Recommended Cash Offer for. Escher Group Holdings plc ( Escher ) by. Exeter Acquisition Limited ( Hanover BidCo )

Transcription

1 Part I Not for release, publication or distribution, in whole or in part, directly or indirectly, in, into or from any jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction. FOR IMMEDIATE RELEASE 8 FEBRUARY 2018 This announcement contains inside information Recommended Cash Offer for Escher Group Holdings plc ( Escher ) by Exeter Acquisition Limited ( Hanover BidCo ) (an investment vehicle ultimately wholly-owned by Hanover Active Equity Fund LP) Summary The Boards of Hanover BidCo and Escher are pleased to announce that they have reached agreement on the terms of a recommended cash offer to be made by Hanover BidCo for the entire issued and to be issued share capital of Escher. Hanover BidCo is an investment vehicle ultimately wholly-owned by Hanover Active Equity Fund LP. As at the date of this announcement Hanover ShareholderCo owns 4,803,114 Escher Shares, representing per cent. of the Issued Share Capital of Escher. Under the terms of the Offer, each Escher Shareholder will be entitled to receive 185 pence in cash per Escher Share. The Offer values the entire issued share capital of Escher at approximately million and million on a fully diluted basis (assuming that all rights in respect of the in-the-money options under the Escher Share Scheme are exercised on the basis set out in this announcement) and represents: a premium of per cent. over the closing middle market price of 140 pence per Escher Share on 12 December 2017, being the Business Day prior to Hanover BidCo s approach to the Escher Directors regarding the Offer; and a premium of per cent. over the closing middle market price of 150 pence per Escher Share on 7 February 2018, being the Business Day prior to the release of this announcement. The Offer is conditional upon, amongst other things, Hanover BidCo receiving valid acceptances (which have not been withdrawn) in respect of and/or having otherwise acquired or agreed to acquire Escher Shares which constitute more than 50 per cent. of the voting rights attached to the Escher Shares. The Escher Directors, who have been so advised by Panmure Gordon, consider the terms of the Offer to be fair and reasonable. In providing its advice to the Escher Directors, Panmure Gordon has taken into account the commercial assessments of the Escher Board. Panmure Gordon is providing independent financial advice to the Escher Directors for the purposes of Rule 3 of the Irish Takeover Rules. 1 HE051/096/AC#

2 Accordingly, the Escher Directors intend to unanimously recommend that the Escher Shareholders accept the Offer. Hanover BidCo has received irrevocable undertakings to accept or procure acceptance of the Offer from those Escher Directors who hold Escher Shares, in respect of a total of 1,790,320 Escher Shares, representing approximately 9.52 per cent. of the Issued Share Capital of Escher. In addition, Hanover BidCo has received irrevocable undertakings to accept or procure acceptance of the Offer from certain Escher Shareholders, in respect of a total of 1,943,669 Escher Shares representing approximately per cent. of the Issued Share Capital of Escher. Furthermore, Hanover ShareholderCo has signed an irrevocable undertaking to accept or procure acceptance of the Offer in respect of its holding of 4,803,114 Escher Shares, representing per cent. of the Issued Share Capital of Escher. In aggregate, Hanover BidCo has received irrevocable undertakings in respect of a total of 8,537,103 Escher Shares, representing approximately per cent. of the Issued Share Capital of Escher. Commenting on the Offer, Matthew Peacock, founding partner of Hanover Investors and a director of Hanover BidCo said: We are delighted to be announcing this recommended cash offer for Escher. Our proposal provides Escher Shareholders with an opportunity to realise a significant premium over the value of their shares prior to Hanover s interest in the business, and will allow Escher to grow outside of the constraints of the public market Commenting on the Offer Nick Winks, Chairman of Escher, commented: This cash offer with its substantial premium is a good outcome for our shareholders - given the uncertainty inherent in our customers spending patterns and traditional one-off licence based business model, as well as the need to invest further in the business. The board is unanimous in recommending this offer as good for shareholders and employees Commenting on the Offer Liam Church, CEO of Escher, commented: The acquisition is being made by a strategic shareholder who has got to know the business over almost a year. Hanover has stated that they intend to continue to invest in Escher, particularly in its Riposte platform, so that the group remains a market leading, global software business, with best in class technology. We have made substantial progress since the restructuring we began in The business now has a platform for sustainable growth as a private company. The management team, backed by Hanover, will be able to focus solely on growing the business, providing greater stability and significant opportunities for our employees. This summary should be read in conjunction with the full text of the following announcement including the Appendices. The Conditions and certain further terms of the Offer are set out in Appendix I to this announcement. Appendix II contains bases and sources of certain information contained within this announcement. Appendix III contains details of the irrevocable undertakings given to Hanover BidCo. Appendix IV contains the definitions of certain terms used in this announcement. This announcement is being made pursuant to Rule 2.5 of the Irish Takeover Rules. 2

