Caledonia Regulatory News (CLDN)

CALEDONIA INVESTMENTS ACQUIRES DEEP SEA ELECTRONICS

Caledonia Investments plc ("Caledonia") is pleased to announce that it has acquired a majority stake in Deep Sea Electronics Ltd ("DSE") in a transaction that values the business at £162.0m.

Based in the UK, DSE is one of the world's leading designers and manufacturers of controllers for diesel-powered electricity generators and intelligent battery chargers. Its products are used worldwide to support public sector infrastructure projects and defence applications, as well as diverse applications across industry sectors, including oil and gas, telecoms, construction, power distribution and facilities management.

Founded in 1975 by Ed Sheader, who was joined in 1980 by co-owner Stan Archer, DSE has been led by Managing Director David Thomson since 2012. It is headquartered in Hunmanby, Yorkshire, is staffed by over 170 employees and operates globally, selling to over 150 countries, both direct and through a comprehensive distributor network.

Caledonia has subscribed £117.2m for a 98.9% equity stake and has also provided a short-term bridging loan of £50.0m, which will be replaced in due course by external bank debt. The management team has invested £1.7m for the remaining equity.

In the most recent audited consolidated accounts for its financial year to 31 May 2018, DSE reported a gross profit of £21.2m and profit before tax of £12.8m on turnover of £37.8m, and, at that date, had gross assets of £35.0m.

The acquisition represents the largest initial investment by Caledonia's Unquoted pool since its inception in 2011 and is consistent with Caledonia's strategy of investing in well-established private companies, with proven management teams, seeking long-term growth capital.

Commenting on the acquisition, Duncan Johnson, Caledonia's Head of Unquoted Investments, said:

"We are proud to have become the new owners of DSE and to partner David Thomson and his team in the next stage of the company's development. DSE's consistently strong profitability, high cash generation and leading market position ideally fit our Unquoted pool's investment criteria. We believe there are exciting opportunities to build further on DSE's excellent record and to expand its global presence."

David Thomson, DSE's Managing Director, commented:

"I am delighted to welcome Caledonia as DSE's new owner. With Caledonia's financial support, flexibility and long-term investment horizon, I am confident that we can build on DSE's well-established reputation for product quality, technical capability and customer service to take advantage of the significant growth potential in our chosen markets."

Ed Sheader and Stan Archer, co-owners of DSE, said:

"As co-owners of DSE for nearly 40 years, we were keen to find a buyer who would be committed to the long-term development of the business and secure employment opportunities for the workforce. We are therefore delighted to pass the company on to Caledonia, with its backing by the Cayzer family and reputation as a long-term, supportive investor, and wish them and David Thomson and his team every success in the future."

15 October 2018

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This announcement contains inside information in relation to Caledonia.

END

Notes for editors:

Caledonia Investments plc

Caledonia is a self-managed investment trust company listed on the London Stock Exchange with net assets of approximately £2.0bn as at 30 September 2018. The company maintains a concentrated portfolio of international quoted, unquoted and fund investments and has paid an increasing annual dividend for 51 years.

In the unquoted arena, Caledonia typically seeks to invest £25m to £100m in private companies, either on a majority or minority basis, providing a meaningful presence and growth capital supporting double-digit operating margins. Its current unquoted portfolio includes Seven Investment Management (a provider of discretionary fund management, asset management and self-invest platform services), Cobehold (a European unquoted investment house), Choice Care Group (a UK learning disability care homes provider), Cooke Optics (the UK manufacturer of premium cinematography lenses), Buzz Bingo (the UK market leading retail bingo operator), and Liberation Group (the Channel Islands and South West England integrated pub and brewing business).

For additional information on Caledonia, please visit www.caledonia.com.

Deep Sea Electronics Ltd

Founded in 1975, DSE designs and manufactures generator control modules, auto transfer switch control modules, intelligent battery chargers and engine and off-highway control modules. Headquartered in Hunmanby, Yorkshire, it also has facilities in Mansfield, UK, Illinois, USA, and Haryana, India, employing over 170 people and selling into over 150 countries, both directly and through a comprehensive distributor network.

For additional information on DSE, please visit www.deepseaplc.com.

Transaction

Caledonia's investment in DSE was led by Chris Hodges, Tom Leader and Theo Tizard.

Taylor Wessing (Ed Waldron) and PwC London (James Tubby) respectively provided legal and financial due diligence advice to Caledonia. Deloitte (Tim Haden) provided tax advice and Wyvern Partners (Mike Barnes) provided debt advice.

GCA Altium (Stuart Warriner and Andy Battersby) provided corporate finance advice to the vendors and legal advice was provided by Addleshaw Goddard (Peter Wood). Commercial and financial due diligence advice were respectively provided to the vendors by CiL (Jon Whiteman) and PwC Leeds (Will Oxley).

Park Place Corporate Finance (Tim Simpson) and Squire Patton Boggs (Jonathan Jones) advised management.

Neither the contents of Caledonia's nor DSE's websites, nor the contents of any website accessible from hyperlinks on these websites (or any other website) is incorporated into, or forms part of, this announcement.