Aquisitions and Placing

 

TIDMFFG 
 
RNS Number : 8589U 
Freedom4 Group PLC 
01 July 2009 
 

1 July 2009 
 
 
Freedom4 Group plc (the "Company") 
 
 
Proposed acquisitions of Daisy and Vialtus for GBP123 million 
Proposed placing of GBP83 million 
 
 
Freedom4 Group plc, (FFG.L) has conditionally agreed to acquire Daisy, the SME 
value-added reseller, and the assets of Vialtus, the mid-market managed 
solutions provider, ("the Acquisitions"), in conjunction with a proposed Placing 
to raise up to GBP83 million. 
 
 
Summary of the Transactions 
 
 
  *  Acquisition of the entire issued capital of Daisy for GBP30 million in cash and 
  the issue to Daisy Vendor and Optionholders of 63,750,000 Consolidated Ordinary 
  Shares (see below), valued at GBP51.0 million 
 
  *  Acquisition of entire issued capital of Vialtus for GBP13 million in cash and 
  the issue of 36,250,000 Consolidated Ordinary Shares, valued at GBP29 million 
 
  *  A proposed Placing by Freedom4 Group to raise up to GBP83 million (before 
  expenses) through the issue of Placing Shares to provide funding for the 
  Acquisitions and for possible future acquisitions 
 
  *  Proposed share consolidation on the basis of 1 Consolidated Ordinary Share of 
  2.0p each for every 20 Unconsolidated Ordinary Shares of 0.1p 
 
  *  Under AIM rules, the Acquisitions constitute a Reverse Takeover of the Company 
  and are therefore subject to shareholder approval 
 
  *  Hard irrevocable undertakings have been received from 32% of the shareholder 
  base 
 
  *  Liberum Capital Ltd is acting as nominated adviser and broker to the Company 
 
 
 
Strategic Rationale 
 
 
  *  The fragmented nature of UK SME and mid-market telecommunications market with 
  its current depressed valuations, present significant opportunities for the new, 
  enlarged group 
 
  *  The strategy of the Enlarged Group is to create, through a combination of 
  further acquisitions and organic growth, one of the largest UK providers to the 
  SME and mid-market of telecommunications services and solutions 
 
  *  Daisy and Vialtus will provide the right platform for potential further growth 
  through a combination of consolidation and integration expertise, critical mass, 
  customer scale, broad product offering and strong operational capability 
 
  *  The senior management team have significant experience of creating shareholder 
  value in the telecoms sector through both organic and acquisitive growth 
 
 
The Enlarged Group 
 
 
  *  Following completion, the Group's market capitalisation will be approximately 
  GBP204.4 million 
 
  *  Matthew Riley, CEO of Daisy, will be appointed Chief Executive Officer 
 
  *  Freedom4 Group plc will be renamed Daisy Group plc 
 
  *  The Enlarged Group intends to provide its SME and mid-market customers with a 
  converged product set including access, hosting, voice, mobile and managed 
  services 
 
 
 
About Daisy 
Daisy is a SME value-added reseller which provides voice and data access, 
billing and wholesale managed services. Daisy's services delivery platform is 
scalable and will be central to the Enlarged Group. Daisy has achieved great 
success in terms of customer management with very low churn rates. Operating 
from its UK-based call centre in Nelson, Lancashire, the company has in excess 
of 30,000 customers and has 176 full time employees. The company also operates a 
green policy and has taken steps to becoming a carbon neutral business by 
offsetting its annual carbon expenditure. 
 
 
About Vialtus 
Vialtus is a mid-market managed solutions company providing voice and data 
access, managed and complex hosting services, and core networks and hosting 
facilities. The company offers its clients end-to-end solutions and has 5,270 
customers and 177 employees. 
 
 
Peter Dubens, Non-Executive Chairman of Freedom4 Group plc, commented: 
 
 
"We are seeing an opportunity in the UK telecoms services market at the moment 
where the fragmented nature and depressed valuations in the sector create 
conditions which are well-suited for generating value through consolidation. 
Our experience in making carefully chosen acquisitions and integrating them 
properly gives us confidence in our ability to generate further value for our 
shareholders.  One of the major strengths of Daisy is the unified brand and 
operating system which will be key to the Group's future success." 
 
 
Matthew Riley, CEO of Daisy, added, 
 
 
"Over the last 8 years, Daisy has grown to be a substantial provider of cost 
effective communications services, with over 30,000 SME customers. With 24 
acquisitions during this time, the management at Daisy has honed its 
consolidation and integration skills, maintaining customer service levels and 
creating a truly scalable operational platform. 
 
 
"Daisy and Vialtus are two highly synergistic businesses; we believe that 
together they will be able to provide SME and mid-market customers with an 
effective and attractive one-stop-shop offer, and provide us with the solid 
foundations for our plans for future growth." 
 
 
This summary should be read in conjunction with the full text of the following 
announcement. 
 