3 Enquiries: Hanover Active Equity Fund LP Matthew Peacock Tel: +44 (0) Tom Russell Fred Lundqvist N+1 Singer (Financial adviser to Hanover BidCo) Mark Taylor Tel: +44 (0) Lauren Kettle Escher Group Holdings plc Liam Church Tel: +353 (0) Nick Winks Clem Garvey Panmure Gordon (Financial adviser, Rule 3 adviser, nominated adviser and broker to Escher) Andrew Godber/Alina Vaskina/Karri Vuori/ Ryan McCarthy (Corporate Finance) Tel: +44 (0) Erik Anderson (Corporate Broking) Instinctif Partners (PR adviser to Escher) Adrian Duffield Tel: +44 (0) Chris Birt 3

4 Responsibility statement The Hanover BidCo Directors and the Hanover HoldCo Directors accept responsibility for the information contained in this Announcement relating to Hanover BidCo, the Hanover BidCo Group and the Hanover BidCo Directors and members of their immediate families, related trusts and persons connected with them. To the best of the knowledge and belief of the Hanover BidCo Directors and the Hanover HoldCo Directors (who have taken all reasonable care to ensure such is the case), the information contained in this Announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. The Escher Directors accept responsibility for the information contained in this Announcement relating to Escher, the Escher Group and the Escher Directors and members of their immediate families, related trusts and persons connected with them. To the best of the knowledge and belief of the Escher Directors (who have taken all reasonable care to ensure such is the case), the information contained in this Announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. Further information This announcement is not intended to and does not constitute, or form part of, any offer to sell or subscribe for 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, nor shall there be any sale, issuance or transfer of securities of Escher in any jurisdiction in contravention of applicable law. This announcement does not constitute a prospectus or equivalent document. Any acceptance or other response to the Offer should only be made on the basis of the information contained in the Offer Document (which will contain the full terms and conditions of the Offer) and the Form of Acceptance. Escher Shareholders are advised to read the formal documentation in relation to the Offer carefully once it has been dispatched. Please be aware that addresses, electronic addresses and certain other information provided by Escher Shareholders, persons with information rights and other relevant persons in connection with the receipt of communications from Escher may be provided to Hanover BidCo during the Offer Period as required under Section 3 of Appendix 1 of the Irish Takeover Rules. N+1 Singer, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to Hanover BidCo and no-one else in connection with the Offer and will not be responsible to anyone other than Hanover BidCo for providing the protections afforded to clients of N+1 Singer, nor for providing advice in relation to the Offer or any matters referred to in this announcement. Panmure Gordon, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to Escher and no-one else in connection with the Offer and will not be responsible to anyone other than Escher for providing the protections afforded to clients of Panmure Gordon, nor for providing advice in relation to the Offer or any matters referred to in this announcement. Overseas jurisdictions The availability of the Offer in, and the release, publication or distribution of this announcement in or into, jurisdictions other than Ireland may be restricted by law. Therefore persons into whose possession this announcement comes who are not resident in Ireland should inform themselves about, and observe, any applicable restrictions. Escher Shareholders who are in any doubt regarding such matters should consult an appropriate independent adviser in the relevant jurisdiction without delay. 4

5 Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction. This announcement has been prepared for the purposes of complying with Irish law and the Irish Takeover Rules and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside Ireland. US shareholders The Offer will be for the securities of a corporation organised under the laws of Ireland and is subject to the procedure and disclosure requirements of the United Kingdom and Ireland, which are different from those of the United States. The Offer will be made in the United States pursuant to the applicable provisions of Section 14(e) of, and Regulation 14E under, the US Securities Exchange Act of 1934 (the Exchange Act ), and otherwise in accordance with the requirements of the Irish Takeover Rules. Accordingly, the Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, the offer timetable, settlement procedures and timing of payments that are different from those applicable under US domestic tender offer procedures and laws. Neither the US Securities and Exchange Commission nor any US state securities commission has approved or disapproved the Offer or passed upon the adequacy or completeness of this announcement. It may be difficult for US holders of Escher Shares to enforce their rights under any claim arising out of the US federal securities laws, since Hanover BidCo and Escher are located outside of the United States, and their officers and directors are resident outside of the United States. The receipt of cash pursuant to the Offer by a US holder of Escher Shares may be a taxable transaction for US federal income tax purposes and under applicable US state and local, as well as foreign and other, tax laws. Each US shareholder of Escher is urged to consult with his, her or its independent professional adviser regarding any acceptance of the Offer including, without limitation, to consider the tax consequences associated with such holder s acceptance of the Offer. To the extent permitted by applicable law, in accordance with, and to the extent permitted by, the Irish Takeover Rules and normal market practice in Ireland and the UK and Rule 14e-5 under the Exchange Act, Hanover BidCo or its nominees or brokers (acting as agents) or their respective affiliates may from time to time make certain purchases of, or arrangements to purchase, Escher Shares outside the United States, other than pursuant to the Offer, before or during the period in which the Offer remains open for acceptance. These purchases may occur either in the open market at prevailing prices or in private transactions at negotiated prices. Such purchases, or arrangements to purchase, will comply with all applicable UK and Irish laws and regulations, including the Irish Takeover Rules, the AIM Rules, and Rule 14e-5 under the Exchange Act to the extent applicable. Any information about any such purchases will be disclosed in accordance with applicable UK and Irish laws and regulations, on the Regulatory News Service on the London Stock Exchange website, To the extent that such information is made public in the United Kingdom and Ireland, this information will also be publicly disclosed in the United States. Disclosure requirements Under Rule 8.3(a) of the Irish Takeover Rules, any person who is, or becomes, interested in 1% or more of any class of relevant securities of the offeree company during an offer period must make a Dealing Disclosure if the person deals in any relevant securities of the offeree company. 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) the offeror company 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(a) applies must be made by no later than 3.30 pm (London time) on the business day following the date of the relevant dealing. 5

