CPR.L Regulatory News (CPR)

 ISIN: GB0001772945LEI: 213800GO32BSNNHXID9015 November 2019

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 OF THAT JURISDICTIONTHIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

RECOMMENDED CASH ACQUISITION

of

Carpetright plc

by

Meditor Holdings Limited

(a company incorporated for this purpose by Meditor European Master Fund Limited)

to be implemented by means of a Scheme of Arrangement

under Part 26 of the Companies Act 2006

The Directors, who have been so advised by Peel Hunt as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Directors, Peel Hunt has taken into account the Directors' commercial assessments.

Accordingly, the Directors intend to recommend unanimously that Carpetright Shareholders vote or procure votes to approve the Scheme at the Court Meeting and vote or procure votes in favour of the Carpetright Resolution at the General Meeting as they have irrevocably undertaken to do in respect of their beneficial holdings which in aggregate amount to 755,724 Carpetright Shares, representing approximately 0.2% of the issued share capital of Carpetright.

Commenting on the Acquisition, Bob Ivell, Chairman of Carpetright, said:

"We believe the MHL offer is in the best interests of all stakeholders. While we have made significant progress with our recovery plan for the Carpetright Group, our ability to invest in the future of the business has been constrained against the backdrop of limiting banking covenants and a very challenging consumer market. With a recapitalised business and the backing of a committed new owner with the resources to invest in Carpetright for the long term, we will be able to complete our recovery in the private arena and emerge as a stronger business."

Commenting on the Acquisition, Talal Shakerchi, Director of MHL, said:

"I believe this Scheme represents the best outcome for all stakeholder groups. In particular, with Meditor's support and financial backing and without the constraints of a public market listing, Carpetright will be well positioned to compete more effectively. This will facilitate substantially increased investment in Carpetright's committed employees and its store estate as well as driving new initiatives and improvements. I am excited about the long term prospects and opportunities for the Carpetright business."

This summary should be read in conjunction with, and is subject to, the full text of this announcement. The Acquisition will be subject to the conditions and further terms set out in Appendix 1 to this announcement and to the full terms and conditions to be set out in the Scheme Document. Appendix 2 to this announcement contains a summary of the irrevocable undertakings and letter of intent received in relation to the Acquisition. Appendix 3 to this announcement contains the sources and bases of certain information used in this summary and in this announcement. Appendix 4 to this announcement contains definitions of certain terms used in this summary and in this announcement.

Important Notices

Panmure Gordon (UK) Limited, which is authorised and regulated in the UK by the FCA, is acting exclusively for MHL and Meditor Fund and no one else in connection with the matters described in this announcement and is not advising any other person and accordingly will not be responsible to anyone other than MHL and Meditor Fund for providing the protections afforded to clients of Panmure Gordon (UK) Limited nor for providing advice in relation to the matters described in this announcement.

Peel Hunt LLP, which is authorised and regulated in the UK by the FCA, is acting exclusively for Carpetright and for no one else in connection with the matters described in this announcement and is not advising any other person and accordingly will not be responsible to anyone other than Carpetright for providing the protections afforded to clients of Peel Hunt LLP nor for providing advice in relation to the matters described in this announcement.

This announcement is for information purposes only and is not intended to and does not constitute, or form part of, an offer to sell or an invitation to purchase or subscribe for any securities or the solicitation of an offer to buy or subscribe for any securities pursuant to the Acquisition or otherwise. The Acquisition will be made solely by the Scheme Document and the Forms of Proxy accompanying the Scheme Document, which will contain the full terms and conditions of the Acquisition, including details of how the Acquisition may be approved.

This announcement has been prepared in connection with proposals in relation to a scheme of arrangement pursuant to and for the purpose of complying with English law and the Code and information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside England. Nothing in this announcement should be relied on for any other purpose.

Carpetright will prepare the Scheme Document to be distributed to Carpetright Shareholders at no cost to them. Carpetright and MHL urge Carpetright Shareholders to read the Scheme Document when it becomes available because it will contain important information relating to the Acquisition.

Overseas Jurisdictions

The release, publication or distribution of this announcement in jurisdictions other than the UK may be restricted by the laws of those jurisdictions and therefore persons into whose possession this announcement comes should inform themselves about and observe such restrictions. Further details in relation to the Overseas Shareholders will be contained in the Scheme Document. Any failure to comply with any such restrictions may constitute a violation of the securities laws of any such jurisdiction. To the fullest extent permitted by applicable law, the companies and persons involved in the Acquisition disclaim any responsibility or liability for the violation of such restrictions by any person.

Unless otherwise determined by MHL or required by the Code, and permitted by applicable law and regulation, the Acquisition will not be made available, directly or indirectly, in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction and no person may vote in favour of the Scheme by any such means from within a Restricted Jurisdiction or any other jurisdiction if to do so would constitute a violation of the laws of that jurisdiction. Accordingly, copies of this announcement and all documents relating to the Acquisition are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in, into or from a Restricted Jurisdiction where to do so would violate the laws in that jurisdiction, and persons receiving this announcement and all documents relating to the Acquisition (including custodians, nominees and trustees) must not mail or otherwise distribute or send them in, into or from such jurisdictions where to do so would violate the laws in that jurisdiction.

The availability of the Acquisition to Carpetright Shareholders who are not resident in the UK may be affected by the laws of the relevant jurisdictions in which they are resident. Persons who are not resident in the UK should inform themselves of, and observe, any applicable requirements.

The Acquisition is subject to the applicable requirements of the Code, the Panel, the London Stock Exchange and the FCA.