 
 
 
For further details, contact: 
 
 
+--------------------------------------------------+---------------------+ 
| Freedom4 Group plc                               | Tel: [phone]  | 
| Peter Dubens, Non-Executive Chairman             |                     | 
| Stewart Porter, Chief Financial Officer          |                     | 
|                                                  |                     | 
+--------------------------------------------------+---------------------+ 
| Daisy                                            | Tel: [phone]   | 
| Matthew Riley, Chief Executive Officer           |                     | 
| Katharine Butler, PR Executive                   |                     | 
|                                                  |                     | 
+--------------------------------------------------+---------------------+ 
| Liberum Capital Limited                          | Tel: [phone]  | 
| Steve Pearce                                     |                     | 
| Tom Fyson                                        |                     | 
|                                                  |                     | 
+--------------------------------------------------+---------------------+ 
| Financial Dynamics                               | Tel: [phone]  | 
| Juliet Clarke / Ed Bridges / Erwan Gouraud       |                     | 
|                                                  |                     | 
+--------------------------------------------------+---------------------+ 
 
 
 
EXPECTED TIMETABLE 
 
 
+-------------------------------------------------------------------------+----------------------------+ 
| Latest time and date for receipt of Forms of Proxy for the General      |    10.00 a.m. 18 July 2009 | 
| Meeting                                                                 |                            | 
+-------------------------------------------------------------------------+----------------------------+ 
|                                                                         |                            | 
+-------------------------------------------------------------------------+----------------------------+ 
| General Meeting                                                         |    10.00 a.m. 20 July 2009 | 
+-------------------------------------------------------------------------+----------------------------+ 
|                                                                         |                            | 
+-------------------------------------------------------------------------+----------------------------+ 
| Record Date for the Share Consolidation                                 |     6.00 p.m. 20 July 2009 | 
+-------------------------------------------------------------------------+----------------------------+ 
|                                                                         |                            | 
+-------------------------------------------------------------------------+----------------------------+ 
| Completion of the Acquisitions and Admission                            |     8.00 a.m. 21 July 2009 | 
+-------------------------------------------------------------------------+----------------------------+ 
|                                                                         |                            | 
+-------------------------------------------------------------------------+----------------------------+ 
| Dealings in the Enlarged Share Capital to commence on AIM and CREST     |     8.00 a.m. 21 July 2009 | 
| accounts credited                                                       |                            | 
+-------------------------------------------------------------------------+----------------------------+ 
|                                                                         |                            | 
+-------------------------------------------------------------------------+----------------------------+ 
| Definitive share certificates for the New Ordinary Shares in            |              4 August 2009 | 
| certificated form and replacement certificates for the Existing         |                            | 
| Ordinary Shares despatched by                                           |                            | 
+-------------------------------------------------------------------------+----------------------------+ 
 
 
Each of the dates in the above timetable is subject to change at the absolute 
discretion of the 
Company and Liberum 
 
 
KEY STATISTICS 
 
 
+---------------------------------------------------------------------------------+--------------------+ 
| Number of Unconsolidated Ordinary Shares in issue at the date of this document  |      1,034,867,898 | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| Number of New Ordinary Shares being issued pursuant to the Acquisitions         |        100,000,000 | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| as a percentage of the Enlarged Share Capital                                   |     39.1 per cent. | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| Number of New Ordinary Shares being issued pursuant to the Placing              |        103,750,000 | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| as a percentage of the Enlarged Share Capital                                   |     40.6 per cent. | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| New Ordinary Shares as a percentage of the Enlarged Share Capital               |     79.7 per cent. | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| Total number of Consolidated Ordinary Shares in issue immediately following     |        255,493,395 | 
| Admission                                                                       |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| Total number of New Warrants in issue immediately following Admission           |          4,612,500 | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| Placing Price                                                                   |                80p | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| Gross proceeds of the Placing                                                   |    GBP83.0 million | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| Estimated net proceeds of the Placing receivable by the Company                 |    GBP79.7 million | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| Market capitalisation of the Company at the Placing Price immediately following |   GBP204.4 million | 
| Admission                                                                       |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| ISIN number                                                                     |       GB00B61G9L20 | 
+---------------------------------------------------------------------------------+--------------------+ 
|                                                                                 |                    | 
+---------------------------------------------------------------------------------+--------------------+ 
| AIM symbol of Enlarged Group                                                    |              DAY.L | 
+---------------------------------------------------------------------------------+--------------------+ 
 
 
 
 
 
Proposed Share Consolidation, acquisitions of Daisy and the Vialtus Assets, 
Placing, 
and Admission of Enlarged Share Capital to AIM 
 
 
1. Introduction 
 
 
On 4 June 2009, the Company announced that it was in talks regarding the 
possible acquisition of two businesses which may or may not lead to a 
transaction which might constitute a reverse takeover under the AIM Rules. Those 
talks culminated in the announcement today that Freedom4 has conditionally 
agreed to acquire Daisy and the Vialtus Assets. Daisy and the Vialtus Business 
are leading independent UK providers of telecommunications services and 
solutions to the SME and midmarket. The Company's strategy is to create, through 
a combination of acquisitions and organic growth, one of the largest UK 
providers of telecommunications services and solutions to the SME and 
mid-market, which will provide its customers with a combined product set 
including access, hosting, voice, managed services and mobile telephony, all 
from a single customer service and billing platform. 
 
 
The Daisy Acquisition comprises the purchase of the entire issued capital of 
Daisy. The consideration for the Daisy Acquisition is to be satisfied by GBP30 
million in cash and the issue to the Daisy Vendor and to the Daisy Optionholders 
of a total of 63,750,000 Consolidated Ordinary Shares in the Company (the Daisy 
Completion Shares). At the Placing Price, the Daisy Completion Shares will be 
valued at GBP51.0 million in aggregate. 
 