6 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 securities exchange offeror, they will be deemed to be a single person for the purposes of Rule 8.3. Details of the offeree and offeror companies in respect of whose relevant securities Dealing Disclosures must be made can be found in the Disclosure Table on the Irish Takeover Panel s website at including details of the number of relevant securities in issue, when the Offer Period commenced and when any offeror was first identified. You should contact the Irish Takeover Panel at or on +353 (0) if you are in any doubt as to whether you are required to make a Dealing Disclosure. Forward-looking statements This announcement contains certain forward-looking statements, including statements regarding Hanover BidCo s and Escher s plans, objectives and expected performance. Such statements relate to events and depend on circumstances that will occur in the future and are subject to risks, uncertainties and assumptions. There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by such forward looking statements, including, among others, the enactment of legislation or regulation that may impose costs or restrict activities; the re-negotiation of contracts or licences; fluctuations in demand and pricing in the industry in which Escher is active; fluctuations in exchange controls; changes in government policy and taxations; industrial disputes; war and terrorism. These forward-looking statements speak only as at the date of this announcement. Rule 2.10 disclosure In accordance with Rule 2.10 of the Irish Takeover Rules, Escher confirms that, as at the date of this announcement, it has 18,810,422 ordinary shares of each in issue. Escher Shares trade on AIM under the ISIN reference IE00B6SKRB38. Publication of this announcement A copy of this announcement will be available subject to certain restrictions relating to persons resident in Restricted Jurisdictions on and by no later than 12 noon on the Business Day following the date of this announcement. The contents of Hanover Investors website and Escher s website are not incorporated into and do not form part of this announcement. Inside information and Market Abuse Regulation (Regulation 596/2014) ( MAR ) Certain Escher Shareholders were, with the consent of the Irish Takeover Panel, formally brought inside in order to discuss giving irrevocable commitments or letters of intent to accept or procure acceptance of the Offer. That inside information is set out in this announcement. Therefore, those persons that received inside information relating to the Offer in a market sounding are no longer considered to be in possession of inside information relating to Escher and its securities; however under MAR such persons are required to form their own opinion as to whether or not they are cleansed. 6

7 Part II Not for release, publication or distribution, in whole or in part, directly or indirectly, in, into or from any jurisdiction where to do so would constitute a violation of the relevant laws or regulations of such jurisdiction. FOR IMMEDIATE RELEASE 8 FEBRUARY 2018 This announcement contains inside information Recommended Cash Offer for Escher Group Holdings plc ( Escher ) by Exeter Acquisition Limited ( Hanover BidCo ) (an investment vehicle ultimately wholly-owned by Hanover Active Equity Fund LP) 1. Introduction The Boards of Hanover BidCo and Escher are pleased to announce that they have reached agreement on the terms of a recommended offer to be made by Hanover BidCo for the entire issued and to be issued share capital of Escher. Hanover BidCo is an investment vehicle ultimately wholly-owned by Hanover Active Equity Fund LP. As at the date of this announcement Hanover ShareholderCo owns 4,803,114 Escher Shares, representing per cent. of the Issued Share Capital of Escher. Under the terms of the Offer, each Escher Shareholder will be entitled to receive 185 pence in cash per Escher Share. 2. Summary of Terms The Offer will be subject to the conditions and further terms set out in Appendix I to this announcement and to be set out in the Offer Document and will be made on the following basis: for each Escher Share 185 pence in cash The Offer values the entire issued share capital of Escher at approximately million and million on a fully diluted basis (assuming that all rights in respect of the in-the-money options under the Escher Share Scheme are exercised on the basis set out in this announcement) and represents: a premium of per cent. over the closing middle market price of 140 pence per Escher Share on 12 December 2017, being the Business Day prior to Hanover BidCo s approach to the Escher Directors regarding the Offer; and a premium of per cent. over the closing middle market price of 150 pence per Escher Share on 7 February 2018, being the Business Day prior to the release of this announcement. 7