Additional information for US Investors

Carpetright Shareholders in the United States should note that the Acquisition relates to the securities of a UK company and is proposed to be effected by means of a scheme of arrangement under English law. This announcement, the Scheme Document and certain other documents relating to the Acquisition have been or will be prepared in accordance with English law, the Code and UK disclosure requirements, format and style, all of which differ from those in the United States. A transaction effected by means of a scheme of arrangement is not subject to the tender offer rules or the proxy solicitation rules under the US Exchange Act. Accordingly, the Acquisition is subject to the disclosure requirements of and practices applicable in the UK to schemes of arrangement, which differ from the disclosure requirements of the United States tender offer and proxy solicitation rules. If, in the future, MHL exercises the right to implement the Acquisition by way of a Takeover Offer and determines to extend the offer into the United States, the Acquisition will be made in compliance with applicable United States laws and regulations, including any applicable exemptions under the US Exchange Act.

Carpetright's financial statements, and all financial information that is included in this announcement or that may be included in the Scheme Document, or any other documents relating to the Acquisition, have been or will be prepared in accordance with International Financial Reporting Standards or other reporting standards or accounting practice which may not be comparable to financial statements of companies in the United States or other companies whose financial statements are prepared in accordance with US generally accepted accounting principles.

The receipt of cash pursuant to the Acquisition by a US holder as consideration for the transfer of its Scheme Shares pursuant to the Scheme will likely be a taxable transaction for United States federal income tax purposes and under applicable United States state and local, as well as foreign and other, tax laws. Each Carpetright Shareholder is urged to consult their independent professional adviser immediately regarding the tax consequences of the Acquisition applicable to that Carpetright Shareholder.

It may be difficult for US holders to enforce their rights and claims arising out of the US federal securities laws, since MHL and Carpetright are located in countries other than the US, and some or all of their officers and directors may be residents of countries other than the US. US holders may not be able to sue a non-US company or its officers or directors in a non-US court for violations of US securities laws. Further, it may be difficult to compel a non-US company and its affiliates to subject themselves to a US court's judgement.

In accordance with normal UK practice and consistent with Rule 14e-5(b) of the US Exchange Act, MHL, certain affiliated companies and their nominees or brokers (acting as agents) may make certain purchases of, or arrangements to purchase, shares in Carpetright outside of the US, other than pursuant to the Acquisition, until the date on which the Scheme becomes effective in accordance with its terms, lapses or is otherwise withdrawn. If such purchases or arrangements to purchase were to be made they would occur either in the open market at prevailing prices or in private transactions at negotiated prices and comply with applicable law, including the US Exchange Act. Any information about such purchases or arrangements to purchase will be disclosed as required in the UK, will be reported to a Regulatory Information Service and will be available on the London Stock Exchange website at www.londonstockexchange.com.

Forward-looking statements

This announcement, oral statements made regarding the Acquisition, and other information published by or concerning Meditor Group and Carpetright Group contain statements which are, or may be deemed to be, "forward-looking statements" in respect of the financial condition, results of operations and business of or concerning Meditor Group and Carpetright Group and their respective groups, and certain plans and objectives of or concerning Meditor Group and Carpetright Group. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of MHL and Carpetright about future events and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. The forward-looking statements contained in this announcement include statements relating to the expected effects of the Acquisition, the expected timing and scope of the Acquisition and other statements other than historical facts. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "plans", "expects" or "does not expect", "is expected", "is subject to", "project", "will likely result", "will continue", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. Although MHL and Carpetright believe that the expectations reflected in such forward-looking statements are reasonable, MHL and Carpetright can give no assurance that such expectations will prove to be correct.

By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. In addition to the information regarding these risks, uncertainties, assumptions and other factors set forth in the public filings made by MHL and Meditor Fund and the public filings (if any) made by Carpetright, important risk factors that may cause such a difference include, but are not limited to, (i) the completion of the Acquisition on anticipated terms and timing, (ii) legislative, regulatory and economic developments, (iii) the impact of foreign exchange rates, (iv) the performance of the global economy, and (v) unpredictability and severity of catastrophic events, including, but not limited to, acts of terrorism or outbreak of war or hostilities. While the list of factors presented here is considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Unlisted factors may present significant additional obstacles to the realisation of forward-looking statements. Such forward-looking statements should therefore be construed in the light of such factors.

Neither MHL, Meditor Fund nor Carpetright, nor any member of the Meditor Group or the Carpetright Group or any of their respective associates or directors, officers or advisers provides any representation, warranty, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements. Each forward-looking statement speaks only as at the date of this announcement. Other than in accordance with their legal or regulatory obligations (including under the Code, the Listing Rules, the Disclosure Guidance and Transparency Rules and MAR), no member of the Carpetright Group nor member of the Meditor Group is under, or undertakes, any obligation, and each of the foregoing expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

All forward-looking statements contained in this announcement are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

No profit forecasts or estimates

No statement in this announcement is intended as a profit forecast or estimate for any period and no statement in this announcement should be interpreted to mean that earnings or earnings per share for Carpetright for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share for Carpetright.

Opening Position and Dealing Disclosure Requirements of the Code

Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of any class of relevant securities of an offeree company or of any securities exchange offeror (being any offeror other than an offeror in respect of which it has been announced that its offer is, or is likely to be, solely in cash) must make an Opening Position Disclosure following the commencement of the offer period and, if later, following the announcement in which any securities exchange offeror is first identified. An Opening Position Disclosure must contain details of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s). An Opening Position Disclosure by a person to whom Rule 8.3(a) applies must be made by no later than 3.30 p. m. (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 p. m. (London time) on the 10th business day following the announcement in which any securities exchange is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a securities exchange offeror prior to the deadline for making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company or of any securities exchange offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company or of any securities exchange offeror. A Dealing Disclosure must contain details of the dealing concerned and of the person's interests and short positions in, and rights to subscribe for, any relevant securities of each of (i) the offeree company and (ii) any securities exchange offeror(s), save to the extent that these details have previously been disclosed under Rule 8. A Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no later than 3.30 p. m. (London time) on the business day following the date of the relevant dealing.

