Conduit Hldg Regulatory News (CRE)

30 November 2010

Creston plc

Proposed Acquisition of US Healthcare Communications Businesses

for up to £19.5 million

Creston plc, the insight and communications group, today announces that the Board has entered into a conditional agreement to acquire substantially all of the assets and liabilities of both the healthcare public relations business, Cooney/Waters, and the healthcare advocacy business, Alembic Health Communications, Cooney/Waters' wholly owned subsidiary, for a cash-only consideration of up to £19.5million ($30.8 million). The Acquisition is conditional, inter alia, upon the approval of Creston Shareholders.

Based in Manhattan, New York, and with a staff of approximately 50 people, Cooney/Waters and Alembic Health Communications (together the "Cooney/Waters Businesses") are specialist communications agencies with an exclusive focus on healthcare and pharmaceutical PR and health advocacy.

Consideration Highlights

·; The total cash consideration of up to £19.5 million ($30.8 million) is to consist of:

o An initial consideration of £5.9 million ($9.4 million) payable on Closing; and

o An additional earn-out consideration of up to a maximum £13.5 million ($21.4 million) payable in two instalments based on the averaged combined earnings before interest and tax of the Cooney/Waters Businesses for the periods from Closing to 31 March 2013 and 31 March 2015.

·; The Initial payment is to be funded from existing bank facilities, with future earn-out payments being funded by the Enlarged Group's future operating cash flows.

Cooney/Waters Highlights

·; Founded in 1992, Cooney/Waters is one of the highest ranked independent healthcare PR agencies in the US and, in April 2010, was named Healthcare Agency of the Year by the Holmes Report, a leading communications industry publication.

·; Founded and chaired by Lenore Cooney, Cooney/Waters has an experienced management team with long tenures of service, all of whom will remain with the company in the Enlarged Group.

·; Cooney/Waters has long standing relationships with its clients, which range from government enterprises to large pharmaceutical companies including Abbott Fund, Sanofi Pasteur and Coca-Cola Company.

·; Cooney/Waters has a strong cultural and strategic fit with Creston's healthcare PR agency, Red Door Communications, which provides similar services and expertise in the UK.

·; In 2008, the two companies founded the Health Collective Network, a multinational group of 10 specialist consultancies, which has led to a number of new business successes for both firms since formation.

 Acquisition Benefits

The Directors believe that the acquisition will:

·; Enable the Cooney/Waters Businesses and Creston Health to share knowledge of and expertise on their respective markets in the US and the UK, allowing the Enlarged Group to benefit from enhanced capabilities in healthcare communications.

·; Provide the necessary scale required to compete more effectively for larger global briefs in healthcare communications.

·; Increase the profile of Creston Health in a consolidating industry where fewer, larger clients require both tailored, local solutions and global reach from their consultancies.

·; Create a stronger competitive advantage for Creston Health, leading to an increased level of new business opportunities and lead generation.

The Board expects the Acquisition to be earnings enhancing for the Enlarged Group in the first full financial year following Closing.

Don Elgie, Chief Executive of Creston, said:

"Cooney/Waters is an industry leading firm with an excellent track record and a blue-chip client list. We have been impressed by the way that Lenore Cooney and her team have built the Cooney/Waters Group, and their high levels of expertise and service delivery. Cooney/Waters' strong cultural and strategic fit with Red Door, our UK healthcare PR firm, will enable seamless integration with Creston, which will open up new opportunities for growth in the US and Europe."

Lenore Cooney, Founder and Chairman of Cooney/Waters, commented:

"The proposed acquisition by Creston represents the next stage of growth for the Cooney/Waters Group, enhancing our capabilities and bringing innovation to our clients' brands and organisations both in the US and internationally. This important step builds on our successful two year affiliation with Creston's Red Door Communications and offers strong synergistic and operational benefits both for Cooney/Waters and Creston."

