7.0) (7.2) (7.5) Invested Capital (7.0) (7.2) (7.5) The above financial information has been prepared for each of the three years ended 31 December 2006 by combining the financial information of Vernons Games, Vernons Trustees and Vernons Financial Services with the trade and assets of Vernons Pools, excluding certain income and expenses relating to assets which are not included in the Acquisition. 3. Reasons for the Acquisition and the New Issue Sportech's core football pools business, Littlewoods Pools, dates back to 1923. With high brand awareness, national media exposure and a loyal customer base, Littlewoods enjoyed many years of operating the UK's largest pool betting game on the UK's most popular sport. Since the introduction of the National Lottery in November 1994, football pools has experienced a significant reduction in the number of people playing the game. Littlewoods lost over 90 per cent of its customers in the period from November 1994 to December 2005. However, the football pools remains a highly popular game with almost 730,000 weekly players. Following the appointment of a new management team and Board of directors, commencing with the appointment of Ian Penrose as Chief Executive in October 2005, the Company commenced a strategic review. Following this review, the Company has focussed its activities on regenerating its football pools business and developing related products and disposed of its loss-making betting business and terminated its loss-making ITV contract. The Acquisition will combine Littlewoods Pools and Zetters Pools with the pools business of Vernons. On Completion, Sportech will own all three major football pools operations in the UK, representing approximately 99 per cent. of the total football pools market, and add Vernons' approximately 230,000 weekly pools customers to Sportech's approximately 500,000 weekly pools customers as at 30 June 2007. The Directors believe that the Acquisiton, once Vernons is fully integrated with Sportech's existing operations, will create a bigger pool of customers, larger jackpots and more winners. Significant operational synergies are expected to be realised in the area of shared overheads and direct costs. The Directors also believe that the Enlarged Group will have opportunities to increase revenue through focused marketing and cross-selling. The agreement which is to be entered into with Ladbrokes on Completion of the Acquisition will provide marketing and distribution of the Enlarged Group's principal football pools products through Ladbrokes' licensed betting offices in the UK. The Acquisition will also provide an opportunity for the rebranding of the Enlarged Group's operations. As part of the acquisition of Littlewoods Leisure in September 2000, Sportech received a royalty-free licence to use the Littlewoods name for a period of 10 years ending in September 2010. Sportech intends to launch a new branding and marketing strategy under the single brand, "The New Football Pools". Following the Acquisition, the Directors intend to make a number of changes to the way that the Enlarged Group operates, including: • merging the operations of Littlewoods and Vernons into the Company's existing site, including the merging of IT systems and possible outsourcing of services, all planned for the first three quarters of 2008. These changes are expected to realise substantial savings in overheads and direct costs. The Directors believe that such savings could amount to approximately £2.5 million per annum and that the full benefit of these savings will be available in 2009. The restructuring costs associated with achieving these savings in direct costs and overheads are expected to amount to approximately £1.5 million and to be incurred in the year ending 31 December 2008; and • launching a number of new "pari mutuel" products in 2008 reflecting the strong community involvement in the game of football and the interest of fans in the game. These games will be targeted at the younger adult market, and will be based around predictions of the results of major football matches in the UK and Europe. The costs of launching these new products, including initial promotional and advertising expenditure and support, and of the re-branding exercise are expected to amount to approximately £2.8 million and will be incurred in 2008. The Directors believe that the effect of the Acquisition, taken together with the costs referred to above, will be to reduce earnings per share in 2008 and, dependent on the successful implementation of the changes referred to above, to increase earnings per share in 2009. 