If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire or control an interest in relevant securities of an offeree company or a securities exchange offeror, they will be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by any offeror and Dealing Disclosures must also be made by the offeree company, by any offeror and by any persons acting in concert with any of them (see Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant securities Opening Position Disclosures and Dealing Disclosures must be made can be found in the Disclosure Table on the Takeover Panel's website at www.thetakeoverpanel.org.uk, including details of the number of relevant securities in issue, when the offer period commenced and when any offeror was first identified. You should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure.

Right to switch to a Takeover Offer

MHL reserves the right to elect, with the consent of the Panel, to implement the Acquisition by way of a Takeover Offer for the entire issued and to be issued share capital of Carpetright (save for the Carpetright Shares held by Meditor Fund) as an alternative to the Scheme. In such an event, the Takeover Offer will be implemented on the same terms or, if MHL so decides, on such other terms being no less favourable (subject to appropriate amendments), so far as applicable, as those which would apply to the Scheme.

Information relating to Carpetright Shareholders

Please be aware that addresses, electronic addresses and certain information provided by Carpetright Shareholders, persons with information rights and other relevant persons for the receipt of communications from Carpetright may be provided to MHL during the offer period as required under Section 4 of Appendix 4 of the Code to comply with Rule 2.11(c) of the Code.

Right to receive documents in hard copy form

Any person entitled to receive a copy of documents, announcements and information relating to the Acquisition is entitled to receive such documents in hard copy form free of charge. A person may also request that all future documents, announcements and information in relation to the Acquisition are sent to them in hard copy form. Hard copies of such documents, announcements, and information will not be sent unless requested.

A hard copy of this announcement may be requested by contacting Carpetright's registrar, Computershare Investor Services PLC, either in writing to The Pavilions, Bridgwater Road, Bristol BS99 6ZZ or by calling the helpline on +44 (0370) 889 3261. Calls outside the UK will be charged at the applicable international rate. Lines are open between 8.30 a. m. and 5.30 p. m. Monday to Friday excluding public holidays in England and Wales.

Rounding

Certain figures included in this announcement have been subjected to rounding adjustments. Accordingly, figures shown for the same category presented in different tables may vary slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Rule 2.9 requirement

For the purposes of Rule 2.9 of the Code, Carpetright confirms that, as at close of business on 14 November 2019 (being the last Business Day before the date of this announcement), the current issued share capital of Carpetright comprised 303,787,164 ordinary shares of £0.01 each. The International Securities Identification Number for the ordinary shares is GB0001772945.

Publication of this announcement on website

A copy of this announcement and the documents required to be published pursuant to Rule 26.1 of the Code will be available, free of charge, subject to certain restrictions relating to persons resident in Restricted Jurisdictions, and on Carpetright's website (https://www.carpetright.plc.uk/) by no later than 12.00 noon on 18 November 2019 (being the Business Day following the date of this announcement).

For the avoidance of doubt, the contents of this website and any websites accessible from hyperlinks on this website are not incorporated into and do not form part of this announcement.

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 OF THAT JURISDICTIONTHIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

15 November 2019

RECOMMENDED CASH ACQUISITION

of

Carpetright plc

by

Meditor Holdings Limited

(a company incorporated for this purpose by Meditor European Master Fund Limited)

to be implemented by means of a Scheme of Arrangement

under Part 26 of the Companies Act 2006

1. Introduction

The boards of MHL and Carpetright announce that they have agreed the terms of a recommended cash offer to be made by MHL (a newly incorporated wholly-owned subsidiary of Meditor Fund) to acquire the entire issued and to be issued share capital of Carpetright not already owned by Meditor Fund. The Acquisition is intended to be implemented by means of the Scheme.

2. The Acquisition

The Acquisition, which will be subject to the Conditions (which includes the FCA granting its consent to a change of controller of Carpetright), the further terms set out below and the terms to be further set out in the Scheme Document, will be made on the following basis:

for each Scheme Share: five (5) pence in cash.

The Acquisition values the entire issued and to be issued share capital of Carpetright at £15,189,358.20 on a fully diluted basis21.

The Scheme Shares will be acquired by MHL fully paid and free from all liens, equitable interests, charges, encumbrances and other interests whatsoever and together with all rights now or hereafter attaching thereto (if any), including the right to receive in full and retain all dividends and other distributions declared, made or paid hereafter.

The Scheme will be conditional on Carpetright Shareholders approving the Scheme and the other Conditions (which include the consent of the FCA to the change of controller of Carpetright, in connection with Carpetright's credit broking authorisations from the FCA) having been satisfied or (where applicable) waived. The Scheme will only become Effective once sanctioned by the Court and upon delivery of the Scheme Court Order to the Registrar of Companies for registration.

If any dividend or other distribution is authorised, declared, made or paid in respect of Scheme Shares on or after the date of this announcement and before the Scheme Effective Date, MHL reserves the right to reduce the Acquisition Price by the amount of any such dividend or other distribution.

There are no agreements or arrangements to which MHL is a party which relate to the circumstances in which it may or may not invoke or seek to invoke a pre-condition or condition of the Acquisition.

3. Irrevocable Undertakings and letter of intent

Irrevocable undertakings and a letter of intent to vote in favour of the Acquisition have been received in respect of an aggregate of 91,924,468 Carpetright Shares, representing 30.3% of the issued share capital of Carpetright (and 43.2% of the issued share capital not currently held by Meditor Fund) as at the Latest Practicable Date.