There will be a presentation for analysts at 8.30am at the offices of Investec Securities. Please contact Creston on 020 7930 9757 for details.

For further information, contact:

Creston plc Tel: 020 7930 9757

Don Elgie, Chief Executive

Barrie Brien, COO & CFO

Sarah Macleod, Communications Director

Investec Tel: 020 7597 5120

James Grace

David Flin

Carlton Nelson

Investec, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for Creston and no one else in connection with the Disposal and this announcement and will not be responsible to anyone other than Creston for providing the protections afforded to clients of Investec nor for providing advice in connection with the Disposal or this announcement or any matter referred to herein.

CRESTON PLC

Proposed Acquisition of the Cooney/Waters Businesses

1. Introduction

The Board of Creston is pleased to announce that C Waters Acquisition and Alembic Acquisition, both US subsidiaries of Creston, has entered into a conditional agreement with Cooney/Waters to acquire substantially all of the assets and certain specified liabilities and the healthcare public relations business of Cooney/Waters and substantially all of the assets and certain specified liabilities and the healthcare advocacy business of Alembic Health, Cooney/Waters' wholly owned subsidiary (together the "Cooney/Waters Businesses"), both based in the United States of America, for a consideration of up to £19.5 million ($30.8 million). £5.9 million ($9.4 million) will be payable in cash on Closing and up to a maximum of £13.5 million ($21.4 million) in additional earn-out cash consideration which will be payable in 2013 and 2015, such payments to be calculated by reference to the performance of the Cooney/Waters Businesses since the Closing Date.

The Acquisition is of sufficient size relative to that of the Group to constitute a Class 1 transaction under the Listing Rules and is therefore conditional upon, inter alia, the approval of Shareholders. Approval of the Acquisition is being sought at a General Meeting of the Company to be held at 12.00 p.m. on 15 December 2010 at the offices of Olswang LLP, 90 High Holborn, London, WC1V 6XX. If the Resolution is passed at the General Meeting on 15 December 2010, then Closing is expected to take place shortly thereafter.

2. Information on the Cooney/Waters Businesses

Formed in 1992 and based in New York, United States of America, Cooney/Waters is an independent healthcare communications agency with a track record of delivering award-winning campaigns to an international client base. With a staff of approximately 50 people, Cooney/Waters provides a full range of public relations and public affairs services across a number of therapeutic areas to healthcare, pharmaceutical and biotechnology enterprises throughout the world.

Within a broad health and medical communications offering, Cooney/Waters specialises in strategic marketing, public education, advocacy relations, professional outreach, health science communication, corporate reputation building and policy and issues management programmes.

The Cooney/Waters Group's clients range from government enterprises to industrial and non-profit organisations. Notable clients include Abbott Fund, the Coca-Cola Company, Purdue Pharma, Sanofi Pasteur and UCB, Inc.. The Cooney/Waters Businesses' top six clients by revenue accounted for approximately 96 per cent. of the total revenue generated in the year ended 31 December 2009. The Cooney/Waters Businesses' largest client, whom they have worked with for over 18 years, represented approximately 44 per cent. of total revenue in the same period. For this client, however, Cooney/Waters services ten separate accounts each of which has a separate budget holder. The Cooney/Waters Businesses' second largest client, which represented approximately 26 per cent. of total revenues over the same period, is an entity that has historically been funded by a number of pharmaceutical companies, one of whom is the Cooney/Waters Businesses' largest client. Cooney/Waters services eight separate accounts for this client.

For the year ended December 2009 the Cooney/Waters Businesses recorded revenue of $12.3 million (£7.6 million) and a loss before tax of $0.9 million (£0.6 million) (which includes the payment of $4.9 million (£3.0 million) relating to director emoluments, constituting annual salary and bonus payments (the latter representing the majority of the charge)) and gross assets of $8.5 million (£5.3 million) at the period end. The Cooney/Waters Businesses' underlying operating margins are broadly in line with those of Creston's other healthcare agencies.

