CSLT.L Regulatory News (CSLT)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

12 December 2011

RECOMMENDED CASH OFFER

by

OVAL (2245) LIMITED

for

COSALT PLC

LETTER FROM DAVID ROSS

Set out below is the full text of a letter from David Ross, Chairman of Oval, to be posted to Cosalt shareholders today.

Enquiries

Dear Shareholder

Further to my offer to you to buy your shares in Cosalt plc (the "Company") I am writing to you to explain the reasons for my offer and why I urge you to accept it.

The very difficult financial position that the Company finds itself in requires, in my opinion, a decisive and lasting solution, to assure properly its future. The Company has had a difficult recent past, as has been documented in the announcements made over the last year or so and as summarised in the Offer Document you received recently.

I do not wish to dwell on the reasons that have led to this unhappy position, but want to emphasise to you that the reason behind my decision to bid for the Company is to secure the future of the Company and the positions of all stakeholders in it - particularly its many employees.

It is clear, I believe, that the Company needs a significant level of further investment into it, shorn of the burden and cost that it has as a public Company, in order for it to survive and to effect a turnaround of its fortunes.

To demonstrate my commitment to this, since the date of the Offer Document I have agreed to invest up to a further £5m into the business, beyond the substantial sums I have already committed, so that in particular, the Company's customers and suppliers can be confident that the business is once more financially dependable.

Without a sufficient inflow of finance into the business, the Company's whole future is at stake and its options are extremely limited. The Company's banks are not prepared to provide any further funds to the business. The funds I have committed during the offer period are repayable on 22 December 2011. If my offer is not accepted by shareholders, then unless any other offers of finance are provided to the Company in the meantime, I do not believe the Company has the ability to continue as a going concern.

In the Offer Document, the independent directors of the Company expressed their belief that, without a further significant injection of funding, the above issues cast doubt over the Company's ability to continue as a going concern in its present form. The Company's largest shareholder has also irrevocably agreed to accept my offer in this context on the basis laid out in the Offer Document.

I am aware that the level of the offer is at a significant discount to the levels that the shares have historically traded at and that this is a frustration for you as shareholders (as some of you have expressed). However, this does not render my offer a "bargain basement" price -

to the contrary, I believe it fairly reflects the Company's current difficult financial position not least the expectation that the pressure on the Group's cash flows will continue (as referred to by the Company's independent directors in the Offer Document),and  it is only part of the financial commitment which I believe is required to secure the Company's future.

Aside from the significant investment I have already made and will need to make into the Company, I have a strong personal commitment to Cosalt and am the third generation of my family to be closely involved in the business. It is my desire to see Cosalt turned around and its fortunes restored to better days. In recent months I have spent considerable time with the Company's employees and talking to its customers. I would like to thank the employees for their continued dedication and the customers for their support.

The deadline for acceptance of the offer is 1pm on 20 December.

I hope that you will recognise the importance of the choice before you and that you will support my objective to secure a future for Cosalt by accepting my offer.

Yours faithfully

David Ross

Notes:

Words and definitions used in this letter shall have the same meaning as in the Offer Document.

Material Change:

Since the publication of the Offer Document the Company has made the following announcements:

1. Funding Update , announced on 30 November 2011

On 23 November 2011, the board announced that Cosalt had sufficient working capital until 30 November 2011. The board is continuing to manage the Group's working capital position in order to remain within its available banking facilities and is grateful for the support of the Group's customers and suppliers. The board is also maintaining an ongoing, constructive dialogue with David Ross regarding his financial support during the period up until 20 December 2011, the earliest date by which Mr Ross' offer could be declared unconditional.

2. Funding Update announced on 7 December 2011

The board of Cosalt confirms that it has now agreed terms with Oval for the provision of short-term working capital and capital expenditure funding. Oval has made a GBP5 million unsecured facility ("the Facility") available to the Company for drawdown with immediate effect. Under the terms of the Facility, any amounts outstanding will fall due for repayment on the earliest to occur of (i) 22 December 2011; (ii) the date of any refinancing of any nature of the bank facilities available to the Company as referred to in paragraph (g) of Appendix 4 of the Offer Document; (iii) any date on which a change of control occurs; or (iv) the date there has been an insolvency event against the Company.