 
The Vialtus Acquisition comprises the purchase of the Vialtus Assets in 
consideration of the payment by the Company of GBP13.0 million in cash plus the 
issue to the Vialtus Vendor of a total of 36,250,000 Consolidated Ordinary 
Shares in the Company (the Vialtus Completion Shares). At the Placing Price, the 
Vialtus Completion Shares will be valued at GBP29.0 million in aggregate. 
 
 
In conjunction with the Acquisitions, the Company is proposing to raise not less 
than GBP83.0 million (before expenses) through the issue of Placing Shares 
pursuant to the Placing, to provide funding for the Acquisitions, and for 
possible future acquisitions which will be undertaken as a part of the Enlarged 
Group's consolidation strategy and for the repayment of certain indebtedness of 
Daisy to Bank of Scotland plc. 
 
 
Immediately following Completion and Admission, the Enlarged Group's market 
capitalisation (at the Placing Price) will be approximately GBP204.4 million. 
 
 
Under the AIM Rules, the Acquisitions constitute a Reverse Takeover of the 
Company. Accordingly, the Acquisitions are conditional, inter alia, on the 
approval by the Shareholders of the Resolutions at the GM. 
 
 
The issue of the Placing Shares and the Completion Shares on completion of the 
Placing and the Acquisitions will result in a dilution of the Existing Ordinary 
Shares as a percentage of the Enlarged Share Capital. However, the Independent 
Directors believe that the Proposals are justified given the potential for the 
Enlarged Group to create long-term value for Shareholders. 
 
 
The 103,750,000 New Ordinary Shares to be issued pursuant to the Placing, at a 
Placing Price of 80 pence per new Ordinary Share, will represent approximately 
40.6 per cent. of the Enlarged Share Capital. The 100,000,000 New Ordinary 
Shares to be issued pursuant to the Acquisitions will represent approximately 
39.1 per cent. of the Enlarged Share Capital. The aggregate 203,750,000 New 
Ordinary Shares to be issued in connection with the Proposals will represent 
approximately 79.7 per cent. of the Enlarged Share Capital. 
 
 
It is also proposed that, conditional on Completion, the name of the Company 
will be changed to Daisy Group plc and that the financial reporting year end of 
the Company will be changed from 31 December to 31 March. 
 
 
In addition, the Company is proposing to undertake a share capital 
restructuring, through the Share Consolidation, to consolidate every 20 
Unconsolidated Ordinary Shares of 0.1 pence into one Consolidated Ordinary Share 
of 2 pence. 
 
 
If the Resolutions are duly passed at the GM then it is expected that the 
Enlarged Share Capital will be re-admitted to trading on AIM on 21 July 2009. 
 
 
The purpose of this document is to provide you with details of the Proposals, to 
explain why the Proposals are considered to be in the best interests of 
Shareholders and to ask you to vote in favour of the Resolutions required to 
implement the Proposals, which will be proposed at the GM convened for 20 July 
2009, notice of which is set out at the end of this document. 
 
 
2. Background to and reasons for the Acquisitions 
 
 
Freedom4 was founded in 2002, following the reverse takeover of Zipcom plc by 
shareholders of Transigent Limited. Between 2002 and 2007 Freedom4 successfully 
consolidated 14 UK telecommunications/internet companies becoming one of the 
leading providers of broadband and web hosting services in the UK. 
 
 
In September 2007 Freedom4 sold certain of its subsidiaries carrying on a 
broadband and voice business to Tiscali UK Limited for GBP210 million, on a cash 
and debt free basis, before adjustments. In April 2008 Freedom4 sold its web 
hosting and data solutions businesses, trading as Host Europe and consisting of 
the Host Europe Group, to Oakley L.P. for GBP120 million (on a cash and debt 
free basis). Following the sale of the Host Europe Group, which included certain 
of the current subsidiaries of Vialtus, Freedom4's sole business activity was 
the development of wireless communications solutions through its 52 per cent. 
shareholding in Freedom4 Limited, the wireless telecommunications joint venture 
between Freedom4 and Intel Capital. The joint venture's principal asset is 
ownership of a national UK spectrum licence to provide WiMAX communications at 
the 3.6 GHz frequency band. 
 
 
After Freedom4's disposal of the web hosting and data solutions businesses, and 
the return of GBP155 million to Shareholders, the Company had significant 
reserves of cash and cash equivalents on its balance sheet, including the 
GBP17.5 million loan notes owed by Host Europe Group Limited (a wholly owned 
subsidiary of Oakley L.P.) to the Company pursuant to an arrangement under which 
part of the consideration for the acquisition of the Host Europe Group was 
deferred. The net cash and cash equivalents (including the Loan Notes receivable 
and accrued interest) on the Freedom4 balance sheet at 31 December 2008 was 
GBP23.2 million. 
 
 
In March 2008 the Company stated that it was its intention to distribute to its 
Shareholders the proceeds of the redemption of the Loan Notes. However, the 
Existing Directors continue to see the potential for shareholder value creation 
in Freedom4 Limited. They also believe that the substantial cash reserves and 
cash equivalents of the Company leave it well positioned to undertake a 
consolidation strategy in the telecommunications services market. 
 
 
If the Resolutions are passed, cash received by the Company on the future 
redemption of the Loan Notes will not be distributed to Shareholders. 
 
 
If the Resolutions are not passed at the GM or Completion does not occur for any 
other reason, the Existing Directors will consider other options for the future 
of the Company which may include a distribution of capital to Shareholders on 
redemption of the Loan Notes. 
 