Cooney/Waters is one of the highest ranked independent healthcare PR agencies in the US by O'Dwyers, and in April 2010 was named Healthcare Agency of the Year by The Holmes Report, a leading communications industry publication.

Cooney/Waters' subsidiary Alembic Health represents approximately one third of the revenues of the Cooney/Waters Businesses. Alembic Health was formed in 2008 to specialise in health advocacy communications, informing public policy to advance public health. The Directors believe that the increasing complexity and evolving nature of healthcare policy and practice in the US and globally makes health advocacy an important area of growth for the Cooney/Waters business. Alembic Health, whilst wholly owned, operates separately from the other Cooney/Waters divisions. Recent notable campaigns include: working with the National Foundation for Infectious Diseases on comprehensive educational and promotional activities designed to increase awareness in the US among healthcare providers and consumers about the severity of influenza and the benefits of immunisation; and with the National Meningitis Association on a campaign across the US to raise awareness of meningococcal disease and reinforce the importance of vaccination.

Cooney/Waters has a history of working with Creston through Creston's subsidiary, Red Door Communications, which provides similar services and expertise of a similar calibre to international clients in the UK. Cooney/Waters' areas of expertise are closely aligned with those of Red Door Communications and the Directors believe the two businesses are culturally compatible. In 2008, the two companies (together with 6 others) formed The Health Collective Network, a multinational group of 10 specialist consultancies set up to develop and manage healthcare communication programmes across international markets. The collaboration has resulted in a number of new international client opportunities for both firms including supporting medical and science communication and new programming in 2009 for Therakos Photopheresis (a Johnson & Johnson company).

3. Background to and reasons for the Acquisition

Since 2009 Creston has been investing in its Health division to complement its existing Insight and Communications divisions. The Directors believe that the acquisition of the Cooney/Waters Businesses will enhance strategically the Group's offering as well as providing a number of additional benefits. One key benefit of the Acquisition is the ability of the Cooney/Waters Businesses and Creston Health to share knowledge and expertise on the contrasting regulatory systems of Europe and the US, and the different approaches to pharmaceutical marketing that the Directors believe these systems require. By combining these skills, the Directors believe that the Enlarged Group will benefit from enhanced capabilities in healthcare communications. In addition, the Directors believe that there are both operational and synergistic benefits to be gained from the inclusion of the Cooney/Waters Businesses within the Group.

Since forming the Health division in April 2009, the existing Insight and Communications divisions have benefitted from its expertise in the field of healthcare communications. The division has continued to perform above management's expectations in a recessionary environment and a consolidating healthcare industry. In the financial year ended 31 March 2010, the Health division generated revenue growth of 5 per cent. whilst continuing to build its capabilities through the development of innovative new offerings in areas such as medical education, social media and digital marketing.

Whilst the Health division continues to benefit from commercial success in its domestic market, the Directors believe that in addition to raising the profile of the Health division, the Acquisition will create a specialist healthcare communications platform in the two key Western

markets of the UK and the US, generating new business opportunities within both agencies and across the Enlarged Group. In addition, the Directors believe that the Acquisition will enable the Enlarged Group to capitalise on its innovative offering and to compete more efficiently and more effectively for global contracts.

This offering is seen as increasingly important in a consolidating industry where fewer, larger clients require both tailored, local solutions and global reach from their consultancies despite increasing economic pressures.

Accordingly, in line with Group strategy, the Directors believe that an international footprint in healthcare communications is necessary to deliver enhanced levels of growth in this rapidly evolving industry.

4. Principal terms of the Acquisition

·; Under the terms of the Acquisition Agreement:

o C Waters Acquisition has agreed to acquire substantially all of the business and assets of Cooney/Waters and certain specified assets of Alembic Health;

o Alembic Acquisition has agreed to acquire substantially all of the business and assets of Alembic Health that are not directly acquired by C Waters Acquisition; and

o C Waters Acquisition and Alembic Acquisition will assume certain specified liabilities. Liabilities not being assumed include US$0.3 million (£0.2 million) of income tax liabilities and US $1.0 million (£0.6 million) of other liabilities.

