Acquisition

RNS Number:9189L
Fenner PLC
22 October 2001




                         FOR RELEASE 22 OCTOBER 2001

                                  FENNER PLC


          PROPOSED ACQUISITION OF THE BELTING DIVISION OF UNIPOLY SA

       #47.5 million acquisition gives Fenner world-leading position in

                               conveyor belting


  * The acquisition of Unipoly Enerka positions Fenner as the world-leader
    in conveyor belting with significant operations on five continents.

   * Unipoly Enerka manufactures heavyweight and lightweight belt together
    with a number of specialist niche products using the "Dunlop" name. In
    2000, it reported a turnover from its continuing activities of #117.6
    million.

  * The acquisition is a major strategic step for Fenner as it enhances its
    product range, is an excellent geographic fit and enables the enlarged
    business to benefit from substantial cost savings.

  * The combination of Unipoly Enerka's position in the wider industrial
    markets is complementary with Fenner's existing strength in the coal
    markets.

  * The acquisition is expected to improve Fenner's key financial
    performance measures and the returns on the investment will clearly exceed
    the group's cost of capital. Targeted investment will unlock further
    value.

  * Fenner will pay a cash consideration equivalent to the net assets of
    Unipoly Enerka at completion.

Mark Abrahams, Chief Executive Officer of Fenner, commented:

"Following the repositioning programme completed in 2000, Fenner is now a
global conveying and industrial motion control group specialising in the
manufacture and distribution of reinforced polymer products.

The acquisition of Unipoly Enerka is another significant step in growing
Fenner's reinforced polymers businesses and will result in Fenner becoming the
world leader in Conveyor Belting with significant operations on five
continents."

This summary should be read in conjunction with the full text of the attached
press release.

There will be an analyst presentation today at 10.00am at Weber Shandwick, 4th
Floor, Aldermary House, 15 Queen Street, London EC4N 1TX.

Enquiries

Fenner PLC                Mark Abrahams            020 7329 0096 (for today
                                                   only)
                          (Chief Executive
                          Officer)                 01482 626 501 (thereafter)
HSBC Investment Bank plc

                          Aidan Wallis             020 7336 9000


Weber Shandwick Worldwide Ben Padovan              020 7329 0096



HSBC Investment Bank plc (HSBC), which is regulated in the United Kingdom by
The Securities and Futures Authority Limited, is acting exclusively for Fenner
and no one else in relation to the matters referred to in this press release
and will not be responsible to anyone other than Fenner for providing the
protections afforded to customers of HSBC, or for providing advice in relation
to the matters referred to in this press release.



                    FOR IMMEDIATE RELEASE 22 OCTOBER 2001

                                  FENNER PLC

          PROPOSED ACQUISITION OF THE BELTING DIVISION OF UNIPOLY SA


Introduction

The Board of Fenner announces today that it has reached agreement to acquire
the Belting Division of Unipoly SA through the acquisition by Fenner of the
entire share capital of Unipoly Enerka for a consideration equal to the net
assets of Unipoly Enerka at Completion. Fenner will pay #47.5 million at
Completion, and the consideration is subject to adjustment on determination of
the net asset value of Unipoly Enerka at Completion. The consideration for the
Acquisition will be paid in cash and financed from Fenner's existing cash
resources.

Due to its size, the Acquisition is conditional, inter alia, upon the approval
of Fenner shareholders at an Extraordinary General Meeting. A circular
convening an Extraordinary General Meeting will be sent to Fenner shareholders
shortly.

Information on Unipoly Enerka

Unipoly Enerka manufactures heavyweight and lightweight belt of both ply and
solid woven construction together with a number of specialist niche products.
It has belt manufacturing plants in Melbourne, Australia; Atlanta, USA;
Drachten, the Netherlands; Tournai, Belgium and a rubber compound
manufacturing unit at Farington in the UK. In addition, there is a belt
service business which operates from twelve locations in Australia and a small
service operation based at Farington.

With the exception of its US subsidiary which was acquired by Unipoly SA
shortly afterwards, the businesses were part of the Polymer Products Division
of BTR plc until the buy-out by Unipoly SA in 1997.

Unipoly SA owns certain rights over the Dunlop brand which will be transferred
to Fenner in respect of conveyor belting products upon Completion.