4. Principal terms of the Acquisition The Acquisition Agreement was executed on 7 November 2007 between (1) Vernons Pools Limited, (2) Vernons Group Limited, (3) Ladbrokes Betting and Gaming Limited, (4) Littlewoods Promotions Limited and (5) the Company under the terms of which Littlewoods Promotions has agreed, subject to the fulfilment of certain conditions, to acquire Vernons. The consideration payable by Littlewoods Promotions is £51 million, which is to be satisfied by the payment of £45 million in cash on Completion and as to the balance in cash in two amounts of £3 million on each of the first and second anniversaries of Completion. Payment of the Deferred Consideration will be guaranteed by BoS in accordance with a guarantee issued pursuant to the New Facility Agreement. Under the Acquisition Agreement, the Company will acquire all the assets and rights of the sellers in relation to the Vernons business, including all Vernons business and customer contracts, various IP rights and domain names, goodwill, equipment, records and stock. Excluded from these assets is the call centre operated on behalf of Ladbrokes by Vernons Pools and the debts owing to Vernons Pools. Littlewoods Promotions has also agreed to enter into a sublease with Vernons Pools of the Vernons Property for a maximum term of 18 months. The Acquisition Agreement is subject inter alia, to the following conditions: (i) the passing of Resolutions 1, 2 and 3 at the EGM; (ii) the grant of landlord's consent for the proposed sub-lease of the Vernons Property; (iii) Admission; and (iv) entry into of the New BoS Funding Arrangements. If any of these conditions is not fulfilled by 31 December 2007 (or such later date as the parties may agree), the Acquisition Agreement will terminate and none of the parties will have any further rights or obligations under it. Vernons Pools has given various undertakings, indemnities, warranties and covenants in the Acquisition Agreement. Vernons Pools has also given restrictive covenants that neither it nor any of its holding companies, subsidiaries and fellow subsidiaries will compete with the Vernons business for a specified period post-Completion. On Completion, Littlewoods Promotions will enter into a distribution agreement with Ladbrokes for the distribution of the enlarged group's football pools products through Ladbrokes' licensed betting offices, which will give the enlarged group a physical marketing and transactional presence in a minimum of 1,750 licensed betting offices in the UK. 5. Interim results, current trading and prospects The Company announced its interim results for the 6 months ended 30 June 2007 on 11 September 2007. Since that date, the Company has continued to trade in line with the Directors' expectations. At the end of September 2007, the Company implemented a number of product enhancements and price adjustments. In line with the Company's expectations, average stakes have increased by 19 per cent to approximately £2.15 per customer per week, offset by a one-off loss of customers of 6 per cent. The Company and Littlewoods Promotions have also entered into an agreement with the English and Scottish professional football leagues and Football DataCo for marketing and data rights. This agreement enables Littlewoods Promotions to strengthen its relationship with football by becoming an Official Licensee of the FA Premier League and the Football League, and an Official Partner of the Scottish Premier League and the Scottish Football League. The agreement provides for a series of additional marketing, branding and data rights, which the Directors expect to assist in the development of the Enlarged Group's business in the UK and internationally. The agreement also provides for Littlewoods Promotions and each of the Leagues to use their best endeavours to conclude a Memorandum of Understanding to set out the procedure for distributing certain of the contributions which Littlewoods Promotions presently makes to the Foundation for Sport and the Arts to charities within the Leagues' "Football Good Causes Framework". The Directors believe that this arrangement will enhance the Company's connection with football and its various interest groups. 6. Consolidation A share consolidation is proposed. The Board believes that this will, inter alia, reduce the bid/offer spread in the Ordinary Shares and that fluctuations in the price of the Ordinary Shares will be more easily absorbed. The Company's middle market share price, as at the close of business on 6 November 2007, being the latest practicable date before publication of the Circular posted to all Shareholders on 7 November 2007, was 10.25 pence, with a bid/offer spread of 10 pence - 10.5 pence. Subject to Resolution 2 being passed by Shareholders at the EGM, the issued and authorised but unissued Existing Ordinary Shares of 5 pence each in the share capital of the Company will be consolidated into 50 pence Ordinary Shares so that holders of Existing Ordinary Shares of 5 pence each will then hold one 50 pence Ordinary Share for every ten Existing Ordinary Shares of 5 pence each previously held. The Placing and Open Offer will take place on a post-Consolidation basis. The effect of the Consolidation will be to reduce the total number of Ordinary Shares in issue without affecting the rights of Shareholders or (except as regards the impact of the sale of fractional entitlements) the proportion of the Company's total issued share capital held by any Shareholder. In the absence of any other factors affecting the Company's share price, the