ELTA.L Regulatory News (ELTA)

FOR IMMEDIATE RELEASE

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

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

4 October 2018

Electra Private Equity PLC

("Electra" or the "Company")

The Board of Electra today announces:

· The agreement for the sale of its larger non-controlled assets, Photobox and Knight Square at 103% of adjusted 31st March 2018 carrying value^

· The outcome of the third phase of its strategic review

· A general meeting to be held on 30 October 2018 to consider the adoption of a revised investment objective and policy

· The intention to distribute excess cash as an initial special dividend of £140m (£3.65 per share) in December (subject to the completion of the Photobox transaction and adoption of the revised investment objective and policy) ('the Initial Special Dividend'), with a subsequent special dividend in respect of the £21m (£0.54 per share) proceeds of the sale of Knight Square ('the Subsequent Special Dividend', and together with the Initial Special Dividend, 'the Special Dividends'). The Subsequent Special Dividend is subject to completion of the disposal of Knight Square, which is conditional on receipt of regulatory approval which is anticipated to be received in the first quarter of 2019

· Its strategy for the remaining portfolio of assets, of which the value of the two larger corporate investments are both over 97% owned by the Company, with aggregated last 12 months unaudited EBITDA of £31m and net debt of £65m. An additional pro forma £28m of cash will be held by the Company following settlement of the transactions announced today and distribution of the Special Dividends

· Future distribution policy comprising intended annual dividends of £10m pa pending further material disposals

Sale of certain non-controlled assets

· Electra has agreed the sale of its larger non-controlled assets, Photobox and Knight Square to funds advised by Lexington Partners L.P. ("Lexington") ('the Lexington Transaction').

· The sale of Electra's interests in Photobox is expected to complete in October, with an expected cash receipt of £98m. The sale of the interests in Knight Square is subject to regulatory approval, which is expected to be received in the first quarter of 2019. Upon completion of the Knight Square disposal the Company will receive a further £21m in cash. This is in addition to a receipt of £13m from a Knight Square loan note repayment in August 2018.

· On a proforma basis the transaction once fully completed will leave the portfolio comprising:

· TGI Fridays £ 149m^

· Hotter Shoes £. 50m^

· Others £. 15m^

· Cash £ 189m

£403m

^ 31st March carrying value adjusted for subsequent transactions

Outcome of Phase 3 of the strategic review and implementation of recommendation

· The Board also announces the outcome of the third phase of its strategic review as first announced on 24 May 2018.

· The Board considers that each of the remaining corporate investments represents an opportunity for value creation within an acceptable timeframe. However, the concentration of the portfolio and the structural inefficiency in reinvesting in a listed private equity vehicle with a significant market discount to NAV make it inappropriate to seek to do this within the existing investment objective and policy of the Company.

· The Board has therefore concluded, and recommends, that it is in the best interests of shareholders to conduct a managed wind-down of the portfolio over a period of time, allowing optimisation of returns, the return of cash to shareholders, and ultimately the winding up of the Company (the 'Recommendation'). The Board intends that until it is finally wound up, the Company will continue to be listed on the London Stock Exchange in its existing listing category and will pay annual dividends funded by cash generated by the portfolio.

· Implementation of the Board's Recommendation will require shareholder approval of a new investment objective and policy. A general meeting of the Company to consider an ordinary resolution to approve the Board's proposed strategy through an updated investment objective and policy will be held on 30 October 2018 (the 'General Meeting').

· Subject to (i) the completion of the sale of Photobox; and (ii) shareholder approval of the revised investment objective and policy, the Board intends to pay the Initial Special Dividend of £140m (£3.65 per share) in December. Payment of the Initial Special Dividend will be confirmed by the Board following the General Meeting.

· Subject to completion of the Knight Square transaction (which is conditional on the receipt of regulatory approval), the Board intends to pay the Subsequent Special Dividend in respect of the proceeds of £21m (£0.54 per share).

· A circular containing further details of the proposed changes to the Company's investment objective and policy and related matters and the notice convening the General Meeting will be posted to shareholders tomorrow. Copies of that circular will be available shortly at www.electraequity.com.