Financial information on and current trading of Unipoly Enerka

In the three years ended 31 December 2000, Unipoly Enerka has achieved
financial results from its continuing operations as follows:


                                                 54 weeks  12 months  12 months
                                                    ended      ended      ended
                                              31 December 31 December 31December
                                                     1998       1999       2000
                                                     #000       #000       #000
                                                     
Turnover                                          123,114    112,547    117,625
Profit before interest, tax, depreciation and
     amortisation (EBITDA) *                       15,830     13,557      3,358
Operating Profit *                                 12,727     11,277      1,061

* before exceptional items


As at 31 December 2000, Unipoly Enerka had consolidated net assets of #42.4
million before deducting net amounts owed to senior lenders and bank
overdrafts of #83.2 million and Net Intercompany Indebtedness of #6.0 million.

In 2000, Unipoly Enerka reported a turnover from its continuing activities of
#117.6 million on which it recorded an operating profit before exceptionals of
#1.1 million. The Directors believe that in that year Unipoly Enerka suffered
a significant loss of operating margin as a result of adverse market
conditions exacerbated by concurrent financial and other pressures in the
Unipoly SA group of companies.

The unaudited management accounts for the first 8 months of the current year
show much improved results with an operating profit in between those achieved
in the comparable periods of 1999 and 2000. This reflects, in particular,
improved trading and market conditions in the Australian and Continental
European ply markets, together with benefits from actions taken by Unipoly
Enerka's recently appointed operating management.

Preliminary management information for the period subsequent to 1 September
2001 indicates an overall continuation of this generally favourable trend,
notwithstanding some signs of a slow down in the US subsidiary.

Background to the Acquisition

Fenner has recently completed a significant repositioning programme to focus
its business on reinforced polymer technology used in heavyweight and
lightweight conveyor belting and in specialist precision products.

These reinforced polymer businesses represent activities where the Directors
believe attractive margins and growth are available and where Fenner has a
strong market position.

In boosting its presence in this market, Fenner has over the last seven years
made three important acquisitions; Scandura Inc, Efson Inc and TBA Belting
Ltd.

Also, the Group has disposed of a number of diverse activities such as its
Power Transmission and Fluid Power Divisions, as part of this restructuring
programme. Many of these businesses operated in markets the Directors
considered to be unattractive.

Following the repositioning, Fenner is now a global conveying and industrial
motion control group specialising in the manufacture and distribution of
reinforced polymer products.

The acquisition of Unipoly Enerka is another significant step in growing
Fenner's reinforced polymer businesses.

Reasons for the Acquisition

Upon Completion, Fenner will become the world leader in conveyor belting with
significant operations on five continents.

The combined businesses will have an increased product offering thereby
enabling the Enlarged Group to provide solutions for a wider range of
applications to a greater number of customers which, in turn, will provide
them with the opportunity to reduce their lifecycle costs of conveying. In
this way Fenner aims to be the conveyor belt supplier of choice.

Additionally, the combination of Fenner's strength in the coal markets with
Unipoly Enerka's position in the wider industrial markets provides a broader
customer base for the Enlarged Group. The Directors therefore believe the
commercial fit of the two businesses to be complementary. In addition, the
broadened product range and enlarged customer base will provide a better
platform for Fenner to develop its technology and improve customer service.

The merging of the two operations will provide the Company with the
opportunity to make substantial cost savings which it expects to deliver over
the first three years following Completion. This should be achieved through
improved manufacturing efficiency, raw material savings, better plant
utilisation and other cost benefits, which in turn will place Fenner in a
stronger position to provide cost effective products to its customers against
its global competition.

The Directors also believe that Unipoly Enerka has been financially
constrained and should benefit from carefully targeted investment. As a
consequence, it is planned to spend some #8 million over 3 years on new
capital equipment designed to improve and restore productivity and customer
service, and to help facilitate the consolidation with Fenner's business.

Financial effects of the Acquisition

From the date of Completion, Fenner will have operational and management
control of Unipoly Enerka and accordingly from that date Fenner will
consolidate Unipoly Enerka's profit and loss account, cash flows and balance
sheet. Unipoly Enerka will not be consolidated into Fenner's 31 August 2001
annual accounts.

The Directors expect that the Acquisition will improve the Group's key
financial performance measures and that returns on the investment will clearly
exceed the Group's cost of capital from the first full financial year
following Completion. The Acquisition is expected to result in the Group's
profits being more evenly spread geographically.

The Group will incur certain costs in relation to the integration of Unipoly
Enerka into the Fenner Group in order to achieve the full potential benefits
of the Acquisition. The payback on these costs is expected to be achieved
within two to three years of the Acquisition being completed.