Consolidation is not expected to affect the Company's market capitalisation. Dealings in 50 pence Ordinary Shares are expected to commence on 3 December 2007. The Company will arrange for new share certificates to reflect the Consolidation to be issued to those Shareholders who hold their Existing Ordinary Shares in certificated form within 14 days of Admission, after which time the existing certificates in respect of such Existing Ordinary Shares shall cease to be valid for all purposes. Options held under the Share Option Schemes and any awards granted under the proposed Performance Share Plan on the day of the EGM will be adjusted to reflect the effect of the Consolidation by decreasing the number of Ordinary Shares under option or award and increasing any exercise price in respect of each grant, as appropriate. The adjustment will be determined by the Board and approved by the Company's auditors (and HMRC where necessary). Such share options and awards will also be adjusted to reflect any dilutive effect of the Open Offer. The share price targets applying to existing options held under the Share Option Schemes will also be adjusted as a result of the consolidation and Open Offer in the same way as noted above for the exercise price for such options. 7. Principal terms of the Placing and Open Offer The Company is proposing to raise approximately £41.4 million (before expenses), subject, inter alia, to Shareholders' approval, through the issue of the New Ordinary Shares by means of the Placing and Open Offer. Save in respect of the Subscription Shares, the New Issue is fully underwritten by Investec. The Company has received an irrevocable undertaking from Newby Manor Limited to subscribe for all the New Ordinary Shares to which it is entitled under the Open Offer, being 11,846,284 New Ordinary Shares representing approximately 28.6 per cent of the New Issue and 11.8 per cent. of the Enlarged Issued Share Capital. The Company has also received an irrevocable undertaking from BoS not to take up any of the 11,779,786 New Ordinary Shares to which it is entitled under the Open Offer, representing approximately 28.4 per cent. of the New Issue and 11.7 per cent. of the Enlarged Issued Share Capital. These New Ordinary Shares, being the Firm Placed Shares, have been placed firm by Investec on behalf of the Company at the Issue Price with institutional investors. Qualifying Shareholders are being offered the right to subscribe for New Ordinary Shares at the Issue Price in accordance with the terms of the Open Offer. The Issue Price, when adjusted to take account of the Consolidation, represents a discount of approximately 2.4 per cent. to the middle market quotation for the Existing Ordinary Shares of 10.25 pence, as derived from the Daily Official List of the London Stock Exchange on 6 November 2007. New Ordinary Shares will be offered to Qualifying Shareholders in the Open Offer, subject to the terms and conditions to be set out in the Circular to be posted to Shareholders, on the following basis: 7 Open Offer Shares for every 10 Ordinary Shares of 50 pence each registered in the names of Qualifying Shareholders on the Record Date, and so in proportion for any other number of Existing Ordinary Shares then registered. Entitlements of Qualifying Shareholders will be rounded down to the nearest whole number of Open Offer Shares. Any resulting fractional entitlements of Qualifying Shareholders arising under the Open Offer will not be allocated pursuant to the Open Offer, but will be aggregated and sold by Investec for the benefit of the Company or taken up under the Placing Agreement. The New Ordinary Shares, when issued, will be fully paid and will rank pari passu in all respects with the 50 pence Ordinary Shares created by and in issue following the Consolidation, including the right to receive all dividends and other distributions declared, made or paid on or after, or by reference to a record date on or after, the date of their issue. The Placing and the Open Offer are conditional on the Placing Agreement becoming unconditional in all respects and not being terminated prior to Admission. The Placing Agreement is itself conditional on, inter alia: • the passing of Resolutions 1, 2 and 3 at the EGM; • the Acquisition Agreement becoming unconditional save for Admission; • the New Facility Agreement becoming unconditional in all respects (save as regards any condition relating to the Placing Agreement and the Acquisition Agreement becoming unconditional); • All the subscription monies due from Newby Manor Limited being received; and • Admission occurring not later than 3 December 2007 or such later time and/or date as the Company and Investec may agree being no later than 8.00 a.m. on 10 December 2007 Under the terms of the Placing Agreement, Investec has the right to terminate its obligations under the Placing Agreement in the event of, inter alia, any of the warranties contained therein being untrue, inaccurate or misleading, or a breach by the Company of its obligations in the Placing Agreement. 