Further details of the irrevocable undertakings and letter of intent entered into are set out in Appendix 2.

4. Background to and reasons for the Recommendation

Historical macroeconomic and competitive environment and impact on trading performance

Carpetright operates in a highly competitive environment. From 2016 to 2018, the Carpetright Group's profitability and financial position deteriorated due both to specific factors affecting the Carpetright Group and macroeconomic challenges, as follows:

In response to this adverse trading environment, Carpetright undertook strategic and operational decisions to improve the business, as well as pursuing a restructuring in early 2018 (the "Restructuring"). The Restructuring involved the following:

The £60 million net proceeds raised by the Placing and Open Offer was principally used by Carpetright to: (i) repay the £12.5 million loan with Meditor Fund (detailed above) and (ii) satisfy an increase in its working capital requirements.

Carpetright's strategy has also focussed on several key areas including: (i) implementing IT infrastructure upgrades across the UK business to drive efficiencies and further online opportunities; (ii) entering into new partnerships, such as with Furniture Village, to deliver increased customer reach with minimal capital commitments; (iii) a continued drive to optimise the UK store estate by means of the CVA through selective closures and relocations to further reduce costs; and (iv) investing in and delivering improved returns from Carpetright's operations in the Netherlands and Belgium, together with a turnaround of its currently loss making business in the Republic of Ireland.

Despite this operational progress, Carpetright has continued to experience a very challenging trading environment, as presented in the results for the year ended 27 April 2019 ("FY2019") (announced in June 2019). Carpetright revenue in FY2019 decreased by 13.4% to £386.4 million. In the UK, like-for-like sales in the full year declined 9.1% compared to like-for-like sales growth of 3.4% in the Rest of Europe. Underlying EBITDA was £2.9 million, compared to £7.1 million for the year ended 28 April 2018 ("FY2018"), and Carpetright made an underlying loss before tax of £16.9 million. Net debt decreased to £27.4 million from £53.0 million. However, positive progress was shown by Carpetright's current trading for the first eight weeks of the new financial year, with UK like-for-like sales increasing by 8.5% and like-for-like sales for the Rest of Europe ahead by 4.3% as trading conditions slowly improved.

Notwithstanding progress being made to stabilise the business, the implementation of the Refinancing has further restricted Carpetright's ability to implement its strategic growth initiatives in the intervening period, reflecting restrictions applied by Carpetright's banking covenants and the costs of interest, which have curtailed further investment in the business.

Further financial restructuring initiatives and background to the Acquisition

Following the Refinancing, Carpetright engaged in discussions with its bankers to refinance the RCF ahead of its maturity on 31 December 2019. Instead of agreeing to refinance the RCF, the banking syndicate, on 3 September 2019, sold their interests under the RCF to Meditor Fund, Carpetright's 29.9% shareholder. No further changes to the terms of the RCF were made as part of Meditor Fund's acquisition of the banks' interest in the RCF apart from Meditor Fund becoming the lender of record. Meditor Fund also acquired a 100% participation interest in the Overdraft Facilities which are also due to expire on 31 December 2019 pursuant to a participation agreement with the lenders. The Meditor Loan Note is due for repayment on 31 July 2020 at a value of £25.7 million (which includes rolled-up interest) (together with the RCF and the Overdraft Facilities, comprising the "Debt Facilities").

Carpetright's statutory net debt as at 26 October 2019 was approximately £27 million, comprising gross debt of £56 million, offset by cash and cash equivalents of £29 million (of which approximately £20 million was restricted cash and monies due from merchant and finance providers). In addition, accrued interest amounted to £6.2 million. In line with normal seasonal trends, statutory net debt is expected to increase to between approximately £40 million to £50 million in December 2019, and gross debt is expected to rise commensurately.

The Board believes that approximately £80 million is needed for Carpetright to: (i) repay the Debt Facilities; (ii) meet Carpetright's ongoing working capital requirements; and (iii) provide Carpetright with the necessary growth capital to execute its strategy.

Prior to and concurrent with discussions with Meditor Fund, Carpetright has actively explored various other long-term financing solutions including standard "high street" refinancing, asset-backed lending, strategic asset sales and equity financing. Having investigated these options thoroughly, the Board believes that none of these solutions would be able to deliver the long-term funding required by Carpetright.

Consequently, the Board believes that the offer from MHL is the only viable route to deliver its requirements for a deliverable, controllable solution to the long-term funding required to make Carpetright a sustainable business.

MHL has informed Carpetright that, following the Scheme becoming Effective, MHL intends to inject approximately £80 million of long-term capital into Carpetright (the "Capital Injection") which will: (i) allow Carpetright to repay the existing Debt Facilities; and (ii) provide Carpetright with additional capital, giving the business a far stronger balance sheet to enable it to pursue its strategic and growth initiatives and a stable base for its long-term future.

In the longer term, Carpetright anticipates that the Acquisition and subsequent Capital Injection will allow it to explore opportunities to improve its sourcing arrangements, further develop its distribution model, mitigate the impact of competition in the sector and pursue potential acquisitions.

Conclusion

In the absence of realistic alternatives to continue as an independent business, the Board has concluded that the offer from MHL provides the best solution and will place Carpetright's business on a more secure basis to address Carpetright's ongoing capital requirements. The offer in terms of value, form of consideration offered and execution certainty also provides the optimal available solution for Carpetright Shareholders, allowing them to realise their investments in Carpetright for cash.