 
The Directors believe that the current fragmented nature of the UK SME and 
mid-market telecommunications market, and the current depressed valuations of 
some quoted and non-quoted operators, present significant consolidation 
opportunities for the Enlarged Group. The Existing Directors have carried out a 
detailed review of the UK business telecommunications market and the operators 
within that market. They have identified Daisy and Vialtus as the platform for 
potential further growth due to their combination of consolidation and 
integration expertise, critical mass, customer scale, a broad product offering 
and strong operational capability. 
 
 
The UK telecommunications market focused on SME and mid-market customers is 
fragmented and includes many smaller operators which are typically privately 
owned. The Enlarged Group will have the benefit of being able to offer 
Consolidated Ordinary Shares as consideration for acquisitions from private 
owners and hence exposing them to the strategy and performance of the Enlarged 
Group. In addition, equity participation is expected to assist with the 
retention of ambitious management teams brought in from any future acquisitions. 
The Directors believe that, given current economic conditions, acquisitions may 
be available at advantageous prices. 
 
 
In many cases, the Directors expect that any customer bases acquired will be 
serviced largely from the existing operational platform of the Enlarged Group 
enabling the Enlarged Group to benefit from cost efficiencies. 
 
 
Following completion of the Acquisitions, the Directors believe that the 
Enlarged Group will be well positioned to pursue a consolidation strategy. Their 
intention is to acquire further SME and mid-market telecommunications operators, 
funded by a combination of cash, debt and Consolidated Ordinary Shares. 
 
 
3. Role of Peter Dubens in the Acquisitions and with the Vialtus Vendor 
 
 
The holding entity of the Vialtus Vendor and Host Europe Seven Limited (being, 
along with the Vialtus Vendor, a seller of shares in Vialtus, to the Company 
pursuant to the First Vialtus Acquisition Agreements) is Oakley L.P., a private 
equity fund which acquired certain current subsidiaries of Vialtus from Freedom4 
as part of the acquisition of the Host Europe Group in April 2008. 
 
 
In August 2007, OCIL raised GBP100 million in a placing and its shares were 
admitted to trading on AIM. OCIL was established to provide investors with 
exposure to the investment strategy being pursued by Oakley L.P.. In October 
2007, OCIL committed EUR140 million to the first closing of Oakley L.P.. 
 
 
Peter Dubens, who is Non Executive Chairman of Freedom4, is a director of OCIL 
(although he owns no shares in OCIL). 
 
 
Peter Dubens is also interested in the Vialtus Vendor and Host Europe Seven 
Limited by virtue of his personal commitment of EUR15 million to the first closing 
of Oakley L.P. (representing approximately 6.07 per cent. of the total 
commitments to Oakley L.P.). 
 
 
Peter Dubens is a director of Oakley Capital (Bermuda) Limited, Oakley L.P.'s 
investment manager, which is the entity responsible for making the investment 
decision as to whether the Vialtus Assets are sold. 
 
 
Peter Dubens has participated in the investment manager's discussions as to 
whether to proceed with the disposal of the Vialtus Assets and on what terms. 
 
 
Peter Dubens is a director of and shareholder in Oakley Capital Limited, 
investment adviser to Oakley L.P.. Oakley Capital Limited provides investment 
advice, arranges and negotiates investment transactions on behalf of Oakley L.P. 
and Oakley Capital (Bermuda) Limited and generally represents Oakley Capital 
(Bermuda) Limited in relation to various matters. Peter Dubens, along with 
others, participates in Oakley L.P.'s profits by means of a carried interest (in 
addition to his participation as a limited partner in Oakley L.P.). 
 
 
The Company holds no shares in OCIL and has itself made no commitment to invest 
in Oakley L.P. 
 
 
Peter Dubens has not taken part in decisions of Freedom4 relating to the Vialtus 
Acquisition. 
 
 
Accordingly, an independent committee of the Board, comprising all of the 
Independent Directors and chaired by Christina Kennedy, was established to 
consider any proposals in relation to the Vialtus Acquisition. Peter Dubens has 
therefore not taken part, inter alia, in the acquisition process relating to the 
Vialtus Assets within the Company, the decision to propose the Resolution 
relating to the approval of the Vialtus Acquisition, nor in the recommendation 
given in relation to that Resolution. These matters have been dealt with by the 
Independent Directors. 
 
 
Peter Dubens, who owns 58,333,334 Unconsolidated Ordinary Shares, being 
approximately 5.4 per cent. of the Existing Ordinary Shares of the Company, has 
also undertaken to abstain from voting on the Resolution relating to the 
approval of the Vialtus Acquisition. 
 
 
It is proposed that Peter Dubens will be the Executive Chairman of the Enlarged 
Group. 
 
 
4. Information on Freedom4 
 
 
Freedom4 is a provider of wireless telecommunications services in the UK. 
Following the disposal of the group's broadband and voice divisions in 2007 and 
the disposal of the web hosting and data solutions businesses in 2008, 
Freedom4's remaining trading businesses focus on providing wireless broadband 
services, and comprise a WiMAX joint venture with Intel (Freedom4 Limited), and 
a WiFi aggregation business (Freedom4 WiFi Limited). 
 