Current trading and prospects

In its trading statement issued on 13 July 2001, Fenner made the following
statement:

"In both the UK and South Africa, the recovery in demand for our heavyweight
belting and precision polymer products has continued and this resilience has
resulted in strong sales growth in both these territories.

However, with over 60 per cent. of Group turnover deriving from North America,
the performance of the Group as a whole is dependant on the prevalent economic
conditions in the US. The first signs of optimism we detected amongst our
customers in May have not lasted and, consequently, our US businesses are
reflecting the widely-recognised general industrial slowdown."

In that statement the Directors indicated their belief that the Group's
operating profits before exceptional items for the financial year ended 31
August 2001 would be marginally ahead of those achieved in the previous year,
which continues to be the case.

The underlying conditions do not appear to have materially changed in the
intervening period. Whilst it may be too early to predict the longer term
effects of the events in New York and Washington of the 11 September 2001,
Fenner's unaudited management accounts for September 2001 indicate an outcome
reflecting the trading patterns of recent months.

The Directors believe that the Enlarged Group will be well placed to benefit
from any upturn in economic conditions in the United States and from a
continuation in the generally favourable market conditions elsewhere.

Terms and financing of the Acquisition

The consideration payable for the whole of the issued and to be issued share
capital of Unipoly Enerka is equal to its net assets at Completion. Prior to
Completion the Vendor will discharge Net Intercompany Indebtedness in Unipoly
Enerka and assume liability for part of its Net External Indebtedness. Fenner
will pay #47.5 million to the Vendor at Completion representing #12.5 million
as an initial payment for the share capital of Unipoly Enerka and #35 million
in repayment of its remaining Net External Indebtedness. The purchase price is
subject to adjustment on final determination of the net asset value at
Completion, but any additional consideration as a result of such determination
will not exceed #7.5 million.

Fenner will fund the Acquisition from the Group's existing cash resources.

Completion of the Acquisition, which is subject to Shareholder and certain
regulatory approvals, is expected by the end of December 2001.

Extraordinary General Meeting

Under the Listing Rules, the Acquisition is, in view of its size, subject to
approval by Fenner shareholders in general meeting. A circular and notice of
Extraordinary General Meeting will be sent to Fenner shareholders shortly.

Enquiries

Fenner PLC                Mark Abrahams            020 7329 0096 (for today
                                                   only)
                          (Chief Executive
                          Officer)                 01482 626 501 (thereafter)
HSBC Investment Bank plc

                          Aidan Wallis             020 7336 9000


Weber Shandwick Worldwide Ben Padovan              020 7329 0096


HSBC Investment Bank plc (HSBC), which is regulated in the United Kingdom by
The Securities and Futures Authority Limited, is acting exclusively for Fenner
and no one else in relation to the matters referred to in this press release
and will not be responsible to anyone other than Fenner for providing the
protections afforded to customers of HSBC, or for providing advice in relation
to the matters referred to in this press release.


APPENDIX 1


DEFINITIONS


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


                                        "Acquisition"     the proposed
                                        acquisition of Unipoly Enerka by
                                        Fenner;


                                        "Belting Division of Unipoly SA"
                                        Unipoly Enerka Group's business;


                                        "Board" or "Directors"     the
                                        directors of Fenner at the date of
                                        this press release;


                                        "Completion"     the completion of the
                                        Acquisition;


                                        "Enlarged Group"     Fenner Group
                                        following Completion;


"Fenner", "the Company",      Fenner PLC and/or (where the context


                                        "Fenner Group" or "the Group"
                                        requires) its subsidiary undertakings
                                        as they may be from time to time;


                                        "Net External Indebtedness"     bank
                                        debt (net of any cash balances) due to
                                        the senior lenders to Unipoly Enerka;


                                        "Net Intercompany Indebtedness"
                                        the net amount owing between any
                                        member of Unipoly Enerka and Unipoly
                                        SA (or any of its other subsidiaries;


                                        "Unipoly Enerka"      Unipoly Enerka
                                        Holdings UK Limited and/or (where the
                                        context requires) its subsidiary
                                        undertakings as they may be from time
                                        to time, the business of which
                                        comprises the Belting Division of
                                        Unipoly SA;


                                        "Unipoly SA" or "the Vendor"
                                        Unipoly SA, the ultimate holding
                                        company of Unipoly Enerka Holdings UK
                                        Limited.
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