K3 Business Technology Group Regulatory News (KBT)

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 JURISDICTION.

This announcement is not an announcement of a firm intention to make an offer under Rule 2.7 of the City Code on Takeovers and Mergers (the "Code") and there can be no certainty that an offer will be made, nor as to the terms on which any offer will be made.

1 March 2012

K3 Business Technology Group Plc ("K3" or the "Company")

Update on Strategic Review and Commencement of Formal Sale Process

Following the announcement of 1 December 2011 commencing a strategic review, and the update announcement of 26 January 2012, the Company can confirm that it has received a number of indicative proposals at levels materially higher than the current share price. Whilst the Board firmly believes that the Company has a secure future as an independent business, it recognises that further investment will enable it to more fully exploit the potential of its managed services business. The strategic review has completed and the Company is holding ongoing discussions with these potential offerors.

The Company has therefore agreed with The Takeover Panel (the "Panel") that the process to explore these proposals and any further potential expressions of interest for the entire issued and to be issued share capital of the Company can be conducted by way of a formal sale process for the purposes of the Code.

Accordingly, the Panel has granted a dispensation from the requirements of Rules 2.4(a), 2.4(b) and 2.6(a) of the Code such that any interested party participating in the formal sale process will not be required to be publicly identified, subject to note 3 on Rule 2.2, as a result of this announcement and will not be subject to the 28 day deadline referred to in Rule 2.6(a), for so long as it is participating in the formal sale process. Interested parties should note Rule 21.2 of the Takeover Code, which will prohibit any form of inducement fee or other offer-related arrangement, and that the Company, although it may do so in the future, has not at this stage requested any dispensation from this prohibition under Note 2 of Rule 21.2.

The Company is proposing to conduct the formal sale process through its financial advisers, Deloitte Corporate Finance (contact details are provided below), in the following manner. Any interested party who approaches Deloitte Corporate Finance will be required to enter into a non-disclosure agreement with the Company on reasonable terms satisfactory to the Board and on the same terms, in all material respects, as other interested parties, before being permitted to participate in the process. Once the non-disclosure agreement has been signed the participant will receive a copy of an information memorandum and information pack. The Company requires that indicative proposals are submitted by interested parties by no later than 27 March 2012.

It is intended that those parties who submit indicative proposals that are acceptable to the Board and its advisers will be taken forward to the next phase of the formal sale process and will be given access to a data room and further access to management, following which interested parties shall be invited to submit revised proposals to the Company. The Board will then discuss acceptable proposals with relevant parties with a view to agreeing an offer with one party which it is able to recommend to shareholders.

The Board reserves the right to alter any aspect of the formal sale process as outlined above or to terminate it at any time and in such cases will make an announcement as appropriate.

The Board reserves the right to reject any approach or terminate discussions with any interested party or participant at any time. There can be no certainty that any offer will be made for the Company, or even proposed, or as to the level of any proposal or offer that may be made.

For the avoidance of doubt, the Company continues to be in an "Offer period" as defined in the Code, and the dealing disclosure requirements listed below apply.

For further information, please contact:

A copy of this announcement will be made available on the Company's website at http://www.k3btg.com as soon as possible.

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, any securities whether pursuant to this announcement or otherwise. The distribution of this announcement in jurisdictions outside 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 law of any such jurisdiction.

Deloitte Corporate Finance, a division of Deloitte LLP, is acting for the Company and no-one else in connection with the possible offer for the Company and will not be responsible to anyone other than the Company for providing the protections offered to clients of Deloitte LLP or for providing advice in relation to the possible offer for the Company. Deloitte LLP is authorised and regulated in the United Kingdom by the Financial Services Authority in respect of regulated activities. Deloitte LLP can be contacted at its principal office: 2 New Street Square, London EC4A 3BZ.

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 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) the 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 pm (London time) on the 10th business day following the commencement of the offer period and, if appropriate, by no later than 3.30 pm (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% 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 company 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) the 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 pm (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 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 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. 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.