5. Recommendations

The Directors, who have been so advised by Peel Hunt as to the financial terms of the Acquisition, consider the terms of the Acquisition to be fair and reasonable. In providing its advice to the Directors, Peel Hunt has taken into account the Directors' commercial assessments. Accordingly, the Directors intend to recommend unanimously that Carpetright Shareholders vote or procure votes to approve the Scheme at the Court Meeting and vote or procure votes in favour of the Carpetright Resolution at the General Meeting as they have irrevocably undertaken to do in respect of their beneficial holdings which in aggregate amount to 755,724 Scheme Shares (representing approximately 0.2% of the issued share capital of Carpetright).

6. Information on Carpetright

Carpetright is a leading specialist floorcoverings retailer in the UK. Since the first store was opened in 1988, the business has developed both organically and through acquisition within the UK and other European countries. Carpetright trades from stores in the UK and the Republic of Ireland, which are managed from the UK, and the Netherlands and Belgium, which are managed from the Netherlands. For financial reporting, Carpetright is organised into two business segments, the "UK" and the "Rest of Europe" (comprising the Netherlands, Belgium and the Republic of Ireland).

Carpetright operates in a highly fragmented market. According to GlobalData, current estimates value the UK floorcovering market at £1.9 billion in 2019, placing Carpetright as the market leader with a share of around 18%. In the UK business, beds provide a complementary revenue stream to Carpetright's core floorcoverings offering. The total beds and bedding market is estimated to be worth £3.8 billion and Carpetright's market penetration, whilst low, is growing.

The nature of the Carpetright Group's product means that the vast majority of customers prefer to visit a store in order to give them the opportunity to see and touch their choice of floorcovering. However, the internet is playing an ever-increasing role in pre-purchase behaviour, becoming a vital research tool for many customers, and the rapid growth of smart phone and tablet use underlines the importance of having an effective and integrated digital proposition.

The Carpetright Group's key business objective is to be a market leading retailer of floorcoverings, offering a comprehensive range of products at great value, supported by excellent customer service, accessed through an integrated multi-channel proposition.

The Carpetright Group's business strategy consists of four key pillars:

As at 26 October 2019 Carpetright had 449 stores, 319 in the UK and 130 in the Rest of Europe. The total number of employees at the same date was 2,689.

For FY2019, Carpetright generated revenue of £386.4 million (FY2018: £446.3 million), with UK like-for-like sales declining by 9.1% (FY2018: declined 3.6%) and Rest of Europe like-for-like sales increasing by 3.4% (FY2018: increased 1.2%). Carpetright had an underlying loss before tax of £16.9 million for the FY2019 (FY2018: £8.0 million underlying loss before tax). After the impact of separately reported items, Carpetright had a loss before tax of £24.8 million for FY2019 (FY2018: £69.8 million loss before tax). For FY2019, Carpetright's underlying basic loss per share was 5.1 pence (FY2018: 5.8 pence underlying basic loss per share) and basic loss per share was 7.9 pence (FY2018: 93.6 pence basic loss per share).

7. Information on MHL and Meditor Fund

MHL is a newly incorporated private limited company incorporated in England on 8 November 2019 as a wholly owned subsidiary of Meditor Fund. Its registered address is Prince Albert House, 18A King Street, Maidenhead, Berkshire SL6 1EF. The directors of MHL are Carl Gosta Samuel (Sam) Nisser and Talal D. Shakerchi.

MHL's strategy is initially to complete the Acquisition and then to make further acquisitions of UK-based businesses. It plans to provide long term support and capital to the businesses in which it invests.

Meditor Fund was incorporated in 1998 in Bermuda as an open-ended mutual fund investment company with company number 25157. Its registered address is Wessex House, 3rd Floor, 45 Reid Street, Hamilton HM 12, Bermuda. The directors of Meditor Fund are Brian F. Desmond, Talal D. Shakerchi, Edith G. Conyers and Susie M. Tindall.

Meditor Fund's investment objective is "to maximise the long term investment return in the base currency (Sterling) through a concentrated global portfolio of primarily equity positions." Meditor Fund invests principally in equity markets of developed countries, primarily through direct equity holdings and exchange traded funds (ETFs). It maintains a highly concentrated portfolio, mainly of listed positions. Stocks are selected on the basis of an assessment of fundamental investment attributes with a focus on potential long term returns. Positions are normally held for long periods but Meditor Fund retains flexibility to reduce positions or exit them altogether as circumstances develop in relation to the portfolio, markets, economic background and the investments themselves.

As at the date of this document, MHL holds no interests in Carpetright Shares. Meditor Fund is the beneficial owner of 91,097,241 Carpetright Shares, representing 29.9% of the shares in issue. It is also the lender under the RCF which is due to expire on 31 December 2019 and funds the Overdraft Facilities, which are also due to expire on 31 December 2019. In addition it is the provider of an unsecured loan which matures on 31 July 2020 at a value of £25.7 million.

8. Financing the Acquisition

Panmure Gordon (UK) Limited, in its capacity as the financial adviser to MHL, is satisfied that sufficient cash resources are available to MHL to satisfy in full the cash consideration payable to Carpetright Shareholders under the terms of the Acquisition.

Further information on the financing of the Acquisition will be set out in the Scheme Document.

9. Intentions with respect to Carpetright's business

MHL believes that Carpetright has a strong presence as market leader in UK flooring retail with high levels of brand awareness. Despite the sector having faced a number of challenges including cost pressures, overcapacity and weak consumer spending and an increase in competition (creating further pressures), MHL believes that Carpetright's business is fundamentally strong and that current adverse trading conditions will not persist indefinitely. As such, MHL believes that if Carpetright is well funded for the long term and the necessary investments are made then satisfactory performance levels can be restored.