 
Freedom4 has a 52 per cent. share in Freedom4 Limited, which owns 84 MHz of 
licensed spectrum in the 3.6 GHz frequency band. This is the largest block of 
licensed spectrum in the UK which is designated for wireless broadband access, 
and provides national coverage. Freedom4 Limited has built WiMAX networks, 
comprising 42 base stations, of which 15 are live, in three initial target 
cities (Manchester, Milton Keynes and Warwick). The 3.6 GHz spectrum licence 
currently permits only fixed wireless broadband access, but Freedom4 Limited has 
submitted a request to Ofcom for a variation in the licence to allow it to offer 
mobile WiMAX services. 
 
 
Under the same licence Freedom4 Limited also owns 84 MHz of licensed spectrum in 
the 4.0 GHz frequency band, and four further licences provide ownership of 2x 
112 MHz of licensed spectrum in the 28 GHz frequency band. These blocks of 
spectrum also provide Freedom4 Limited with national coverage and are suitable 
for provision of high capacity fixed link data traffic backhaul. 
 
 
Freedom4 WiFi Limited has agreements with major WiFi operators which provide 
access to over 4,000 "hot-spots" in the UK including hotel chains and airports. 
In addition Freedom4 WiFi Limited has international roaming agreements which 
provide access to approximately 55,000 WiFi "hotspots" worldwide. Freedom4 WiFi 
Limited also has an agreement with a UK telecoms operator and at the end of 2008 
launched a combined 3G and WiFi access service, to provide customers with the 
best available data connection while on the move. 
 
 
Freedom4's strategy is to focus on becoming a leading provider of wireless 
broadband communications, providing a multi-technology mobile broadband service. 
At the same time Freedom4 is closely aligning the financial profile of the 
business of Freedom4 Limited to reflect the development of the market. 
 
 
5. Information on the Daisy Group 
 
 
Daisy was established in 2001 to provide cost-effective communication services 
to business customers across the UK. Daisy's range of solutions includes fixed 
and mobile voice, data and IP, standard and specialist non-geographic numbers, 
line rental and broadband, anti-virus and antispam, laptops and utilities. 
 
 
Daisy now has more than 30,000 SME customers and operates from Lancashire. 
 
 
Daisy provides its services through two divisions: Daisy Communications and 
Tempest, the Daisy billing and wholesale managed services division. Both are 
supported in the UK by its call centre in Lancashire. 
 
6. Information on the Vialtus Group 
 
 
Vialtus is a provider of managed IP hosting and connectivity solutions to over 
5,000 SME and midmarket companies in the UK. The Vialtus Business has been 
operating as one of three distinct business divisions within the Host Europe 
Group. The Host Europe Group was acquired from Freedom4 by Oakley L.P. in April 
2008. 
 
 
Vialtus operates an end to end "Data Centre to Device" service strategy, 
offering a practical model for easily scalable and often virtualised resources 
to be provided as a single service over the internet to mid-market companies. 
 
 
7. Details of the Placing 
 
 
The Company is expected to raise GBP83.0 million (gross) pursuant to the Placing 
through the issue of the Placing Shares to new and existing institutional 
investors at the Placing Price. 
 
 
Under the Placing Agreement, Liberum has agreed, as agent for the Company, 
conditional, inter alia, on Admission taking place not later than 1 August 2009 
(or such later date as Liberum and the Company may agree, but not later than 31 
August 2009) to use its reasonable endeavours to procure placees for the Placing 
Shares, in each case at the Placing Price. The Placing Agreement contains 
provisions entitling Liberum to terminate the Placing at any time prior to 
Admission in certain circumstances. The Placing is not underwritten. 
 
 
8. Details of the Acquisitions 
 
 
The Acquisitions are inter-conditional, such that the Daisy Acquisition may not 
complete unless the Vialtus Acquisition completes, and vice versa. In view of 
the size of the Acquisitions, in relation to Freedom4, the Acquisitions 
constitute a Reverse Takeover of Freedom4 under the AIM Rules. As such, the 
Acquisitions are subject to the approval of Shareholders, which is being sought 
at the General Meeting convened for 20 July 2009. Subject to such approval and 
to satisfaction of the other conditions relating to the Acquisitions, completion 
of the Acquisitions is expected to take place on 21 July 2009, the expected date 
of Admission. Further details of each of the Acquisitions are as follows: 
 
 
The Daisy Acquisition 
 
 
Under the terms of the Daisy Acquisition Agreement, Freedom4 has conditionally 
agreed to acquire all of the issued shares of Daisy at Completion. The Daisy 
Acquisition Agreement is conditional on approval of the Resolutions, 
satisfaction of each of the conditions to which the Placing Agreement and the 
Vialtus Acquisition Agreements are respectively subject (other than any such 
conditions relating to Admission or to the Daisy Acquisition Agreement having 
become unconditional) and Admission occurring. 
 
 
The Daisy Optionholders have elected to exercise the respective Daisy Options 
held by them and thereby to acquire up to 5,734 new shares of Daisy. Matthew 
Riley is currently interested in the entire issued share capital of Daisy. The 
Daisy Optionholders will each enter into an Optionholder Agreement for the 
purposes of selling to the Company the relevant shares in Daisy acquired by 
them. Completion of the sale of shares in Daisy pursuant to the Optionholder 
Agreements will take place immediately following the sale and purchase of shares 
in Daisy pursuant to the Daisy Acquisition Agreement. The consideration payable 
by the Company in connection with the acquisition of all of the issued shares of 
Daisy shall be allocated as follows: 
 
 
  *  Matthew Riley - GBP27.6 million in cash and 61,218,610 Daisy Completion Shares 
  *  Daisy Optionholders - in aggregate, GBP2.4 million in cash and 2,531,390 Daisy 
  Completion Shares 
 