·; The purchase price will be an amount up to US $30,750,000 depending on the financial results of the Cooney/Waters Businesses, to be paid in three instalments.

·; The first instalment of the purchase price is US $9,360,000 and is payable on the Closing Date. The second instalment will be calculated by reference to a multiple of 3.5 times C Waters Acquisition and Alembic Acquisition's combined average annual earnings before interest and taxes during the period from the Closing Date to 31 March 2013 and will not exceed US $10,000,000. The third and final instalment will be calculated by reference to a multiple of between 5.0 and 5.5 times C Waters Acquisition and Alembic Acquisition's combined average annual earnings before interest and taxes during the period from the Closing Date to 31 March 2015 and when aggregated with the first and second instalments will not exceed the overall cap on the purchase price of US $30,750,000.

·; Closing is conditional, inter alia, on the passing of the Resolution by the Shareholders, and Cooney/Waters and Alembic Health not having suffered any event which has a material adverse effect on the Cooney/Waters Businesses.

·; The Acquisition Agreement contains a number of representations, warranties and indemnities which are customary for a transaction of this nature.

·; Undertakings have been given by Cooney/Waters and Alembic Health that they will carry on business as normal until the Closing Date. Cooney/Waters and Alembic Health will ensure that the Cooney/Waters Businesses have a minimum aggregate cash balance of $700,000 and net assets balance of US $900,000 on Closing. In the event that either the cash balance is below $700,000 or the net assets balance is below $900,000 then C Waters Acquisition and Alembic Acquisition will be reimbursed by Cooney/Waters and Alembic Health for the shortfall. Where either there is excess cash over $700,000 or excess net assets over $900,000 then such excess will become payable to Cooney/Waters and Alembic Health with any payment capped at $3,400,000, such payment being funded by the excess cash balance acquired.

·; Creston has agreed to guarantee the obligations of C Waters Acquisition and Alembic Acquisition to pay the purchase price and to indemnify Cooney/Waters and Alembic Health in the case of a breach of warranty or covenant by C Waters Acquisition or Alembic Acquisition.

 5. Directors, management and employees of the Cooney/Waters Businesses

Creston attaches great importance to the skills and experience of the long serving existing management and employees of the Cooney/Waters Businesses. Lenore Cooney, founder and Chief Executive Officer, and each of the key individuals of the Cooney/Waters Businesses have agreed to enter into new employment contracts with C Waters Acquisition and Alembic Acquisition subsequent to Closing. In addition, under the terms of the Acquisition Agreement, C Waters Acquisition and Alembic Acquisition agreed to adopt an incentive plan under which they will pay up to $4.3 million in cash to certain key employees of C Waters Acquisition and Alembic Acquisition (excluding Lenore Cooney) as an additional employment incentive. Payments under the plan will be calculated by reference to the earnings of the Cooney/Waters Businesses and paid in 2013 and 2016 to those participants who are still employees at that time. Any payments made to participants in 2013 will be capped at $1,000,000 in aggregate and any payments made to participants in 2016 will be capped at $3,250,000 in aggregate. Directors of Creston may not participate in the plan.

Upon Completion, it is intended that Timothy Bird (Executive Vice President and General Manager of Cooney/Waters) will join the Creston Health management committee to enable the Enlarged Group to exploit collaborative opportunities in client accounts and service offerings.

6. Financial effects of the Acquisition on the Group

The Board believes that the Acquisition will be earnings enhancing for the Enlarged Group in the first full financial year following Closing. This statement is not meant or intended to be a profit forecast, and should not be interpreted to mean that the earnings per share of Creston following the Acquisition will necessarily match or exceed the historical published earnings per share.