MHL also believes that Carpetright will benefit from private ownership compared to its current status, whereby its ordinary shares are publicly listed and traded, which creates significant distractions for management, burdens the business with additional costs and responsibilities and can have the effect of constraining Carpetright from taking actions focussed on its longer term interests.

In the three to six months following the Scheme becoming Effective, MHL intends to conduct a review of Carpetright's business and operations in conjunction with its management team with a view to determining a sustainable strategy and forming a plan to maximise the long-term success of the business (the "Business Review"). This will cover all main aspects of the business but focus areas are likely to include distribution model, store portfolio, store investment programme, mix and source of product, staff training, profitability of the Republic of Ireland business, digital strategy and information technology. The Business Review will examine where new investment can best support the business as well as opportunities to expand through vertical or horizontal integration.

MHL expects that the proposed Capital Injection will provide Carpetright with: (i) capacity to repay the existing Debt Facilities; (ii) additional capital to enable it to pursue strategic and growth initiatives arising from the Business Review; and (iii) a strengthened balance sheet and stable base for its long-term future.

As a result of Carpetright's current constraints, its capital expenditure in recent periods has been limited. If the Acquisition is successful, with a strengthened balance sheet and an injection of growth capital, MHL expects Carpetright to invest further in the following areas: the store refurbishment programme; staff training; the development of its digital platform; marketing; and its operations in the Rest of Europe. The total cost of these initiatives over the medium term is expected to be £20 to £25 million, to be funded as result of the proposed Capital Injection.

If the Acquisition is successful, MHL intends that Carpetright will also use the new funds to mitigate the impact of competition in the sector. In the longer term, Carpetright anticipates that the Acquisition and subsequent refinancing referred to above will allow it to explore opportunities to improve its sourcing arrangements, further develop its distribution model and evaluate potential acquisitions.

Meditor Fund has confirmed that if by 28 December 2019:

MHL does not intend, as a consequence of the Scheme, to make any material changes to the deployment of any of Carpetright's significant fixed assets.

MHL has confirmed that it does not currently intend to make any changes in respect of Carpetright's limited research and development activities.

10. Intentions with respect to Carpetright's management, employees locations and pension schemes

Carpetright management is, as part of the ongoing CVA process, continuously reviewing its UK property portfolio and it is anticipated that this process will continue under MHL's ownership. It is expected that stores will continue to close or relocate where the rents are not supported by trading results. MHL also intends to review options to turn around the currently loss-making business in the Republic of Ireland, which may also involve some store closures or relocations. Carpetright will continue to explore new store openings where justified by trading prospects. Store closures will impact current employees in those stores where no satisfactory alternatives can be offered.

The Business Review process is also expected to identify opportunities for continuous improvement initiatives within Carpetright's operations, which may result in increases in opportunity and employment in certain sections of the business and reductions in others over time.

There are not expected to be material changes in headcount or the balance of skills and functions of Carpetright management and employees as a result of the Acquisition. However some changes in employment, including redundancies in some cases, are expected to continue to arise in relation to Carpetright's ongoing store portfolio realignment in the UK and Republic of Ireland.

Neither MHL nor the Meditor Fund has entered into, or had discussions on any proposal to enter into, any form of incentivisation arrangements with members of Carpetright's management.

Carpetright operates a number of pension schemes. MHL does not currently intend to propose any changes to the terms of such schemes or the level of employer contributions.

It is intended that Carpetright's Non-Executive Directors resign from the Board with effect from the Scheme Effective Date.

MHL currently has no employees.

There is no current intention to change Carpetright's headquarters location in Purfleet, Essex.

As part of Meditor Fund's ongoing strategy, MHL intends to grow over time through other acquisitions of UK-based businesses, some of which may be businesses related to that of Carpetright which may offer synergy and employment opportunities.

No statements in paragraph 9 above or in this paragraph 10 constitute "post-offer undertakings" for the purposes of Rule 19.5 of the Code.

11. Share Option Schemes

The Scheme will extend to any Carpetright Shares which are unconditionally allocated, issued or transferred to satisfy the vesting or exercise of awards under the Share Option Schemes prior to the Scheme Record Time.

Participants in the Share Option Schemes will be contacted separately regarding the effect of the Scheme on their rights under the Share Option Schemes and appropriate proposals will be made to such participants in due course. Further details of the terms of such proposals shall be included in the Scheme Document or separate proposal documentation.

Any rights to acquire Scheme Shares under the Share Option Schemes have not been taken into account in the calculation of the fully diluted share capital of Carpetright in this announcement because either: (i) the options have a higher exercise price than the Acquisition Price (and therefore are not expected to be exercised), (ii) any related performance conditions are not expected to be achieved and/or (iii) the vested options will be cash settled by Carpetright.

12. Structure of the Acquisition

It is intended that the Acquisition will be implemented by means of the Scheme, which is a scheme of arrangement between Carpetright and the Scheme Shareholders under Part 26 of the Companies Act, requiring Court approval to become Effective. MHL reserves the right to elect to implement the Acquisition by way of a Takeover Offer (with the consent of the Panel).

The purpose of the Scheme is to provide for MHL to become the holder of the issued and to be issued ordinary share capital of Carpetright, save for the Excluded Shares. This is to be achieved by the transfer of the Scheme Shares to MHL, in consideration for which the holders of Scheme Shares will receive the cash consideration on the basis set out in paragraph 2 of this announcement. Meditor Fund's shareholding of 91,097,241 Carpetright Shares will be Excluded Shares for the purposes of the Scheme.