8. Principal Terms of the New Facility Agreement and the New Working Capital Facility Agreement The New Facility Agreement and the New Working Capital Facility Agreement will provide total facilities of up to £124 million to Sportech, and in the case of the New Working Capital Facility Agreement, to the Enlarged Group. The New Facility Agreement may be drawn upon by Sportech for the purposes of onlending sums drawn to Littlewoods Promotions for the purposes of funding part of the consideration payable for the Acquisition and related costs and expenses and for certain other purposes agreed with the lenders thereunder. The New Facility Agreement also includes provision for BoS to issue a guarantee in respect of the Deferred Consideration. The New Facility Agreement and the New Working Capital Facility Agreement impose various obligations on Sportech, including compliance with financial covenants. Prior to Completion, each of Sportech's non dormant subsidiaries will have acceded to the New Facility Agreement as guarantors (and thereby will guarantee sums payable by Sportech and its subsidiaries under the New Facility Agreement, the New Working Capital Facility Agreement and other related documents) and Sportech and each of its non dormant subsidiaries will also provide full security over their property, assets and undertaking to secure their obligations (in the case of subsidiaries not incorporated in the United Kingdom, such security will be limited to security over the shares in such subsidiaries and the shares held by such subsidiary in other subsidiaries). Within three Business Days of Completion, each of Vernons Games, Vernons Trustee Company and Vernons Financial Services will be required to accede to the New Facility Agreement and the New Working Capital Facility Agreement as guarantors and provide full security over their assets. The New Working Capital Facility Agreement provides uncommitted working capital facilities to Sportech and its non dormant subsidiaries. Initially, the facility is limited to £8 million but it increases to £14 million to enable the Deferred Consideration to be paid except to the extent that a drawing is made by Sportech under the New Facility Agreement to fund the Deferred Consideration. The New Facility Agreement and the New Working Capital Facility Agreement were executed on 7 November 2007 and are unconditional in all respects save for Admission, Shareholders' approval of the New BoS Funding Arrangements, the Placing and the Open Offer and the Acquisition, the fulfilment of certain conditions precedent relating to the guarantees and security to be provided by certain of Sportech's subsidiaries, the Company being able to repeat certain representations and warranties and there being no breach of certain events of default on Admission. The interest rate applicable to the facilities advanced under the New Facility Agreement will be LIBOR plus a margin of between 1.375 per cent and 3 per cent per annum plus mandatory costs. The New Facility Agreement contains normal representations and warranties, general and financial covenants and events of default. The New Working Capital Facility Agreement provides for an interest rate of 1.25 per cent. above BoS's base rate from time to time. If the Acquisition does not proceed, the facilities provided by the New Facility Agreement and the New Working Capital Facility Agreement will not be available to the Group. In this event the Group will continue to use the Existing Facility Agreement with BoS. As BoS is a substantial shareholder of the Company, the giving of security pursuant to the New BoS Funding Arrangements will constitute a related party transaction for the purposes of Chapter 11 of the Listing Rules and will require Shareholders' approval at the EGM. 9. Dividend Policy Subject to the Enlarged Group trading in line with their expectations, the Directors intend to consider the payment of a dividend in respect of the Company's 2009 financial year. 10. Amendment of Articles of Association In order to effect the Consolidation as described above, the Company is proposing to alter its Articles of Association so as to provide that, in respect of any Shareholders who would become entitled to fractions of a share on any consolidation, the Directors may sell the shares represented by the aggregated fractions to any person (including the Company) on behalf of those Shareholders. The Directors must obtain the best price reasonably obtainable for the shares and distribute the net proceeds of sale pro rata amongst the relevant Shareholders, except that amounts of £2 or less will be retained by the Company. 