If Oval's offer for the Company has not been declared unconditional by 22 December 2011 and in the absence of any other offers of short-term funding, the board intends to seek Oval's agreement to an appropriate extension of the Facility repayment date. Should Oval's offer for the Company be declared unconditional and the Facility be repaid, Mr Ross has indicated that Oval would be prepared to provide GBP5 million of longer-term funding as set out in the announcement of 25 November 2011.

A summary of the Facility, which is considered to be an additional material contract pursuant to Rule 27.1 of the Code, follows:

Monies under the Facility can be drawn down by the Company when required by it, subject to the satisfaction of certain customary conditions precedent (including that there has been no change in control resulting from a third party competing offer being declared wholly unconditional).

Until the date (the "Discharge Date") that all payments have been made or discharged to the Company's senior lenders under the amended senior facilities agreement as referred to in paragraph (g) of Appendix 4 of the Offer Document posted to shareholders on 29 November 2011 (the "Bank Facilities Agreement"), no repayment amounts shall be made without the prior written consent of The Royal Bank of Scotland plc, acting as agent for the senior lenders unless, following a competing offer being made for shares in the Company and being declared wholly unconditional, the Discharge Date has not occurred within 2 months of such offer being so declared unconditional. Following the Discharge Date, any amount outstanding under the Facility shall be immediately repayable upon the earliest to occur of (i) 22 December 2011; (ii) the date of any refinancing of any nature of the bank facilities available to the Company pursuant to the Bank Facilities Agreement; (iii) any date on which a change of control occurs; or (iv) the date there has been an insolvency event against the Company.

An arrangement fee of GBP100,000 is payable in respect of the provision of the Facility subject to certain restrictions.

Save as disclosed in this Announcement, as at 8 December 2011 (being the latest practicable date prior to publication of this Announcement), the boards of Cosalt and Oval confirm that, pursuant to Rule 27.1 of the Code, they are not aware of any material change in the information contained in the Offer Document and in particular to the information set out in Appendix 4 to the Offer Document in relation to:

-- changes or additions to, or the replacement of, material contracts, irrevocable commitments or letters of intent or financing arrangements;

-- any known significant changes in the financial or trading position;

-- interests and dealings;

-- directors' emoluments;

-- special arrangements;

-- ultimate owner of securities acquired under the Offer;

-- arrangements in relation to dealings; and -- changes to directors' service contracts.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

This Announcement contains certain forward looking statements with respect to the financial condition, results of operations and business of Oval and Cosalt or the Cosalt Group and certain plans and objectives of the Oval Board and the Cosalt Board. These forward looking statements can be identified by the fact that they do not relate to historical or current facts. Forward looking statements often use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could" or the negative form of these terms and similar expressions. These statements are based on assumptions and assessments made by the Oval Board and the Cosalt Board in the light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe appropriate. By their nature, forward looking statements involve risk and uncertainty and the factors described in the context of such forward looking statements in this Announcement could cause actual results and developments to differ materially from those expressed in or implied by such forward looking statements.

Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Announcement. Except as required by the FSA, the London Stock Exchange or any other applicable law, Oval and Cosalt assume no obligation to update or correct the information contained in this Announcement.

Nothing in this Announcement shall be deemed to be a forecast, projection or estimate of the future financial performance of Oval or Cosalt following completion of the Offer unless otherwise stated.

IMPORTANT INFORMATION

The Offer Document and (in the case of Cosalt Shares held in certificated form) the Form of Acceptance were posted to Cosalt Shareholders on 29 November 2011, other than in relation to those in a Restricted Jurisdiction, and the Offer will remain open for acceptance until Day 21.

The Oval Directors accept responsibility for the information contained in this Announcement other than: (i) the information relating to Cosalt Group, Cosalt Directors, their immediate families, related trusts and connected persons and (ii) the recommendations and opinions of the Independent Cosalt Directors relating to the Offer. To the best of the knowledge and belief of the Oval Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this Announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information.