In order to become Effective, the Scheme must be approved by a majority in number of the holders of Scheme Shares voting at the Court Meeting, either in person or by proxy, representing at least 75% in value of the Scheme Shares voted. In addition, the Carpetright Resolution must be approved by the requisite majority or majorities at the General Meeting. The General Meeting will be held immediately after the Court Meeting.

The Scheme will also be subject to the Conditions and further terms set out in Appendix 1 to this announcement and to be set out in the Scheme Document.

Once the necessary approvals from Carpetright Shareholders have been obtained and the other Conditions (which include the consent of the FCA to the change of controller of Carpetright, in connection with Carpetright's credit broking authorisations from the FCA) have been satisfied or (where applicable) waived, the Scheme requires sanction by the Court. The Scheme will only become Effective upon delivery of the Scheme Court Order to the Registrar of Companies for registration.

Upon the Scheme becoming Effective, it will be binding on all Carpetright Shareholders, irrespective of whether or not they attended or voted at the Court Meeting or the General Meeting, but should the Scheme not become Effective by the Long-Stop Date, the Scheme will lapse and the Acquisition will not occur.

If any dividend or other distribution is authorised, declared, made or paid in respect of Scheme Shares on or after the date of this announcement and before the Scheme Effective Date, MHL reserves the right to reduce the Acquisition Price by the amount of any such dividend or other distribution.

Further details of the Scheme, including an indicative timetable for its implementation, will be set out in the Scheme Document, which, together with the Forms of Proxy, is expected to be despatched to Carpetright Shareholders as soon as practicable and, in any event, within 28 days of this announcement.

13. De-listing and re-registration

If the Scheme is sanctioned by the Court, subject to any applicable requirements of the London Stock Exchange, MHL intends to procure that Carpetright will make an application to the FCA (in its capacity as the UK Listing Authority) for cancellation of the listing of Carpetright Shares on the Official List and to the London Stock Exchange for cancellation of trading of Carpetright Shares on the London Stock Exchange's main market for listed securities, with effect from the Scheme Effective Date.

It is also intended that, following such de-listing and cancellation, Carpetright will be re-registered as a private company limited by shares under the relevant provisions of the Companies Act.

The last day of dealings in and registration of transfers of Carpetright Shares on the London Stock Exchange is expected to be the Business Day prior to the Scheme Effective Date.

On the Scheme Effective Date entitlements held within the CREST system will be cancelled and share certificates in respect of the Scheme Shares will cease to be valid.

14. Disclosure of interests in Carpetright

Meditor Capital Management Limited made an Opening Position Disclosure on behalf of Meditor Fund, setting out the details required to be disclosed by it under Rule 8 of the Code, on 4 November 2019.

As at the close of business on the Latest Practicable Date, Meditor Fund is the beneficial holder of the following Carpetright Shares:

Save for (a) the irrevocable undertakings referred to in paragraph 3 of this announcement and (b) the disclosures above in this paragraph 14, neither MHL, nor any of its directors, nor, so far as MHL is aware, any person acting in concert (within the meaning of the Code) with it had:

"interests in securities" for these purposes arise, in summary, when a person has long economic exposure, whether absolute or conditional, to changes in the price of securities (and a person who only has a short position in securities is not treated as interested in those securities). In particular, a person will be treated as having an 'interest' by virtue of the ownership, voting rights or control of securities, or by virtue of any agreement to purchase, option in respect of, or derivative referenced to, securities.

15. Overseas shareholders

The availability of the Acquisition to Carpetright Shareholders who are not resident in and citizens of the UK may be affected by the laws of the relevant jurisdictions in which they are located or of which they are citizens. Persons who are not resident in the UK should inform themselves of, and observe, any applicable legal or regulatory requirements of their jurisdictions. Further details in relation to overseas shareholders will be contained in the Scheme Document.

16. Takeover Offer

MHL reserves the right, with the consent of the Panel, to elect to implement the acquisition of the Scheme Shares by way of a Takeover Offer.

17. General

It is expected that the Scheme Document will be posted to Carpetright Shareholders as soon as practicable and in any event within 28 days of this announcement (save with the Panel's consent). The Scheme is expected to become Effective in early 2020.

The Acquisition will be on the terms and subject to the conditions set out herein and in Appendix 1 and to be set out in the Scheme Document. A summary of the irrevocable undertakings and letter of intent given in relation to the Acquisition is contained in Appendix 2 to this announcement. Details of the sources and bases of certain information set out in this announcement are included in Appendix 3. Appendix 4 contains definitions of certain terms used in this announcement.

The Acquisition will be governed by English law and will be subject to the jurisdiction of the English courts.

Panmure Gordon (UK) Limited and Peel Hunt have each given and not withdrawn their consent to the publication of this announcement with the inclusion herein of the references to their names in the form and context in which they appear.

18. Documents published on a website

Copies of the following documents will be published on Carpetright's website (https:// www.carpetright.plc.uk/) by no later than 12 noon on 18 November 2019:

APPENDIX 1Conditions and certain further terms of the Acquisition

1. Scheme Conditions

The Acquisition is conditional on the Scheme becoming unconditional and being Effective, subject to the Code, on or before the Long-Stop Date.

The Scheme will be conditional upon:

2. General Conditions

The Acquisition is, subject as set out in paragraph 3 of this Appendix 1 below and to the requirements of the Panel, conditional on satisfaction of the following Conditions and accordingly the Scheme will not become Effective unless such Conditions have been satisfied or, where relevant, waived:

Notifications, Authorisations and waiting periods

General antitrust and regulatory

FCA change of controller condition

Matters arising as a result of arrangements and agreements

Certain events occurring since 27 April 2019

No adverse changes etc

No discovery of certain matters

Sanctions and anti-corruption

APPENDIX 2Irrevocable Undertakings and letter of intent

Irrevocable undertakings to vote in favour of the Scheme have been given by the Directors and certain shareholders of Carpetright in respect of 85,390,309 Scheme Shares. Together these represent 28.1% of the issued share capital of Carpetright.