8 The Offer is to be effected by way of an offer under the Irish Takeover Rules. Hanover BidCo reserves the right, with the consent of Escher and the Irish Takeover Panel to elect to implement the acquisition of the Escher Shares by way of a Scheme of Arrangement under Chapter 1 of Part 9 of the Irish Companies Act. In such event, the Scheme of Arrangement will be implemented on the same terms (subject to appropriate amendments), so far as applicable, as those which would apply to the Offer. 3. Background to the reasons for the Offer Hanover BidCo recognises Escher as a market-leading, global software business with best in class technology, strong customer relationships and an excellent team. However, it is evident that the uncertain timing of significant licence wins generates a level of volatility in revenues and profitability which is unsuited to the public market. In addition, Hanover BidCo considers the costs and management resource required to maintain a public market listing is outsized relative to Escher's size and profitability. Hanover BidCo believes that Escher will be much better positioned for growth as a private company, outside of the constraints of the public market. The Cash Offer represents an opportunity for Escher Shareholders to realise their holding in Escher in cash for a premium of per cent. to the closing middle market price of 140 pence on 12 December 2017 (being the Business Day prior to the Hanover BidCo approach to the Escher Directors regarding the Offer). Hanover BidCo believes its Offer also provides certainty, in cash, for Escher Shareholders today and also gives them an opportunity to exit now, rather than to wait for Escher s financial performance to be reflected in its share price and bear the risks of that alternative not being achieved. 4. Recommendation The Escher Board, which has been so advised by Panmure Gordon, considers the terms of the Offer to be fair and reasonable. In providing its advice, Panmure Gordon has taken into account the commercial assessments of the Escher Board. The Escher Directors intend to recommend unanimously that all Escher Shareholders accept the Offer. Liam Church and Fionnuala Higgins, being those Escher Directors who hold Escher Shares, have undertaken to accept or procure acceptance of the Offer in respect of their own beneficial holdings in Escher of 1,790,320 Escher Shares in aggregate, representing approximately 9.52 per cent. of the Issued Share Capital of Escher. 5. Background to and reasons for recommendation Escher is a premier provider of point-of-service software to the postal sector. Riposte, its core product, remains a reference for this sector across the globe, giving customers a scalable platform to digitise the processing of complex transactions in omni-channel environments. Escher s strategy remains focused on broadening its software range and enhancing its customer offering by investing in its existing software portfolio and new software ranges. Escher s growth is dependent on converting its pipeline of sales opportunities. As detailed in its trading update on 14 November 2017, and its year-end update on 12 January 2018, the timing of revenue from licence sales remains difficult to predict accurately. The Escher Directors continue to manage Escher s fixed-cost base in order to remain profitable, even in the absence of major one-off licence sales. In the year to 31 December 2017, exceptional costs of the order of $300,000 were incurred in order to complete restructuring commenced in Additional costs were incurred in the exploration of routes 8

9 to new markets for its technology platforms. The Escher Directors believe that meaningful progress in technological development and sustainable growth in revenues may only be achieved through additional investment, which will absorb much of Escher s free cash flow in the short to medium term. Whilst the Escher Directors continue to believe in the prospects for the business and the attractiveness of its product offering, it is the Escher Directors belief that the Offer represents an acceptable and certain valuation given the Escher Group s recent share price performance. The Escher Directors have also considered the interests of the current shareholder base of Escher and consider that, given the low level of free float, the Offer therefore provides Escher Shareholders with an opportunity to realise their investment which would not otherwise be available to them given the relatively illiquid market for Escher s shares. Accordingly, the Escher Directors intend to recommend unanimously the Offer to Escher Shareholders. 6. Information on the Hanover Fund and Hanover BidCo The Hanover Fund Hanover AEF General Partner LP (the General Partner ) is the general partner of Hanover Active Equity Fund LP (the Hanover Fund ). The Hanover Fund is a Cayman Islands exempted limited partnership formed to invest in small-cap public companies and private equity situations, primarily in the UK, and currently has a total of approximately 85 million in committed capital. Hanover Investors Management (Cayman) Limited (the Manager ) has been appointed by the General Partner as the manager of the Hanover Fund and in turn Hanover Investors Management LLP ( Hanover Investors ) provides certain investment advisory services to the Manager in respect of the Hanover Fund. Hanover Investors was registered on 7 January 2005 and is authorised and regulated by the FCA. Matthew Peacock is the founding partner of Hanover Investors. Hanover BidCo Hanover BidCo is a newly incorporated company formed at the direction of Hanover Investors (on behalf of the Hanover Fund) for the purposes of implementing the Offer. Hanover BidCo is currently indirectly owned 100 per cent. by the Hanover Fund. Hanover BidCo is a private limited company incorporated in Ireland on 18 December 2017 under the Irish Companies Act with registered number It has its registered office at Ten Earlsfort Terrace, Dublin 2, D02 T380, Ireland. The Directors of Hanover BidCo are Matthew Peacock, Fredrik Lundqvist and Tom Russell. Save for activities in connection with the implementation and financing of the Offer, Hanover BidCo has not carried on any business prior to the date of this announcement. 7. Information on Escher Escher is a world leading provider of outsourced point-of-service software for use in the worldwide postal, retail and government sectors. Escher s core product remains the Riposte platform, which processes complex transactions in omni-channel environments. Escher supplies solutions to benefit postal operators and government agencies; both their employees and customers. It has developed and deployed point-of-sale solutions including mobile, loyalty and 24-hour service post offices. Escher 9

