Gooch & Housego Regulatory News (GHH)

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16 December 2010

GOOCH & HOUSEGO PLC

Proposed Acquisition, Placing and Notice of General Meeting

The Board of Gooch & Housego today announces that it proposes to acquire EM4, a US manufacturer of fibre optics, based near Boston, Massachusetts, for an expected initial consideration of $10 million (approximately £6.3 million) and to raise approximately £10.6 million (approximately £10.2 million net of expenses) through a Placing of New Ordinary Shares at 450 pence per New Ordinary Share.

Acquisition of EM4

·; EM4 designs and manufactures fibre optic products that incorporate "active" components such as lasers, detectors and high frequency receivers or transmitter electronics

·; EM4's products are utilised in aerospace and defence, telecommunication, industrial and life sciences applications

·; In the year ended 31 December 2009, EM4 had revenues of $4.5 million and EBITDA of $(1.4) million and in the 10 months to 31 October 2010, had revenues of $6.5 million and EBITDA of $1.1 million

·; The initial consideration for the Acquisition will be calculated as six times EM4's EBITDA in its financial year to 31 December 2010 and is expected to be $10.0 million (approximately £6.3 million). The initial consideration is capped at $12.0 million (approximately £7.5 million)

·; An earnout, based on EM4's EBITDA in its financial year to 31 December 2011 and capped at $7.0 million (approximately £4.4 million), will also be payable, in cash, in March 2012

·; The Directors expect the Acquisition to be earnings enhancing for the Group in the financial year to 30 September 2012

·; The Acquisition is expected to complete towards the end of January 2011

Key details of the Placing

·; Placing to raise approximately £10.6 million at 450 pence per New Ordinary Share

·; The Placing Shares will represent approximately 12.2 per cent. of the Existing Issued Ordinary Share Capital and approximately 10.9 per cent. of the Enlarged Issued Ordinary Share Capital

·; The Issue Price represents a discount of approximately 4.8 per cent. to the closing middle market price per Ordinary Share on 15 December 2010

·; Admission of the New Ordinary Shares to trading on AIM is expected to take place on 6 January 2011

·; The Placing is being carried out on a non pre-emptive basis to institutional and other professional investors and is being arranged and fully underwritten by Investec

·; It is intended that the net proceeds of the Placing will, in part, be used to fund the proposed acquisition of EM4 and that the balance of the net proceeds of the Placing will provide capital for further expansion, which may include additional acquisition opportunities currently under consideration by the Board

·; The Placing is not conditional on the successful completion of the Acquisition

·; In the event that the Acquisition and/or any further acquisitions are not made by the Group, the net proceeds of the Placing will be used to reduce the Group's bank debt

The Placing is conditional, inter alia, on Shareholder approval of the Resolution at the General Meeting. It is expected that the Company will post a Circular to Shareholders today with details of the Placing and Acquisition and giving notice of the General Meeting, to be held at 11.00 a.m. on 5 January 2011 at Dowlish Ford, Ilminster, Somerset TA19 0PF. A copy of this announcement and the Circular will be available on the Company's website, www.goochandhousego.com.

Dr Julian Blogh,Non-executive Chairman, said:

"I am delighted to announce the placing and proposed acquisition of EM4, which the Board believes is directly in line with Gooch & Housego's strategy of market diversification. The acquisition of EM4 will enable Gooch & Housego to move further towards a fully integrated service platform offering both 'active' and 'passive' fibre optic technology, and enhance our penetration of the US aerospace and defence market. Gooch & Housego has a good track record of successfully integrating businesses into the Group and I am confident that EM4 will fit in well. The prospects for the fibre optics market are exciting and make the acquisition both strategically and commercially compelling. I believe that, with the support that Gooch & Housego can offer EM4, the business will continue to go from strength to strength."

 This announcement does not constitute or form part of any offer or instruction to purchase, subscribe for or sell any shares or other securities in Gooch & Housego nor shall it nor any part of it nor the fact of its distribution form the basis of, or be relied on in connection with, any contract therefor. This announcement provides information about the Placing, but does not invite participation in the Placing. This announcement does not constitute, and the Company is not making, an offer to the public of transferable securities within the meaning of sections 85 and 102B of FSMA nor does it constitute an admission document drawn up in accordance with the AIM Rules for Companies. This announcement is therefore not an approved prospectus for the purposes of section 85 of FSMA, and has not been prepared in accordance with the prospectus rules of the FSA and as such neither its contents nor its issue have been approved by the FSA or by any authority which would be a competent authority for the purposes of any legislation that implements the EU Prospectus Directive.