Remaining portfolio, management and realisation strategy and distribution policy

Following completion of the Lexington Transaction announced today and distribution of the intended Special Dividends totalling £161m, the Company will be left with a portfolio comprising:

^ Adjusted to reflect subsequent transactions at 31st March value. Updated valuations as at 30th September year end will be prepared through the Company's normal valuation process and announced with the annual results in December

*Others includes:

· Sentinel, a UK based producer and international distributor of heating system related products with LTM EBITDA of £3m (March 2018 valuation: £6m);

· SPC, a US based manufacturing business with LTM pre-exceptional EBITDA of $2.5m (March 2018 valuation: £3m) and;

· other assets expected to be realised within the next 12 months

** Pre-exceptional

*** Pro forma based on settlement of the Lexington Transaction and the Special Dividends

The Board considers that each of the remaining corporate investments, represents an opportunity for value creation within an acceptable timeframe. The larger two investments, TGI Fridays and Hotter Shoes, both operate in the UK consumer market where current challenging trading conditions are reflected by low market multiples. We have reduced leverage in both businesses in order to allow them to focus on medium term operational optimisation.

TGI Fridays has followed a strategy of sustainable growth for several years with revenue and EBITDA CAGRs of 11% and 16% between 2010 to 2017. Whilst the business has been impacted by the heavy discounting that has been prevalent in the casual dining sector over recent months, TGI Fridays' focus on differentiation, customer experience and maintenance of brand value has allowed it to continue to perform well at EBITDA level and the company is now well positioned for growth following its return to like for like sales growth.

TGI Fridays' recent and future growth is expected to be self-financing with strong free cash generation following improvement of cash conversion from 33% to 63% from 2010 to 2017.

Hotter Shoes has performed well through direct marketing in a niche market segment for many years. The business grew strongly through an aggressive retail expansion from 2010 and 2016 and development of a customer acquisition focused US business. Over the last five years EBITDA has fluctuated between £13m and £8m. Prior to the debt reduction in the current year, investment in product and infrastructure necessary to stabilise the business and provide a platform for sustainable growth was constrained by the need to service financing payments. The required investment is now in progress and whilst the business continues to be impacted by the UK retail environment progress is being made towards optimising the retail estate. Medium term development into adjacent customer segments and development of the US business also present significant growth opportunities.

The Board will continue to work with the management teams of these companies and the other assets to implement their strategic plans and optimise the timing and proceeds of future exits.

Cost Base and Board

In recognition of the reduced scale of the portfolio and the proposed change to the investment objective and policy the operating cost base of the company will be reduced further (including a reduction in the number of Board members). Details will be given in our December annual results announcement.

Distribution Policy

Subject to the adoption of the proposed revised investment objective and policy and completion of the Photobox transaction announced today the Board intends to pay an Initial Special Dividend of £140m (£3.65 per share) in December. It is intended that this will be followed by the Subsequent Special Dividend following completion of the disposal of Knight Square, which is anticipated to take place in the first quarter of 2019.

Further distributions will then be considered following subsequent realisations.

Pending further material disposals it is the Board's intention that annual dividends of £10m pa will be paid.

Commenting on the sale and conclusion of the Strategic Review, Neil Johnson, Chairman of Electra Private Equity PLC, said:

"The Board is pleased to announce agreement for the successful realisation of its larger non-controlled assets.

Having carefully considered all options the Board now believes that given the size of the portfolio and the structural inefficiency of the listed private equity model that is accentuated by making new investments, it is now in shareholders' best interests to announce the controlled realisation of the remaining portfolio over an appropriate period. The remaining assets have opportunity for value creation from current levels and the Board will actively work with portfolio company management to optimise realisations over time.

The Board unanimously recommends that shareholders vote in favour of the proposed change in investment objective and policy, and if these are approved, will manage the Company's cost base and size of the Board to a scale appropriate for the Company's future needs."

The person responsible for arranging for the release of this announcement on behalf of Electra Private Equity PLC is Gavin Manson, Chief Financial Officer.

For further information, please contact:

Further information

Greenhill & Co. International LLP ("Greenhill") is authorised and regulated by the FCA in the United Kingdom. Greenhill is acting exclusively as financial adviser for the Company and for no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Greenhill, or for providing advice in relation to the matters referred to in this Announcement. Neither Greenhill nor any of its subsidiaries, branches or affiliates owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Greenhill in connection with the matters referred to in this Announcement.

A copy of this announcement is also available on Electra's website at www.electraequity.com.