10 provides solutions and services to over 35 customers on a global basis, servicing approximately 1 billion citizens worldwide. Headquartered in Dublin, Escher also operates from offices in the US, Singapore and South Africa. For the year ended 31 December 2016, Escher reported revenue of US$22.41 million and profit before tax of US$2.38 million. As at 31 December 2016, Escher had gross assets of US$49.28 million and net current assets of US$5.66 million. For the six months ended 30 June 2017, Escher reported unaudited revenue of US$9.39 million and a loss before tax of US$27,000. As at 30 June 2017, Escher had gross assets of US$48.74 million and net current assets of US$5.68 million. 8. Interests in Escher Shares and irrevocable undertakings 8.1 Hanover ShareholderCo As at the date of this announcement, Hanover ShareholderCo owns 4,803,114 Escher Shares, representing per cent. of the Issued Share Capital of Escher and no other entity in the Hanover BidCo Group holds Escher Shares. Hanover BidCo has received an irrevocable undertaking from Hanover ShareholderCo to accept or procure acceptance of the Offer in respect of its holding of Escher Shares. 8.2 Escher Directors Irrevocable undertakings to accept or procure acceptance of the Offer have been received from Liam Church and Fionnuala Higgins, being those Escher Directors who hold Escher Shares, in respect of 1,790,320 Escher Shares in aggregate, which represent approximately 9.52 per cent. of the Issued Share Capital of Escher. 8.3 Other Escher Shareholders Irrevocable undertakings to accept or procure acceptance of the Offer have been received from John Quinn, Bernard Somers and Bacchantes Limited in respect of 587,827, 745,840 and 610,002 Escher Shares, respectively, which in aggregate represent approximately per cent. of the Issued Share Capital of Escher. In aggregate, Hanover BidCo has therefore received irrevocable undertakings in respect of a total of 8,537,103 Escher Shares, representing approximately per cent. of the Issued Share Capital of Escher. Further details regarding the irrevocable undertakings are set out in Appendix III of this announcement. 9. Management, employees and locations Hanover BidCo attaches great importance to the value created and built up by Escher Group employees and senior management in recent years and believes they will continue to play an important role in the future of the business. It also recognises the value in Escher Group s brands, including its Riposte platform, and intends that these brands shall remain following implementation of the Offer. Hanover BidCo intends to carry out a strategic and operational review of the Escher Group following completion of the Offer. Hanover Investors intends to continue the Escher Group s policy of managing its fixed cost base with a view to remaining profitable, but does not 10

11 expect significant changes to the Escher Group s locations of business or to redeploy any of its fixed assets as a result of its review. Hanover BidCo s intention is to grow the Escher business and although the review may result in some headcount reductions to specific functions, it does not anticipate any reductions will be significant. Hanover BidCo does not expect to make any material changes to the conditions of employment of Escher Group employees or management or their location of employment. Hanover BidCo confirms that, following implementation of the Offer, the existing contractual and statutory employment rights, including in relation to pensions, of all Escher employees will be honoured. On or shortly after the date the Offer becomes or is declared wholly unconditional it is proposed that the non-executive Directors will resign from the board of Escher and will be replaced by directors appointed by Hanover BidCo. In accordance with Rule 16.2 of the Irish Takeover Rules, Hanover BidCo confirms that no incentivisation arrangements are proposed for Escher s management. The Escher Directors welcome Hanover BidCo s approach and intentions regarding the future of the Escher Group s employees and places of business, and the value that Hanover BidCo attaches to the skills and experience of the Escher Group s management and employees. The Escher Directors welcome the approach that Hanover BidCo is intending to take to ensuring that the distinctive ethos of Escher s brands is maintained. The Escher Directors welcome the statement that there are unlikely to be significant reductions in headcount and that there is no intention to make any material changes to the conditions of employment of the employees. It is also noted that Hanover BidCo expects Escher Group to continue to operate, principally as it does today, from its existing locations and places of business. 10. Escher Share Scheme The Offer will extend to any Escher Shares issued or unconditionally allotted, and any Treasury Shares unconditionally sold or transferred by Escher, in each case, prior to the date on which the Offer closes (or such earlier date as Hanover BidCo may, subject to the Irish Takeover Rules, decide) as a result of the exercise of options granted under the Escher Share Scheme. Under the Escher Share Scheme, there are currently 221,336 options vested and in the money. It has been agreed that the Offer to the participants with vested options of the Escher Share Scheme will be made on a net cash settlement basis. Options that are vested and have a strike price in euros will convert into pound sterling at the prevailing sterling / euro exchange rate at the time of posting of the Offer Document. Under the Escher Share Scheme, the chief financial officer of Escher has a tranche of 60,000 options that have met all the vesting criteria and are expected to vest during the course of the Offer Period on 1 April As agreed with Hanover BidCo and pursuant to the existing terms of the Escher Share Scheme, Escher s Remuneration Committee is intending to include these 60,000 options within the terms of the Offer. No other employees or members of the management team have options vesting during the Offer Period. In total, there will be 281,336 options vested by the time of the Offer becoming unconditional which will be subject to the Offer. The participants of the Escher Share Scheme can expect to receive from Hanover BidCo a more detailed proposal of how they can exercise their vested 11