The Placing Shares have not been, and will not be, registered under the United States Securities Act 1933 (as amended) or under the applicable securities laws of Canada, Japan, Australia or South Africa. Accordingly the Placing Shares may not be, directly or indirectly, offered, sold, taken up, delivered or transferred in or into the United States, Canada, Japan, Australia or South Africa. The distribution of this announcement in jurisdictions other than the United Kingdom may be restricted by law and therefore persons who receive this announcement should inform themselves about and observe the laws governing those jurisdictions. Any failure to comply with any restrictions may constitute a breach of securities laws of any such jurisdictions.

Investec Bank plc, which is authorised and regulated in the United Kingdom by the FSA, is acting as nominated adviser, broker and underwriter to Gooch & Housego in relation to the Placing and Admission and is not acting for any other persons in relation to the Placing and Admission. Investec Bank plc is acting exclusively for Gooch & Housego and for no one else in relation to the matters described in this announcement and is not advising any other person and accordingly will not be responsible to anyone other than Gooch & Housego for providing the protections afforded to clients of Investec Bank plc, or for providing advice in relation to the contents of this announcement or any matter referred to in it. The responsibilities of Investec Bank plc as Gooch & Housego's nominated adviser and broker under the AIM Rules for Companies and the AIM Rules for Nominated Advisers are owed solely to the London Stock Exchange and are not owed to Gooch & Housego or to any Director, Shareholder or any other person, in respect of any decision to acquire or dispose of shares in the capital of Gooch & Housego in reliance on any part of this announcement, or otherwise.

No liability is accepted by Investec Bank plc nor does it make any representation or warranty, express or implied, in relation to, the contents of this announcement, including its accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Company and the Placing and accordingly Investec Bank plc disclaims all and any responsibility or liability whether arising in tort, contract or otherwise which it might otherwise have in respect of this announcement or any such statement. Investec Bank plc has not authorised the contents, or any part, of this announcement. Investec Bank plc may, in accordance with applicable legal and regulatory provisions, engage in transactions in relation to the Ordinary Shares (including the Placing Shares) and/or related instruments for its own account for the purposes of hedging its underwriting exposure or otherwise. Except as required by applicable law or regulation, Investec Bank plc does not propose to make any public disclosure in relation to any such transactions.

Proposed Placing of 2,366,666 New Ordinary Shares at 450 pence per shareApproval of authority to allot Ordinary Shares on a non pre-emptive basis

1. Introduction

The Company today announces that it proposes to raise, by way of a placing of 2,366,666 New Ordinary Shares at 450 pence per share, approximately £10.6 million (approximately £10.2 million net of expenses). The Issue Price represents a discount of approximately 4.8 per cent. to the closing middle price per Ordinary Share on 15 December 2010 (being the latest practicable date prior to publication of this announcement).

The Placing is being carried out on a non pre-emptive basis to institutional and other professional investors and is being arranged and fully underwritten by Investec pursuant to and conditional upon the terms of the Placing Agreement.

The Placing is conditional upon, inter alia, the approval of the Resolution by Shareholders at the General Meeting being convened at 11.00 a.m. on 5 January 2011 at Dowlish Ford, Ilminster, Somerset, TA19 0PF.

2. Details of the Placing

Investec has, as agent for the Company, conditionally placed with institutional and other professional investors 2,366,666 New Ordinary Shares at the Issue Price to raise approximately £10.6 million (approximately £10.2 million net of expenses). The Placing is being carried out on a non pre-emptive basis to institutional and other professional investors and is being arranged and fully underwritten by Investec pursuant to and conditional upon the terms of the Placing Agreement.

The Issue Price represents a discount of approximately 4.8 per cent. to the closing middle market price of 472.5 pence per Ordinary Share on 15 December 2010 (being the latest practicable date prior to publication of this announcement). The Placing Shares will represent approximately 12.2 per cent. of the Existing Issued Ordinary Share Capital and approximately 10.9 per cent. of the Enlarged Issued Ordinary Share Capital.

The Placing Shares will be issued credited as fully paid and will, on issue, rank pari passu with the Existing Ordinary Shares (including the right to receive all dividends or other distributions declared, made or paid thereon following Admission).

The Placing is conditional on, inter alia, the following conditions being satisfied by no later than 8.00 a.m. on 6 January 2011, or such later time and date, being no later than 8.00 a.m. on 20 January 2011, as the Company and Investec may agree:

(1) the passing (without amendment) of the Resolution at the General Meeting;

(2) the Placing Agreement becoming unconditional in all respects and not having been terminated in accordance with its terms; and

(3) Admission of the Placing Shares to trading on AIM.