11. Extraordinary General Meeting In order to effect the Proposals, it is necessary to obtain Shareholders' approval of the Resolutions. Accordingly, it is expected that an EGM will be convened for 10.00 a.m. on 30 November 2007 at the offices of Kirkpatrick & Lockhart Preston Gates Ellis LLP, 110 Cannon Street, London, EC4N 6AR. The Resolutions proposed are as follows: Resolution 1 This Resolution, which will be proposed as an ordinary resolution, seeks approval for the Acquisition on the terms of the Acquisition Agreement. This is necessary because the Acquisition is a Class 1 transaction for the Company under Chapter 10 of the Listing Rules and as such requires the prior approval of Shareholders for its Completion. Resolution 2 This Resolution will be proposed as a composite special resolution, and will, if passed: (a) increase the Company's authorised share capital and authorise the Directors (b) disapply Shareholders' statutory pre-emption rights in relation to the Placing and Open Offer and certain future allotments of equity securities (c) approve the terms of the Placing and Open Offer; (d) alter the Company's Articles of Association to enable the Consolidation to proceed as described above; and (e) effect the consolidation of every ten of the Company's issued and authorised but unissued 5 pence Ordinary Shares into one 50 pence Ordinary Share. Resolution 3 This Resolution, which will be proposed as an ordinary resolution, seeks approval for the entering into of the New BoS Funding Arrangements by the Group and the enlarged group. This is necessary because the grant of security pursuant to the New BoS Funding Arrangements constitutes a related party transaction for the purposes of Chapter 11 of the Listing Rules and as such requires the prior approval of Shareholders. Resolution 4 This Resolution, which will be proposed as an ordinary resolution, seeks approval of the rules of the Company's proposed new Performance Share Plan (details of which will be contained in the Circular) and authorises the Directors (i) to make such modifications to the PSP as they consider appropriate and (ii) establish overseas plans based on the PSP. Other than in relation to the issue of the New Ordinary Shares pursuant to the Placing and Open Offer, the Directors have no present intention of issuing any equity securities pursuant to the disapplication of pre-emption rights referred to above. 12. Major Shareholders' and Directors' intentions regarding the Open Offer In relation to the New Issue, the following irrevocable undertakings have been received: Newby Manor Limited has given an irrevocable undertaking, dated 5 November 2007, to take up all the New Ordinary Shares to which it is entitled under the Open Offer, amounting in aggregate to 11,846,284 New Ordinary Shares representing approximately 28.6 per cent of the total number of New Ordinary Shares. Newby Manor Limited has also undertaken to vote in favour of all the Resolutions at the EGM. BoS has given an irrevocable undertaking, dated 7 November 2007, not to take up any of the New Ordinary Shares to which it is entitled under the Open Offer, amounting in aggregate to 11,779,786 New Ordinary Shares and representing approximately 28.4 per cent. of the total number of New Ordinary Shares and approximately 11.7 per cent. of the Enlarged Issued Share Capital. These New Ordinary Shares have been placed firm by Investec on behalf of the Company at the Issue Price with institutional investors. BoS has also undertaken to vote in favour of all the Resolutions at the EGM other than Resolution 3. Because of its interest in the subject matter of Resolution 3, BoS has irrevocably undertaken to abstain from voting on Resolution 3 and to take reasonable steps to ensure that its associates will abstain from voting on Resolution 3 at the EGM. BoS has undertaken to the Company and Investec not to sell or otherwise dispose of any of its Ordinary Shares for a period of twelve months following Admission. This undertaking will not prevent BoS from disposing of any shares: (a) In the event that Newby Manor Limited sells or otherwise disposes of Ordinary Shares representing in excess of 5 per cent of the Enlarged Issued Share Capital during the twelve months following Admission or there is a recommended offer for the Company; (b) Representing up to 84,141,331 Existing Ordinary Shares at a price of 10 pence per Existing Ordinary Share to satisfy surplus demand for Existing Ordinary Shares on 7 November 2007; and (c) Upon notification from Investec (in its capacity as broker to the Company) that it has received interest from a third party to acquire Ordinary Shares of the Company for which there is an insufficient number of Ordinary Shares of the Company offered for disposal on the Main Market at that time. However BoS has confirmed that it is not its present intention to accept any such offer which may be made for its shares if it has sold the shares referred to in (b) above, so that it will continue to hold the balance of its Existing Ordinary Shares remaining after such sale until the first anniversary of Admission. Two of the Directors, Ian Penrose and John Barnes, intend to take up from their Open Offer Entitlements 75,000 New Ordinary Shares (at a cost of £75,000 at the Issue Price) and 25,000 New Ordinary Shares (at a cost of £25,000 at the Issue Price) respectively. Ian Penrose has agreed to sell 15,000 of these New Ordinary Shares to Steve Cunliffe and 25,000 of these New Ordinary Shares to Jon Holmes, all at the Issue Price. PART II EXPECTED TIMETABLE OF PRINCIPAL EVENTS