12 options in due course and Escher option holders may wish to await receipt of these details before taking any action with regards to their options. 11. Profit Forecast In the trading update dated 14 November 2017, Escher made the following statement in relation to its financial targets for the twelve months to 31 December 2017: Group revenues are now expected to be approximately US$18m for the year to 31 December 2017 with licence revenues, which have a high margin, materially lower than expectations and The adjusted EBITDA 1, excluding exceptional items, is expected to be approximately US$2.7m for the year to 31 December In the year end trading update dated 12 January 2018, Escher made the following statement in relation to its financial targets for the twelve months to 31 December 2017: Group revenue is expected to be marginally ahead of the figure published in the Trading Update on 14 November 2017 and adjusted EBITDA 2 is expected to be in the order of $2.8m. The above statements constitute a profit forecast for the purposes of the Irish Takeover Rules (the Profit Forecast ) and a confirmation of that Profit Forecast respectively. The Profit Forecast relates to the period ending 31 December 2017 and relates to the Group s adjusted EBITDA. The Escher Directors confirm that the Profit Forecast remains valid and confirm that the Profit Forecast has been properly compiled on the basis of the assumptions stated below and that the basis of accounting used is consistent with Escher's accounting policies. The Profit Forecast does not take into account any impact of the Offer. The Escher Directors prepared the Profit Forecast on the basis of the following assumptions, any of which could turn out to be incorrect and therefore affect whether the Profit Forecast is achieved: 11.1 there will be no material change in legislation or regulatory requirements impacting on the Escher Group's operations or its accounting policies; 11.2 there will be no material litigation or regulatory investigations, or material unexpected developments in any existing litigation or regulatory investigation, in relation to any of Escher's operations, products or services; and 11.3 no significant errors, omissions, misstatements or incorrect estimations will be identified by the auditors in the course of their normal annual audit which might materially impact the Profit Forecast, either positively or negatively. 12. Further details of the Offer The Escher Shares will be acquired under the Offer fully paid and free from all liens, equitable interests, charges, encumbrances, options, rights of pre-emption and any other third party rights or interests of any nature whatsoever with all rights attaching thereto, including the right to receive and retain all dividends and other distributions and returns of value declared, paid or made after the Offer becomes or is declared unconditional in all respects. 1 *Operating profit before, depreciation, amortisation, share-based payments and exceptional items. 2 *Operating profit before, depreciation, amortisation, share-based payments and exceptional items. 12

13 If any dividend or other distribution or return of value is proposed, declared, made, paid or becomes payable by Escher in respect of Escher Shares on or after the date of this announcement and prior to the Offer becoming or being declared unconditional in all respects, Hanover BidCo will have the right to reduce the value of the consideration payable for each Escher Share by up to the amount per Escher Share of such dividend, distribution or return of value except where the Escher Share is or will be acquired pursuant to the Offer on a basis which entitles Hanover BidCo to receive the dividend, distribution or return of value and to retain it. If any such dividend, distribution or return of value is paid or made after the date of this announcement and Hanover BidCo exercises its rights described above, any reference in this announcement to the consideration payable under the Offer shall be deemed to be a reference to the consideration as so reduced. Any exercise by Hanover BidCo of its rights referred to in this paragraph shall be the subject of an announcement and, for the avoidance of doubt, shall not be regarded as constituting any revision or variation of the terms of the Offer. 13. Compulsory acquisition, cancellation of admission to trading on AIM and reregistration as a private limited company If Hanover BidCo acquires, whether through acceptances under the Offer or otherwise, 80 per cent. or more of the Escher Shares to which the Offer relates and the Offer becomes or is declared unconditional in all respects, Hanover BidCo will exercise its rights pursuant to the provisions of section 457 of the Irish Companies Act to acquire compulsorily the remaining Escher Shares. If the Offer becomes or is declared unconditional in all respects and Hanover BidCo has acquired or agreed to acquire Escher Shares which, together with any Escher Shares already owned by the Hanover BidCo Group, represent 75 per cent. or more of the voting rights attaching to the Escher Shares then Hanover BidCo may decide to procure the making of an application by Escher to the London Stock Exchange for the cancellation of the admission to trading of Escher Shares on AIM and to re-register Escher as a private company as soon as it is appropriate to do so under the provisions of the Irish Companies Act. It is anticipated that any cancellation of admission to trading on AIM would take effect no earlier than twenty Business Days after Hanover BidCo has acquired or agreed to acquire 75 per cent. of the voting rights attaching to the Escher Shares. Cancellation of admission to trading on AIM would significantly reduce the liquidity and marketability of all Escher Shares not assented to the Offer at that time. 14. Offer-related arrangement 14.1 Confidentiality Agreement Hanover Investors and Escher entered into a mutual non-disclosure agreement on 22 December 2017 (as supplemented on 2 February 2018), pursuant to which Hanover Investors and Escher have undertaken to keep confidential information relating to the other party and not to disclose it to third parties (other than permitted recipients) unless required by applicable law or regulation (the Confidentiality Agreement ). These confidentiality obligations will remain in force until the earlier of (a) the completion of a business transaction between Hanover Investors and Escher; and (b) a period of 12 months following the issue of a notice in writing by either party to the Confidentiality Agreement that negotiations in relation to a business transaction between Hanover Investors and Escher have terminated. The Confidentiality Agreement also contains certain non-solicit restrictions on Escher in the context of the Offer. 13