3. Reasons for the Placing and use of Placing proceeds

It is intended that the net proceeds of the Placing will, in part, be used to fund the proposed acquisition of EM4 from management shareholders and a consortium of venture capital funds, which includes Baker Communications, Rustic Canyon Ventures and Swedestart Tech. The initial consideration for the Acquisition will be calculated as six times EM4's EBITDA in its financial year to 31 December 2010. The initial consideration is expected to amount to $10.0 million (approximately £6.3 million) and will be capped at $12.0 million (approximately £7.5 million). An earnout based on EM4's EBITDA in its financial year to 31 December 2011 will also be payable in cash in March 2012 and will be capped at $7.0 million (approximately £4.4 million).

The Acquisition will take place pursuant to an agreement entered into on 16 December 2010 by G&H Capital Holdings (Florida), Inc., a subsidiary of the Group, with EM4 and certain of EM4's major shareholders. Completion of the Acquisition is subject to various conditions including final approval of the Acquisition by US regulatory authorities, the obtaining of various third party consents and the Placing becoming unconditional in all respects. The Acquisition is expected to complete towards the end of January 2011.

The balance of the net proceeds of the Placing will provide capital for further expansion, which may include additional acquisition opportunities which are currently under consideration by the Board. The Placing is not conditional on the Acquisition or on any further acquisitions. In the event that the Acquisition does not complete and/or no further acquisitions are made by the Group, the net proceeds of the Placing will be used to reduce the Group's bank debt.

4. Information on EM4

EM4 is a US fibre optics business based near Boston in Massachusetts. It was established in 2000 to supply fibre optic components to the communications market. Today, EM4 designs and manufactures fibre optic products that incorporate "active" components such as lasers, detectors and high frequency receiver or transmitter electronics. These products are utilised in aerospace and defence, telecommunications, industrial and life sciences applications. EM4 specialises in high performance, ruggedised components and systems that are qualified for use in extreme environments such as those found in satellite and aerospace applications. EM4 predominantly serves customers in the US and Europe.

Gooch & Housego is a manufacturer of optical components and systems spanning a broad range of photonic technologies including "passive" fibre optics. Fibre optic systems require both "active" and "passive" components and the Board therefore believes that as "active" and "passive" components are deployed together in most applications, there is logic in a combination of Gooch & Housego and EM4.

The Directors also believe that the Acquisition will benefit the Group through the cross-selling of EM4's products to the Company's worldwide customer portfolio and the Company's products to EM4's US aerospace and defence customers.

In the year ended 31 December 2009, EM4 had revenues of $4.5 million and EBITDA of $(1.4) million. In the 10 months to 31 October 2010, EM4 had revenues of $6.5 million and EBITDA of $1.1 million.

5. Current trading and prospects

On 30 November 2010, the Company released its preliminary results for the year to 30 September 2010. The following is an extract from that announcement:

"We will continue our strategy of diversification and strengthen our position in the Aerospace & Defence and Life Sciences sectors as we develop closer relationships with our key customers and progressively migrate from the largely component-level product set of today to modules sub-assemblies and instruments in the future. Adding the necessary skills and resources in engineering, management and manufacturing will be a high priority, with increased capacity, reduced leadtimes and shorter development times as the main objectives. The supply-chain and the strategic partnerships we have established will be important in supporting growth and providing flexibility, and we are considering bolt-on acquisition opportunities which have the potential to help us achieve our objectives more quickly and cost effectively than would be possible by other means.

The momentum gained in 2010 has continued into the first months of the new financial year and customer sentiment remains positive. Despite the uncertain economic climate in Europe and the USA, Gooch & Housego is well positioned for further growth in 2011."

The Directors believe that this statement remains valid as at the date of this announcement.

6. Notice of General Meeting

A General Meeting of the Company is to be held at 11.00 a.m. on 5 January 2011 at Dowlish Ford, Ilminster, Somerset, TA19 0PF. The General Meeting is being held for the purpose of considering and, if thought fit, passing the Resolution to approve the Placing. The Placing is conditional on the Resolution being passed.

The Directors believe that the Placing is in the best interests of the Company and the Shareholders as a whole and accordingly the Directors intend to recommend unanimously that Shareholders vote in favour of the Resolution to be proposed at the General Meeting.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Notes.

1) Each of the times and dates in the above timetable are subject to change at the absolute discretion of the Company and Investec. If any of the above times and / or dates change, the revised times and / or dates will be notified to Shareholders by announcement through a Regulatory Information Service.

2) All references in this announcement are to London times unless otherwise stated.

DEFINITIONS

In this announcement, the following expressions have the following meanings, unless the context requires:

All references to "pounds", "pounds sterling", "sterling", "£", "pence" and "p" are to the lawful currency of the United Kingdom.