The table below summarises the financial performance of Cooney/Waters for the three years ended 31 December 2009:

The loss before interest and tax for the year ended 31 December 2009 of $0.9 million was significantly less than the profits recorded in the two preceding years ended 31 December 2007 and 31 December 2008, primarily as a result of the $4.9 million of director emoluments (2007: $1.5 million; 2008: $1.8 million) paid by Cooney/Waters during the period.

The initial payment of £5.9 million ($9.4 million), payable on Closing, will be funded from Creston's existing £25 million committed bank facilities which at 30 September 2010 were undrawn. It is anticipated that the future consideration payments will be funded by the Enlarged Group's future operating cash flows. The Directors believe that the Enlarged Group will be able to obtain tax relief in the US on the majority of the consideration payments over 15 years.

At 30 September 2010 the Group had net assets of £95.4 million and net cash of £0.2 million. Following the Acquisition, the pro forma net assets of the Enlarged Group as at 30 September 2010 would have been £92.7 million and pro forma net debt of £2.4 million. If the estimated contingent deferred consideration liabilities, which are due over the next five years, of £8.9 million are included (which the Directors believe currently represents the most likely amount to be paid), the pro forma net debt increases to £11.3 million. The Board remains committed to controlling the Enlarged Group's net debt position and ensuring the Acquisition's impact on the Enlarged Group does not exceed the gearing levels previously set by the Board.

 7. Current trading and prospects

On 30 November 2010 the Group announced its interim results for the six months ended 30 September 2010. This announcement contained the following statement:

"After a particularly strong revenue performance in the first half of the year, there is positive momentum across the Group and the new business pipeline remains active. During the second half, anticipated new business wins are expected to offset tightening public sector research and marketing budgets which, although minimal, will have some impact on the Group.

Our second half is traditionally our strongest period. With continuing new business successes, the upside from investments in the first half and the proposed acquisition of Cooney Waters, we believe we are well positioned for the period ahead."

8. Recommendation

The Board, who has received financial advice from Investec, is of the opinion that the Acquisition is in the best interests of the Company and Shareholders as a whole. In providing advice to the Board, Investec has taken into account the Board's commercial assessments.

Accordingly, the Board unanimously recommends that you vote in favour of the Resolution to be proposed at the General Meeting, as the Directors who are interested in shares intend to do in respect of their own beneficial holdings, which amount in aggregate to 2,277,821 Ordinary Shares and represent approximately 3.71 per cent. of Creston's issued share capital as at 29 November 2010 (the latest practicable date prior to publication of this announcement).

Shareholders should read the whole of the circular to be sent to them and not just rely on the summarised information set out in this announcement.

Definitions

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

Acquisition the proposed acquisition of substantially all of the business and assets of Cooney/Waters and Alembic Health and the assumption of certain specified liabilities relating to the Cooney/Waters Businesses pursuant to the Acquisition Agreement;

Acquisition Agreement the agreement relating to the Acquisition;

Alembic Acquisition Alembic Acquisition LLC, an indirect subsidiary of Creston incorporated in Delaware with registered number 4898254 whose registered office is at 160 Greentree Drive, Suite 101, Dover, DE19904;

Alembic Health Alembic Health Communications Inc., a New York corporation whose registered office is at 90th 5th Avenue, 8th Floor, New York, NY10011;

Board the board of directors of Creston;

business day any day, other than a Saturday, Sunday or public or bank holiday, on which banks are generally open for business in the City of London;

C Waters Acquisition C Waters Acquisition LLC, an indirect subsidiary of Creston incorporated in Delaware with registered number 4898257 whose registered office is at 160 Greentree Drive, Suite 101, Dover, DE 19904;

Creston or Company Creston plc, a company incorporated in England and Wales with registered number 210505 whose registered office is at 30 City Road, London, EC1Y 2AG

Creston Share Schemes the EMI Scheme, the Sharesave Scheme, the Unapproved Plan and the LTIP;