The Cosalt Directors accept responsibility for the information contained in this Announcement relating to Cosalt Group, Cosalt Directors, their immediate families, related trusts and connected persons (other than the recommendation(s) and opinions of the Independent Cosalt Directors relating to the Offer, for which only the Independent Cosalt Directors accept responsibility. To the best of the knowledge and belief of the Cosalt Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this Announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information.

The Independent Cosalt Directors accept responsibility for the recommendation and opinions of the Independent Cosalt Directors relating to the Offer. To the best of the knowledge and belief of the Independent Cosalt Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this Announcement for which they are responsible is in accordance with the facts and does not omit anything likely to affect the import of such information.

WH Ireland, which is authorised and regulated in the United Kingdom by the FSA, is acting exclusively for Oval and no one else in connection with the Offer and will not be responsible to anyone other than Oval for providing the protections afforded to clients of WH Ireland nor for providing advice in relation to the Offer or any other matter or arrangement referred to in this Announcement.

The release, publication or distribution of this Announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this Announcement comes should inform themselves about, and observe, such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities laws of any such jurisdiction. The following Announcement has been prepared in accordance with English law and the Code and information disclosed may not be the same as that which would have been prepared in accordance with the laws of jurisdictions outside England.

This Announcement does not constitute an offer or an invitation to purchase or subscribe for any securities or the solicitation of any vote or approval in any jurisdiction pursuant to the Offer or otherwise. The Offer will be made solely by means of the Offer Document and the Form of Acceptance (in respect of certificated Cosalt Shares), which will contain the full terms and conditions of the Offer, including details of how the Offer may be accepted. Any acceptance or other response to the Offer should be made only on the basis of the information in the Offer Document and the Form of Acceptance (in the case of certificated Cosalt Shares). This announcement does not constitute a prospectus or prospectus equivalent document.

Unless otherwise determined by Oval and permitted by applicable law and regulation, the Offer will not be made, directly or indirectly, in or into, or by the use of the mails or by any means or instrumentality (including, without limitation, telephonically or electronically) of interstate or foreign commerce, or any facility of a national securities exchange, of a Restricted Jurisdiction (including the United States, Canada, Australia or Japan) and the Offer will not be capable of acceptance by any such use, means, instrumentality or facility or from within a Restricted Jurisdiction. Accordingly, copies of this Announcement are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from a Restricted Jurisdiction and persons receiving this Announcement (including, without limitation, custodians, nominees and trustees) must not mail or otherwise forward, distribute or send it in or into or from a Restricted Jurisdiction. Doing so may render invalid any purported acceptance of the Offer. The availability of the Offer to persons who are not resident in the United Kingdom may be affected by the laws of the relevant jurisdictions. Persons who are not resident in the United Kingdom should inform themselves about and observe any applicable requirements.

DEALING DISCLOSURE REQUIREMENTS

Under Rule 8.3(a) of the Code, any person who is interested in 1 per cent. or more of any class of relevant securities of an offeree company or of any paper 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 paper 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) an offeree company and (ii) any paper 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 paper offeror is first identified. Relevant persons who deal in the relevant securities of the offeree company or of a paper 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 per cent. or more of any class of relevant securities of the offeree company or of any paper offeror must make a Dealing Disclosure if the person deals in any relevant securities of the offeree or of any paper 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) an offeree company and (ii) any paper offeror, 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 the offeree company or a paper 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 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. If you are in any doubt as to whether you are required to make an Opening Position Disclosure or a Dealing Disclosure, you should contact the Panel's Market Surveillance Unit on +44 (0)20 7638 0129.

FURTHER INFORMATION

Please be aware that addresses, electronic addresses and certain other information provided by Cosalt Shareholders, persons with information rights and other relevant persons for the receipt of communications from the Cosalt Group may be provided to Oval during the Offer Period as required under Section 4 of Appendix 4 of the Code.

If you are in any doubt about the action you should take, you are recommended to seek your own personal financial advice immediately from your stockbroker, bank manager, solicitor, accountant or independent financial adviser authorised under the Financial Services and Market Act 2000 (as amended) if you are resident in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

A copy of this Announcement will shortly be made available for inspection on the Company's website www.cosalt.com.