 
The Vialtus Acquisition 
 
 
Under the terms of the Vialtus Acquisition Agreements, further details of which 
are set out in paragraph 19.1 of Part VIII of this document, Freedom4 has 
conditionally agreed to acquire all of the issued shares of Vialtus and those 
shares in Vialtus Solutions Limited not already owned by Vialtus at Completion. 
The Company has also agreed to acquire, by way of assignment, debt owed by 
Vialtus Solutions Limited to the Vialtus Vendor. The Vialtus Vendor and Host 
Europe Seven Limited are continuing subsidiaries of Oakley L.P.. The Vialtus 
Acquisition Agreements are conditional on approval of the Resolutions, 
satisfaction of each of the conditions to which the Placing Agreement and the 
Daisy Acquisition Agreement are respectively subject (other than any such 
conditions relating to Admission or to the Vialtus Acquisition Agreements having 
become unconditional) and Admission occurring. The consideration payable to the 
Vialtus Vendor in connection with the sale of those shares in Vialtus Solutions 
Limited not already owned by Vialtus and the assignment of GBP29.0 million of 
the Vialtus Debt under the terms of the Second Vialtus Acquisition Agreement 
comprises the Vialtus Completion Shares. The consideration due to the Vialtus 
Vendor in connection with the assignment of the balance of GBP13.0 million of 
the Vialtus Debt comprises GBP13.0 million in cash. The consideration payable to 
the Vialtus Vendor and Host Europe Seven Limited in connection with the sale of 
all of the issued shares of Vialtus is GBP2 in aggregate. 
 
 
9. Share Capital Restructuring 
 
 
The Board is proposing to undertake a restructuring of the share capital of the 
Company. In order to consolidate the number of shares in issue and to allow the 
Proposals to proceed at an appropriate pricing, it is proposed to carry out the 
Share Consolidation. Under the Share Consolidation, it is proposed that the 
issued and unissued Unconsolidated Ordinary Shares will be consolidated so that 
every 20 Unconsolidated Ordinary Shares of 0.1p each will be consolidated into 
one Consolidated Ordinary Share of 2p. Shareholders with a holding of 
Unconsolidated Ordinary Shares which is not exactly divisible by 20 will have 
their holdings rounded down to the nearest whole number of Consolidated Ordinary 
Shares. Holders of fewer than 20 Unconsolidated Ordinary Shares will not be 
entitled to receive any Consolidated Ordinary Shares following the Share 
Consolidation. Any fractions arising from the Share Consolidation will be 
aggregated and sold for the benefit of the Company. 
 
 
All Existing Warrants and options (in each case, to the extent not terminated) 
granted under the Share Option Scheme will be consolidated in the same way as 
the Unconsolidated Ordinary Shares. The New Warrants will relate to Consolidated 
Ordinary Shares. 
 
 
The rights attaching to the Consolidated Ordinary Shares will be identical in 
all respects to those of the Unconsolidated Ordinary Shares. 
 
 
The Share Consolidation will mean that the Consolidated Ordinary Shares will 
have a nominal value of 2p each. The total number of Existing Ordinary Shares 
held by Shareholders on Admission will be [51,743,394] (although this number 
could vary due to fractional entitlements which may arise as a result of the 
Share Consolidation). 
 
 
Authority for the Share Consolidation will be sought by the proposal of 
Resolution 1 at the General Meeting. 
 
 
Following the Share Consolidation, replacement share certificates will be 
despatched to Shareholders in respect of newly denominated Existing Ordinary 
Shares held in certificated form. Share certificates are expected to be 
despatched by 4 August 2009. Existing certificates will be void. In respect of 
Existing Ordinary Shares held in uncertificated form, CREST accounts will be 
credited with the newly denominated Existing Ordinary Shares on the record date 
for the Share Consolidation, being 20 July 2009. 
 
 
The issue and allotment of the New Ordinary Shares will increase the issued 
share capital of the Company by 394 per cent. In order to accommodate the New 
Ordinary Shares and to give the Company flexibility to effect future allotments 
of Consolidated Ordinary Shares (in accordance with the appropriate shareholder 
authorities) it is proposed that the authorised share capital of the Company be 
increased from GBP4,000,000 to GBP10,000,000 by the creation of 300,000,000 
additional Consolidated Ordinary Shares. Authority for the increase in the 
authorised share capital of the Company will be sought by the proposal of 
Resolution 2 at the General Meeting. 
 
 
10. Details of Admission and settlement 
 
 
Application will be made to the London Stock Exchange for admission of the 
Enlarged Share Capital to trading on AIM. It is expected that Admission will 
become effective and that trading in the Enlarged Share Capital will commence on 
21 July 2009. 
 
 
If, for whatever reason, the Proposals are not approved or completed it is 
anticipated that the current suspension of trading of the Existing Ordinary 
Shares will be lifted, the Existing Ordinary Shares will thereafter continue to 
trade on AIM and the Existing Directors will examine other options for the 
Group's future. 
 
 
The Articles permit the Company to issue shares in uncertificated form. CREST is 
a computerized share transfer and settlement system which allows shares and 
other securities to be held in electronic form rather than paper form. 
Accordingly, settlement of transactions in Existing Ordinary Shares and the New 
Ordinary Shares following Admission may take place within the CREST system if 
the relevant Shareholder so wishes. Persons acquiring Consolidated Ordinary 
Shares as part of the Placing may elect to receive Consolidated Ordinary Shares 
in uncertificated form if, but only if, that person is a "system-member" (as 
defined in the CREST Regulations) in relation to CREST. CREST is a voluntary 
system and Shareholders can continue to hold their Ordinary Shares in 
certificated form and to continue dealing based on share certificates and stock 
transfer forms. 
 