In the case of the irrevocable undertaking from Aberforth Partners LLP, ("Aberforth"), Aberforth may transfer Scheme Shares in certain circumstances and the irrevocable undertaking ceases to bind any of the Scheme Shares to which it is subject to the extent that such Scheme Shares are transferred by Aberforth as a result of (i) a distribution to an investor in funds managed by Aberforth by way of redemption in specie; (ii) a termination or amendment of Aberforth's discretion to manage the assets of the relevant investor; (iii) disposal at a price of 8 pence or higher, or (iv) the shares being subject to stock lending (save that Aberforth has agreed to endeavour to recall such Scheme Shares). The irrevocable undertaking will cease to be binding if the Scheme Document has not been posted within 28 days of this announcement, or the Scheme does not become Effective or is withdrawn or an announcement is made under Rule 2.7 of the Code in respect of a competing offer which represents a value of 8 pence per Scheme Share or more.

On 31 October 2019, it was announced that Carpetright had received a letter of intent from Majedie Asset Management Limited ("Majedie") to vote in favour of the Scheme. Majedie have now entered into an irrevocable undertaking in respect of their Scheme Shares. Majedie may transfer Scheme Shares in certain circumstances and the irrevocable undertaking ceases to bind any Scheme Shares which are so transferred. The irrevocable undertaking will cease to be binding if: (i) the Scheme Document is not published within 28 days of this announcement; (ii) the Scheme does not become Effective and in the event MHL does not announce that it intends to implement the Acquisition by way of a Takeover Offer; or (iii) a third party (that is, not MHL or any person acting in concert with it) announces (in accordance with the Code) an offer which represents an improvement of 25 (twenty-five) per cent. or more in value of the price per Scheme Share specified in this announcement (or in any improved subsequent offer made by MHL or any person acting in concert with it).

On 6 November 2019, it was announced that Carpetright had received a letter of intent from Investec Asset Management Limited ("Investec") to vote in favour of the Scheme. Investec have now entered into an irrevocable undertaking in respect of their Scheme Shares. Investec may transfer Scheme Shares in certain circumstances and the irrevocable undertaking ceases to bind such Scheme Shares which are transferred. The irrevocable undertaking will cease to be binding if: (i) the Scheme Document is not published within 28 days of this announcement; (ii) the Scheme does not become Effective and MHL not having announced that it intends to implement the Acquisition by way of a Takeover Offer; (iii) the Carpetright Resolution is not passed; or (iv) there is a material amendment to, or omission from, the Scheme Document.

In the case of the irrevocable undertaking from Jupiter Asset Management Limited, in its capacity as discretionary investment manager in respect of the Jupiter Absolute Return Fund, the Jupiter Global Levered Absolute Return Fund and Jupiter Global Absolute Return Fund ("Jupiter"), the irrevocable undertaking ceases to be binding if: (i) if the Scheme Document is not published within 14 days of this announcement; (ii) a third party (that is, not MHL, a Parent Undertaking or subsidiary undertaking or any person acting in concert with it) announces (in accordance with the Code) an offer to acquire all of the Scheme Shares which represents an improvement of 10 (ten) per cent. or more in value of the price per Scheme Share specified in this announcement; (iii) MHL announces it does not intend to proceed with the Acquisition; (iv) the Scheme does not become Effective by 17:00 (London time) on the Long-Stop Date (or such later time as MHL and Carpetright (with the consent of the Panel) agree; (v) there is a material change to the terms of the Scheme; (vi) Jupiter's discretionary investment mandate in respect of certain of its Scheme Shares is revoked or terminated (in which case the irrevocable undertaking will continue to be binding in respect of the remaining Scheme Shares); or (vii) the Scheme not becoming Effective in circumstances where MHL has not announced that it intends to implement the Acquisition by way of a Takeover Offer.

On 31 October 2019, it was announced that Carpetright had received a letter of intent from Soros Fund Management LLC ("Soros") to vote in favour of the Scheme. Soros have now entered into an irrevocable undertaking in respect of their Scheme Shares. Soros may transfer Scheme Shares in certain circumstances and the irrevocable undertaking ceases to bind any of the Scheme Shares to which it is subject to the extent that such Scheme Shares are transferred by Soros. The irrevocable undertaking will cease to be binding if: (i) the Scheme Document not being posted and the General Meeting not convened within 28 days of this announcement; or (ii) in the event of a higher competing offer at not less than 8 pence per Share or the Scheme is withdrawn or does not become effective.

In the case of the irrevocable undertakings from Wilf Walsh and David Clifford, the irrevocable undertakings will cease to be binding if: (i) the Scheme Document has not been posted within 28 days of this announcement, or if MHL announces that it intends to implement the Acquisition by way of a Takeover Offer, if an offer document in respect of such Takeover Offer is not posted within 28 days of that announcement, or (ii) the Scheme does not become Effective.

A letter of intent to accept the Acquisition has also been given by Countrywide Developments Limited in respect of further Scheme Shares. Together these Scheme Shares total 6,534,159, representing 2.2% of the issued share capital of Carpetright.

APPENDIX 3Sources and Bases of Information

In this announcement, unless otherwise stated or the context otherwise requires, the following bases and sources have been used:

APPENDIX 4

Definitions

All references to "pounds", "pounds Sterling", "Sterling", "£", "pence", "penny" and "p" are to the lawful currency of the UK.

All the times referred to in this announcement are London times unless otherwise stated.

References to the singular include the plural and vice versa.