Record Date for entitlement under the Open Offer Close of business on 5 November 2007 Existing Ordinary Shares marked "ex" entitlement to Open Offer 7 November 2007 Open Offer Entitlements credited to Stock Accounts in CREST of Qualifying CREST Shareholders 8 November 2007 Recommended latest time for requesting withdrawal of Open Offer Entitlements from CREST 4.30 p.m. on 22 November 2007 Latest time for depositing Open Offer Entitlements into CREST 3.00 p.m. on 26 November 2007 Latest time for splitting of Application Forms(to satisfy bona fide market claims) 3.00 p.m. on 27 November 2007 Latest time and date for receipt of Forms of Proxy 10.00 a.m. on 29 November 2007 Latest time and date for receipt of Application Forms and payment in full under the Open Offer 11.00 a.m. on 29 November 2007 Extraordinary General Meeting 10.00am on 30 November 2007 Consolidation Record Date 5.00pm on 30 November 2007 Admission and commencement of dealings in New Ordinary Shares 03 December 2007 CREST members' accounts credited 03 December 2007 Despatch of definitive share certificates for New Ordinary Shares in certificated form (where applicable) By 10 December 2007 Despatch of cheques in respect of fractional entitlement under the Consolidation 10 December 2007 Despatch of share certificates in respect of 50 pence Ordinary Shares arising on the Consolidation By 17 December 2007 The dates set out in the expected timetable of principal events above and mentioned throughout this announcement may be adjusted by Sportech, in which event details of the new dates will be notified to the UK Listing Authority and the London Stock Exchange and, where appropriate, to Shareholders. DEFINITIONS The following definitions apply throughout this document, unless the context otherwise requires: "Acquisition" the proposed acquisition by the Company of Vernons, pursuant to the Acquisition Agreement "Acquisition Agreement" the conditional agreement between (1) Vernons Pools Limited, (2) Vernons Group Limited, (3) Ladbrokes Betting and Gaming Limited, (4) Littlewoods Promotions Limited and (5) the Company, relating to the Acquisition "Admission" admission of the 50 pence Ordinary Shares to the Official List becoming effective in accordance with the Listing Rules and admission to trading on the London Stock Exchange's market for listed securities becoming effective in accordance with the London Stock Exchange's Admission and Disclosure Standards "Application Form" the application form accompanying this document by which Qualifying Shareholders may apply for Open Offer Shares under the Open Offer "Arbuthnot" Arbuthnot Securities Limited, a private limited company registered in England and Wales under company number 00762818 and authorised and regulated by the FSA (no. 114265) and a member of the LSE "Articles" or "Articles of Association" the articles of association of the Company "Audit Committee" the audit committee of the Directors "Bet Direct" the telephone and internet betting business carried on by Littlewoods Promotions and sold by the Company in July 2006 "Board" or "Directors" the directors of the Company as at the date of this document "BoS" Bank of Scotland plc, having its registered office at The Mound, Edinburgh EH1 1YZ "Business Day" a day (other than Saturday or Sunday or a bank holiday) on which banks are generally open for normal banking business in the City of London "Company" or "Sportech" Sportech PLC, a public limited company registered in Scotland under company number SC069140 "Completion" completion of the Acquisition Agreement "Consolidation" the proposed consolidation of the 5p Ordinary Shares into 50 pence Ordinary Shares "Consolidation Record Date" the date of the EGM "CREST" the system for the paperless settlement of trades in securities and the holding of uncertificated securities in accordance with the CREST Regulations "CREST Regulations" the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), as amended from time to time "Deferred Consideration" the deferred consideration to be paid under the terms of the Acquisition Agreement in two amounts each of £3 million on the first and second anniversaries of the date of Completion "EEA State" a state which is a contracting party to the agreement on the European Economic Area signed at Oporto on 2 May 1992 as it has effect for the time being as at the date of this prospectus, being: Austria, Belgium, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, The Netherlands, Norway, Poland, Portugal, The Slovak Republic, Slovenia, Spain, Sweden and the United Kingdom "e-gaming" gambling conducted via the internet or through other remote means "Enlarged Group" the Group as enlarged by the proposed Acquisition "Enlarged Issued Share Capital" the issued ordinary share capital of Sportech immediately following the issue of the New Ordinary Shares "Existing Ordinary Shares" the 592,074,138 5 pence Ordinary Shares in issue at the date of this document "Extraordinary General Meeting" or "EGM" the extraordinary general meeting of the Company expected to be held at 10.00 a.m. on 30 November 2007 