 
11. New Board and key employees 
 
 
New Board 
 
 
Peter Dubens - Executive Chairman (aged 42) 
Peter Dubens is the founder of a privately owned asset management and advisory 
group comprising private equity, fund of funds, corporate finance, capital 
introduction and venture capital operations. 
 
 
Peter is the Managing Director of Oakley Capital Limited, the investment adviser 
to Oakley L.P., a European middle-market private equity fund specialising in 
turnarounds, restructurings and consolidation opportunities. During the last 20 
years Peter has acquired, restructured and consolidated public and private 
companies. Most recently as executive chairman, he led the formation of two 
public companies, being 365 Media Group plc and Pipex Communications plc (now 
Freedom4 Group plc). The 365 Media platform consolidated 12 businesses within 
the online sports information and gambling industry and the Pipex platform 
consolidated 14 businesses within the telecoms and internet industries. 365 
Media was sold for over GBP102 million to BSkyB and the main operating divisions 
of Pipex were sold for approximately GBP330 million, on a cash and debt free 
basis, before adjustments. 
 
 
Peter Dubens is, at the date of this document, non executive chairman of the 
Company. Following Admission, Peter will continue as chairman in an executive 
capacity. 
 
 
Matthew Riley - CEO (aged 35) 
Matthew Riley established Daisy in 2001 and has led the company through rapid 
growth to become one of the UK's leading business communication providers to the 
SME and mid market. Daisy is regularly recognised for outstanding growth in 
independent surveys and awards programmes. 
 
 
Prior to establishing Daisy, Matthew began his career as a sales executive at FH 
Brown, achieving rapid promotion to Regional Area Sales Manager and subsequently 
Regional Manager in 1997. He then joined German telecoms company DeTeWe AG, 
progressing to UK Sales Manager in 1999. 
 
 
Matthew subsequently established and sold three start-up companies before 
founding Daisy. Matthew's achievements with Daisy have been independently 
recognised through the award of Ernst & Young's UK Young Entrepreneur of the 
Year Award in 2007. In the same year he was also the inaugural winner of the 
Bank of Scotland Entrepreneur Challenge, securing a GBP5 million interest free 
loan from Bank of Scotland and mentoring from Sir Philip Green. 
 
 
Stewart Porter - CFO & Company Secretary (aged 56) 
Stewart Porter is a Chartered Accountant and holds a Bachelor of Science degree 
in Electrical Engineering. Stewart was a founding director of Zipcom plc (now 
Freedom4 Group plc) in 2000 and has been instrumental in the development of the 
Group over this period. 
 
 
Prior to this, Stewart spent eight years at Cable & Wireless in a number of 
senior financial positions most recently as Finance Director for Global Markets, 
the division of Cable & Wireless responsible for serving the Group's 
multinational customers. Subsequently he was closely involved with a number of 
telecommunications sector start-ups around Europe. 
 
 
Mike Read - CEO - Freedom4 Wireless Broadband (aged 61) 
Mike Read has over 30 years experience in the communications and internet 
industry. He started his career in British Telecom where he focused mainly on 
international activities. This culminated in him playing a key role in Concert, 
the US-based joint venture between British Telecom and MCI, and later leading 
all of British Telecom's global engineering and operational activities. 
 
 
In the mid 1990s, Mike joined ANS (an AOL company) to lead sales, marketing and 
product management in the rapidly expanding internet market, in advance of its 
eventual sale to Worldcom. In 1999 he became President of OneMain.com, a US 
NASDAQ-listed ISP roll-up, building the company to approximately 900,000 
customers through organic growth and the purchase of 30 companies. OneMain was 
sold to Earthlink in September 2000. Mike returned to the UK to lead XO Europe 
as CEO. After a strategic review in October 2002, the business was sold and 
became a cornerstone of Freedom4; Mike became CEO of the larger AIM-listed 
company which was later renamed Pipex Communications plc. 
 
 
Laurence Blackall (age 58) 
Laurence Blackall has had a 30 year career in the information, media and 
communication industries. After an early career that included Virgin and the 
SEMA Group, Mr Blackall was appointed a director of Frost & Sullivan and a 
vice-president of McGraw Hill. Mr Blackall was also CEO of AIM listed Internet 
Technology Group, which he founded in 1995, and Chairman of Boat International 
Publications. Mr Blackall was also instrumental in the creation of Pipex 
Communication plc (now Freedom4). He is also a director of OCIL. 
 
 
Mr Blackall has an MA in marketing and currently holds a number of directorships 
in public and private UK companies. 
 
 
Christina Kennedy - Independent Non Executive Director (aged 60) 
Christina Kennedy has a Masters Degree in Business Administration and is a 
Fellow of the Chartered Institute of Secretaries. Until a few years ago she 
worked on a consultancy basis at board level acting as Company Secretary in a 
variety of listed companies, including AIM, FTSE 250 and overseas companies with 
a secondary listing. She has more recently held roles as a non executive 
director. 
 