14 14.2 Expenses Reimbursement Agreement Escher has entered into the Expenses Reimbursement Agreement dated 8 February 2018 with Hanover Fund, the terms of which have been approved by the Panel. Under the Expenses Reimbursement Agreement, Escher has agreed to pay to Hanover Fund in certain circumstances an amount equal to all documented, specific, quantifiable third party costs and expenses incurred by Hanover BidCo, or on its behalf, for the purposes of, in preparation for, or in connection with the Offer, including, but not limited to, exploratory work carried out in contemplation of and in connection with the Offer, legal, financial and commercial due diligence and engaging advisers to assist in the process. The liability of Escher to pay these amounts shall arise only after the date of this Announcement and is limited to a maximum amount equal to 1 per cent. of the total value attributable to the entire issued and to be issued share capital of Escher under the Offer (excluding, for the avoidance of doubt, any treasury shares and any interest in Escher Shares held by Hanover BidCo or any person Acting in Concert with Hanover BidCo) as ascribed by the terms of the Offer as set out in this Announcement. The amount payable by Escher to Hanover Fund under such provisions of the Expenses Reimbursement Agreement will exclude (a) any amounts in respect of VAT incurred by Hanover BidCo attributable to such third party costs other than Irrecoverable VAT incurred by Hanover BidCo and (b) any amounts paid or payable by Hanover in connection with any financing. The circumstances in which such payment will be made are if: (a) following the publication of this announcement Escher s Board: (i) (ii) (iii) declines to include that recommendation of the Offer in the Offer Document; any one or more of them withdraws or adversely modifies its recommendation of the Offer; or recommends (or clearly indicates or announces an intention to recommend) any Escher Alternative Proposal ; (b) following the publication of this announcement all of the following occur in sequential order: (i) (ii) (iii) an Escher Alternative Proposal is publicly disclosed or any person shall have publicly announced an intention (whether or not conditional) to make an Escher Alternative Proposal; the Offer subsequently lapses or (with the consent of Escher) is withdrawn or does not become effective; and the Escher Alternative Proposal becomes effective or unconditional within nine (9) months of the disclosure or announcement of such Escher Alternative Proposal. Panmure Gordon, financial advisers to Escher, along with the Escher Directors, have each confirmed in writing to the Panel that in their respective opinions, in the context of the Note to Rule 21.2 of the Takeover Rules and the Offer, the Expenses Reimbursement Agreement is in the best interests of Escher and Escher Shareholders. 14

15 15. Financing of the Offer The cash consideration due under the Offer will be funded from existing cash resources of the Hanover Fund, made available to Hanover BidCo, further details of which will be set out in the Offer Document. N+1 Singer, financial adviser to Hanover BidCo, is satisfied that sufficient resources are available to Hanover BidCo to satisfy in full the cash consideration payable under the terms of the Offer. 16. Disclosure of interests in Escher Shares Save for the shareholding and irrevocable undertakings referred to in section 8 above, as at close of business on 7 February 2018, being the last practicable Business Day prior to this announcement, neither Hanover BidCo, Hanover Investors, the Hanover Fund, nor any of the directors or members (as applicable) of Hanover BidCo, Hanover Investors or the Hanover Fund nor, so far as Hanover BidCo, Hanover Investors, the Hanover Fund and the directors of Hanover BidCo, Hanover Investors and the Hanover Fund are aware, any person acting, or deemed to be acting, in concert with Hanover BidCo for the purposes of the Offer has: 16.1 any interest, or right to subscribe for, any relevant securities of Escher; 16.2 any short positions in respect of any securities of Escher (whether conditional or absolute and whether in the money or otherwise), including any short position under a derivative, any agreement to sell or any delivery obligation or right to require another person to purchase or take delivery of, relevant securities of Escher; 16.3 borrowed or lent any relevant Escher securities (save for any borrowed relevant securities which have either been on-lent or sold); 16.4 procured an irrevocable commitment or letter of intent to accept or procure acceptance of the Offer or vote in favour of a scheme of arrangement in respect of any relevant Escher securities; or 16.5 any arrangement in relation to any relevant Escher securities. 17. Expected timetable The Offer Document will be sent to Escher Shareholders (other than those in a Restricted Jurisdiction) as soon as practicable and in any event within 28 days of this announcement (or such later date as is agreed between the Irish Takeover Panel and Hanover BidCo). 18. Documents available on website Copies of the following documents will be available at until the end of the Offer: the irrevocable undertakings listed in Appendix III to this announcement; the Confidentiality Agreement referred to in section 14.1 above; the Expenses Reimbursement Agreement referred to in section 14.2 above; and this announcement. 15