at the offices of Kirkpatrick & Lockhart Preston Gates Ellis LLP at 110 Cannon Street, London EC4N 6AR "Firm Placed Shares" the 11,779,786 New Ordinary Shares conditionally placed by Investec with institutional and certain other investors which are not subject to any clawback to satisfy valid applications from Qualifying Shareholders under the Open Offer "Football Gaming" Littlewoods Pools, Zetters Pools and the Company's Spot the Ball, Premier 10, Treble Chance, Littlewoods Lotto 3 and Littlewoods Lotto 4 products "FSA" the Financial Services Authority "FSMA" the Financial Services and Market Act 2000, as amended "Guarantors" means Sportech and Littlewoods Gaming as the date hereof and such other non dormant subsidiaries of Sportech as accede to the New Facility Agreement before and, in the case of Vernons Games, Vernons Trustee Company and Vernons Financial Services, after Completion "Group" the Company and its subsidiaries at the date of this document "HMRC" Her Majesty's Revenue & Customs "Investec" Investec Bank (UK) Limited, a private limited company registered in England and Wales under company number 00489604, acting through its division Investec Investment Banking "Issue Price" 100 pence per New Ordinary Share "Ladbrokes" Ladbrokes PLC, a public limited company registered in England and Wales under company number 0566221 "LIBOR" London Interbank Offered Rate "Listing Rules" the listing rules made by the UK Listing Authority for the purposes of Part VI of the FSMA "Littlewoods Gaming" Littlewoods Gaming Limited, a wholly owned subsidiary of Sportech, a private limited company registered in England and Wales under company number 04118085 "Littlewoods Leisure" the betting and gaming division of Littlewoods Organisation acquired by the Company in September 2000 "Littlewoods Lotteries" Littlewoods Lotteries Limited, a private limited company registered in England and Wales under company number 02884057 "Littlewoods Organisation" Littlewoods Limited, a private limited company registered in England and Wales under company number 00262152, the name of which was The Littlewoods Organisation plc until 21 September 2000 and which re-registered as a private limited company on 1 November 2002 "Littlewoods Pools" the football pool business carried on by Littlewoods Promotions "Littlewoods Promotions" Littlewoods Promotions Limited, a wholly owned subsidiary of Sportech, a private limited company registered in England and Wales under company number 00545018 "London Stock Exchange" or "LSE" London Stock Exchange plc "New BoS Funding Arrangements" means the New Facility Agreement, the New Working Capital Facility Agreement and all guarantees and security provided or to be provided by the Group or the Enlarged Group to secure obligations thereunder "New Facility Agreement" means the conditional facilities agreement dated 7 November 2007 between, inter alia, BoS (in various capacities) and Sportech setting out the terms pursuant to which the term loan and guarantee facilities (totalling £116 million) referred to therein will be made available to Sportech, such agreement including a guarantee from the Guarantors of sums due under the New BoS Funding Arrangements and certain other documents "New Issue" the issue of New Ordinary Shares to be made pursuant to the Placing and Open Offer "New Ordinary Shares" the 41,445,189 new 50 pence Ordinary Shares to be issued pursuant to the Placing and Open Offer "New Working Capital Facility Agreement" means the conditional agreement constituted by the acceptance by Sportech and certain of its subsidiaries of a letter from BoS dated 7 November 2007 setting out the terms pursuant to which BoS will provide up to £14 million of working capital facilities to borrowers thereunder and to which Vernons Games, Vernons Trustee Company and Vernons Financial Services will accede after Completion "Official List" the Official List of the UK Listing Authority "Open Offer" the conditional offer made by Investec, as agent for the Company, inviting Qualifying Shareholders to subscribe for the Open Offer Shares at the Issue Price "Open Offer Entitlements" entitlements allocated to Qualifying Shareholders to subscribe for Open Offer Shares under the Open Offer "Open Offer Shares" the New Ordinary Shares available to Qualifying Shareholders under the Open Offer "Ordinary Shares" 5 pence Ordinary Shares and 50 pence Ordinary Shares "5 pence Ordinary Shares" ordinary shares of 5 pence each in the capital of the Company at the date of this document "50 pence Ordinary Shares" ordinary shares of 50 pence each in the capital of the Company following the Consolidation "Overseas Shareholders" holders of Ordinary Shares with registered addresses outside the United Kingdom or who are citizens of, incorporated in, registered in, or otherwise resident in, countries outside the United Kingdom "Placing" the conditional placing of the Firm Placed Shares and Open Offer Shares by Investec as agent for the Company pursuant to the Placing Agreement subject (other than in respect of the Firm Placed Shares) to recall to satisfy valid