Closing the completion of the Acquisition in accordance with the terms of the Acquisition Agreement;

Closing Date the date of completion of the Acquisition in accordance with the terms of the Acquisition Agreement;

Companies Act 2006 the Companies Act 2006, as amended;

Cooney/Waters Cooney/Waters Group, Inc., a New York corporation whose registered office is at 104 5th Avenue, New York, NY10011;

Cooney/Waters Businesses the healthcare and public relations business and substantially all of the assets and liabilities of Cooney/Waters and the Healthcare advocacy business and substantially all of the assets and liabilities of Alembic Health;

Cooney/Waters Director Lenore Cooney;

Cooney/Waters Group Cooney/Waters and its subsidiaries;

CREST the relevant system (as defined in the Regulations) in respect of which Euroclear is the Operator (as defined in the Regulations);

Directors the members of the board of directors of Creston;

Disclosure and the disclosure and transparency rules made by the

Transparency Rules Financial Services Authority in its capacity as the UK Listing Authority under the Financial Services and Markets Act 2000, and contained in the UK Listing Authority's publication of the same name;

EMI Scheme the Creston plc Enterprise Management Incentive Scheme;

Enlarged Group Creston and its subsidiaries, including the Cooney/Waters Businesses;

Euroclear Euroclear UK & Ireland Limited, the operator of CREST;

Form of Proxy the form of proxy accompanying this document for use by Shareholders in connection with the General Meeting;

General Meeting the general meeting of the Company convened by the Notice of General Meeting to be held at 12.00 p.m. on 15 December 2010 at the offices of Olswang LLP, 90 High Holborn, London WC1V 6XX or any reconvened meeting following any adjournment thereof;

Group Creston and its subsidiaries, excluding the Cooney/Waters Businesses;

Investec Investec Bank plc whose registered office is at 2 Gresham Street, London, EC2V 7QP and registered number is 489604;

Listing Rules the rules and regulations made by the Financial Services Authority in its capacity as the UK Listing Authority under the Financial Services and Markets Act 2000, and contained in the UK Listing Authority's publication of the same name;

London Stock Exchange London Stock Exchange plc;

LTIP the Creston plc Long Term Incentive Plan;

Notice of General Meeting the notice of General Meeting set out at the end of this document;

Ordinary Shares ordinary shares of 10 pence each in the capital of the Company;

Prospectus Rules the rules and regulations made by the Financial Services Authority in its capacity as the UK Listing Authority under the Financial Services and Markets Act 2000, and contained in the UK Listing Authority's publication of the same name;

PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP, whose registered office is at 1 Embankment Place, London, WC2N 6RH and registered number is OC303525;

Red Door Communications Red Door Communications Limited, a subsidiary of Creston;

Regulations the Uncertificated Securities Regulations 2001 (St 2001 No. 3755);

Resolution the ordinary resolution to approve the Acquisition set out in the Notice of General Meeting;

Shareholders holders of Ordinary Shares, and Shareholder shall be construed accordingly;

Sharesave Scheme the Creston plc 2004 Sharesave Scheme;

subsidiary and subsidiary undertaking have the meanings given to them in the Companies Act 2006;

UK or United Kingdom the United Kingdom of Great Britain and Northern Ireland;

UK Listing Authority the Financial Services Authority acting in its capacity as the competent authority for listing purposes under Part VI of the Financial Services and Markets Act 2000;

Unapproved Plan the Creston plc Unapproved Share Option Plan; and

US the United States of America.

References to "£" and "p" or "pence" are to pounds sterling and pence being the lawful currency of the United Kingdom. References to "$" are to dollars being the lawful currency of the United States of America.

Headings are included in this announcement for convenience only and do not affect its interpretation.

All references to legislation in this announcement are to English legislation unless the contrary is indicated. Any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.

Words importing the singular shall include the plural and vice versa, and words importing the masculine gender shall include the feminine or neutral gender.