16 19. Market quotations The following table shows the closing middle market price of Escher Shares on the following dates, unless otherwise indicated: the first Business Day of each of the six months immediately before the date of this announcement; and 7 February 2018, being the last Business Day before this announcement. Date Price per Escher Share (pence) 1 September October November December January February February General This announcement does not constitute an offer or an invitation to purchase any securities. The Offer will be made subject to the Conditions and on the terms contained in Appendix I to this announcement and on the further terms and Conditions to be set out in the Offer Document. The Offer will be governed by Irish law and subject to the applicable rules and regulations of the London Stock Exchange, the Irish Takeover Panel and the FCA. The person responsible for arranging release of this announcement on behalf of Hanover BidCo is Fred Lundqvist, Partner at Hanover Investors. The Conditions and certain further terms of the Offer are set out in Appendix I to this announcement. Appendix II contains bases and sources of certain information contained within this announcement. Appendix III contains details of the irrevocable undertakings given to Hanover BidCo. Appendix IV contains the definitions of certain terms used in this announcement. This announcement is being made pursuant to Rule 2.5 of the Irish Takeover Rules. Enquiries: Hanover Active Equity Fund LP Matthew Peacock Tel: +44 (0) Tom Russell Fred Lundqvist 16

17 N+1 Singer (Financial adviser to Hanover BidCo) Mark Taylor Tel: +44 (0) Lauren Kettle Escher Group Holdings plc Liam Church Tel: +353 (0) Nick Winks Clem Garvey Panmure Gordon (Financial adviser, Rule 3 adviser, nominated adviser and broker to Escher) Andrew Godber/Alina Vaskina/Karri Vuori/ Ryan McCarthy (Corporate Finance) Tel: +44 (0) Erik Anderson (Corporate Broking) Instinctif Partners (PR adviser to Escher) Adrian Duffield Tel: +44 (0) Chris Birt Responsibility statement The Hanover BidCo Directors and the Hanover HoldCo Directors accept responsibility for the information contained in this Announcement relating to Hanover BidCo, the Hanover BidCo Group and the Hanover BidCo Directors and members of their immediate families, related trusts and persons connected with them. To the best of the knowledge and belief of the Hanover BidCo Directors and the Hanover HoldCo Directors (who have taken all reasonable care to ensure such is the case), the information contained in this Announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. The Escher Directors accept responsibility for the information contained in this Announcement relating to Escher, the Escher Group and the Escher Directors and members of their immediate families, related trusts and persons connected with them. To the best of the knowledge and belief of the Escher Directors (who have taken all reasonable care to ensure such is the case), the information contained in this Announcement for which they accept responsibility is in accordance with the facts and does not omit anything likely to affect the import of such information. Further information This announcement is not intended to and does not constitute, or form part of, any offer to sell or subscribe for 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, nor shall there be any sale, issuance 17

18 or transfer of securities of Escher in any jurisdiction in contravention of applicable law. This announcement does not constitute a prospectus or equivalent document. Any acceptance or other response to the Offer should only be made on the basis of the information contained in the Offer Document (which will contain the full terms and conditions of the Offer) and the Form of Acceptance. Escher Shareholders are advised to read the formal documentation in relation to the Offer carefully once it has been dispatched. Please be aware that addresses, electronic addresses and certain other information provided by Escher Shareholders, persons with information rights and other relevant persons in connection with the receipt of communications from Escher may be provided to Hanover BidCo during the offer period as required under Section 3 of Appendix 1 of the Irish Takeover Rules. N+1 Singer, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to Hanover BidCo and no-one else in connection with the Offer and will not be responsible to anyone other than Hanover BidCo for providing the protections afforded to clients of N+1 Singer, nor for providing advice in relation to the Offer or any matters referred to in this announcement. Panmure Gordon, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively as financial adviser to Escher and no-one else in connection with the Offer and will not be responsible to anyone other than Escher for providing the protections afforded to clients of Panmure Gordon, nor for providing advice in relation to the Offer or any matters referred to in this announcement. Overseas jurisdictions The availability of the Offer in, and the release, publication or distribution of this announcement in or into, jurisdictions other than Ireland may be restricted by law. Therefore persons into whose possession this announcement comes who are not resident in Ireland should inform themselves about, and observe, any applicable restrictions. Escher Shareholders who are in any doubt regarding such matters should consult an appropriate independent adviser in the relevant jurisdiction without delay. Any failure to comply with such restrictions may constitute a violation of the securities laws of any such jurisdiction. This announcement has been prepared for the purposes of complying with Irish law and the Irish Takeover Rules and the information disclosed may not be the same as that which would have been disclosed if this announcement had been prepared in accordance with the laws of jurisdictions outside Ireland. US shareholders The Offer will be for the securities of a corporation organised under the laws of Ireland and is subject to the procedure and disclosure requirements of the United Kingdom and Ireland, which are different from those of the United States. The Offer will be made in the United States pursuant to the applicable provisions of Section 14(e) of, and Regulation 14E under, the US Securities Exchange Act of 1934 (the Exchange Act ), and otherwise in accordance with the requirements of the Irish Takeover Rules. Accordingly, the Offer will be subject to disclosure and other procedural requirements, including with respect to withdrawal rights, the offer timetable, settlement procedures and timing of payments that are different from those applicable under US domestic tender offer procedures and laws. Neither the US Securities and Exchange Commission nor any US state securities commission has approved or disapproved the Offer or passed upon the adequacy or completeness of this announcement. It may be difficult for US holders of Escher Shares to enforce their rights under any claim arising out of the US federal securities laws, since Hanover BidCo and Escher are located outside of the United States, and their officers and directors are resident outside of the United States. 18