applications under the Open Offer, as described in this document "Placing Agreement" the agreement dated 7 November 2007 between Sportech and Investec relating to the Placing and Open Offer "Proposals" the Acquisition, the Consolidation, the adoption of the Performance Share Plan, the amendment of the Articles, the Placing and the Open Offer and the New BoS Funding Arrangements "PSP" or "Performance Share Plan" The Sportech Performance Share Plan "Qualifying CREST Shareholders" Qualifying Shareholders whose Existing Ordinary Shares on the Company's register of members on the Record Date are held in uncertificated form in CREST "Qualifying Shareholders" holders of 5 pence Ordinary Shares on the register of members of the Company on the Record Date, excluding certain Overseas Shareholders "Record Date" the close of business on 5 November 2007 "Remuneration Committee" the remuneration committee of the Directors "Resolutions" the resolutions numbered 1 to 4 set out in the notice of Extraordinary General Meeting "Shareholder" a holder of Ordinary Shares "Share Option Schemes" the share option schemes entered into by the Company on 4 September 2000, in both HMRC approved and unapproved form "Stock Account" an account within a member account in CREST to which a holding of a particular share or other security in CREST is credited "Subscription" the subscription for 11,846,284 New Ordinary Shares by Newby Manor Limited, which has agreed to take up such shares under the terms of the Open Offer by way of an irrevocable undertaking dated 5 November 2007 "Subscription Shares" the 11,846,284 Open Offer Shares which Newby Manor Limited has undertaken to take up in the Open Offer under the Subscription "UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland, its territories and dependencies "UK Listing Authority" or "UKLA" the FSA acting in its capacity as the competent authority for the purposes of Part VI of the FSMA "Vernons" the pools business of Vernons Pools and its related assets, the shares of Vernons Games Limited, Vernons Trustee Company Limited and Vernons Financial Services Limited "Vernons Pools" Vernons Pools Limited, a private limited company registered in England and Wales under company number 00935350 "Vernons Games" Vernons Games Limited, a private limited company registered in England and Wales under company number 01714462 "Vernons Trustee Company" Vernons Trustee Company Limited, a private limited company registered in Scotland under company number SC121262 "Vernons Financial Services" Vernons Financial Services Limited, a private limited company registered in England and Wales under company number 02122895 "Working Capital Facility Agreement" the facility letter from BoS addressed to Sportech (and various of its subsidiaries) dated 10 August 2000 under the terms of which BoS agreed to provide working capital facilities to Sportech and various of its subsidiaries (as amended, varied and supplemented from time to time) "Zetters Pools" the football pools business acquired by Littlewoods Promotions from Zetters International Pools Limited in August 2002 and carried on since then by Littlewoods Promotions This summary should be read in conjunction with the full text of this announcement. This announcement does not constitute, or form any part of, an offer or an invitation to purchase any securities. Civil liability attaches to the Company and the Directors who are responsible for the contents of this summary, including any translation of this summary, but only if this summary is misleading, inaccurate or inconsistent when read together with the other parts of this document. Where any claim relating to information contained in this document is brought before a court, the plaintiff investor might, under the national legislation of the EEA States, have to bear the costs of translating this document before any legal proceedings are initiated. This announcement does not constitute an offer of, or the solicitation of any offer to buy, any Ordinary Shares to any person in any jurisdiction to whom or in which such offer or solicitation is unlawful. The distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdiction. Investec Investment Banking, a division of Investec Bank (UK) Limited, which is regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company as sponsor, joint broker and underwriter and for no one else in relation to the matters described in this announcement and will not be responsible to anyone other than the Company for providing the protections afforded to customers of Investec Investment Banking or for providing advice in relation to the subject matter or contents of this announcement. For further information please contact: Sportech PLC Ian Penrose, Chief Executive 0151 288 3561 Steve Cunliffe, Finance Director 0151 288 3561 Investec James Grace / Patrick Robb 0207 597 5180 Arbuthnot Neil Kirton / Nick Marsh 0207 012 2000 Bell Pottinger Corporate & Financial David Rydell / Emma Kent / Rosanne Perry 0207 861 3232 This information is provided by RNS The company news service from the London Stock Exchange