 
Christina's industry experience is wide ranging and includes manufacturing, 
leisure and service companies. She has worked in a consultancy capacity as 
corporate governance Adviser for a major UK pension fund and therefore has a 
good understanding of investors' governance requirements. Christina's experience 
has involved her working with boards on acquisitions; restructuring; board 
compositions and appointments; directors' service contracts and remuneration 
issues; long term incentive schemes; share options and risk management issues 
related to internal control requirements. 
 
 
Ian McKenzie - Non Executive Director (aged 58) 
Ian McKenzie has spent more than 40 years in the telecommunication and broadcast 
industry working in various international markets. He initially worked with 
British Telecom in a number of senior positions, leading divisions to 
successfully target business and consumer markets with voice, data, broadband 
and complex solution services, both in the UK and Europe. His final position was 
as chief operating officer in the Asia Pacific Region. He then joined Kingston 
Communications as chief operating officer, which he left in 2002. 
 
 
Ian then worked as an advisor and consultant for various private equity 
investors and took non executive chairman roles with a number of businesses, 
including Karneval Media and executive chairman of Invitel in Hungary both of 
which have been sold. He is currently non executive chairman of Daisy 
Communications Ltd, Ceské Radiokomunikace in the Czech Republic and Multicom 
Security AB in Sweden. He also works as a Senior Telecommunications Advisor to 
GMT Communications Partners LLP. 
 
 
Ian brings with him a wealth of experience from telecommunications, media and 
broadcast sectors targeting business, small-medium enterprises and consumer 
markets. 
 
 
Key employees after Admission 
 
 
Maria Cappella - Vialtus CEO (aged 42) 
With more than 22 years of IT and telecoms experience as a transformation 
manager, Maria has held senior positions in sales, marketing, merchandising, 
purchasing and product management for a number of public and private 
organisations. Part of the founding management team of the PC World superstore 
chain, Maria entered the Service Provider market in the mid 1990's assisting in 
the IPO of Internet Technology Group, and was instrumental in its sale to XO 
Communications in 2000. Appointed Vialtus CEO in April 2008, Maria has a strong 
strategy and leadership style based upon her extensive knowledge of the market 
and its drivers. 
 
 
Riki Kinnaird - Vialtus CFO (aged 38) 
Riki Kinnaird holds a Bachelor of Commerce Degree and a Post Graduate Diploma in 
marketing and management from the University of Otago, New Zealand. Riki was 
appointed CFO of Vialtus in August 2008 having previously held the role of Head 
of Strategic Planning at British Telecom Openreach. Riki has held senior 
financial and commercial positions at a number of international 
telecommunications companies including COLT and Equant/Orange Business Services 
and has also provided consultancy services to Vodafone plc. Over his career Riki 
has established a strong reputation for cost and profit transformation. 
 
 
Anthony Riley - Daisy CFO (aged 41) 
Anthony Riley is CFO of Daisy. 
 
 
Anthony studied at the University of Sheffield, gaining a first class honours 
degree in Economics. Following graduation he joined Deloitte in the audit and 
assurance department, where he spent three years undertaking his Association of 
Chartered Accountants qualification and a futher two years in supervisory and 
management roles. 
 
 
He has over 13 years experience of senior financial roles within industry. 
Anthony joined JJB Sports plc in 1995 and was promoted to Associate Finance 
Director in 1999. He played a key role for JJB in the integration of the Sports 
Division business following its acquisition in 1998. 
 
 
Anthony joined Homeserve Claims Management Limited as Finance Director in 2002. 
He helped guide the company through a six year period of significant continued 
growth. 
 
 
Anthony was appointed CFO of Daisy in August 2008. 
 
 
12. Financial Information for Freedom4 Group plc 
 
 
The annual reports, including audited consolidated accounts (including their 
respective audit reports), of Freedom4 for the financial years ending 31 
December 2006, 31 December 2007 and 31 December 2008 are incorporated in this 
document by reference. These accounts are available online at 
www.freedom4group.com. 
 
 
 
13. Current trading of Vialtus and Daisy and prospects of the Enlarged Group. 
 
 
Vialtus unaudited revenue and EBITDA for the quarter ending 31 March 2009 were 
GBP9.3 million and GBP1.4 million respectively. Daisy unaudited revenue for the 
quarter ending 31 March 2009 was GBP13.6 million. Unaudited EBITDA for the same 
period was GBP2.0 million which includes one off director bonuses and payments 
of GBP0.9million. Both businesses are currently trading ahead of the quarter 
ending 31 March 2009 run rate at unaudited EBITDA level. 
 
 
The Directors are confident that there will be considerable opportunities for 
the Enlarged Group to increase revenues across its core business streams in 
particular from cross selling from the Enlarged Group's expanded suite of 
services. It is also expected that the Enlarged Group will considerably improve 
its group financial performance in the current financial year from identified 
cost savings. 
 
 
These savings are expected partly from reduction in duplicated functions and 
partly from efficiencies created by the Acquisitions. The increased financial 
strength and scale resulting from the Acquisitions and Placing will position the 
Enlarged Group as an entity that can lead the consolidation opportunities that 
exist within the markets in which it operates. Indeed, the Directors have 
already identified a number of potential complementary acquisitions and will 
seek to bring some of these to fruition during the course of this year. 
 
 
14. Current market of the Enlarged Group 
 
 
The UK business telecommunications market has grown consistently since 2002, 
with a gradual decline in voice revenues being more than offset by the growth in 
mobile and corporate data revenues. According to Ofcom, total UK revenues from 
business telecoms were GBP13.2 billion in 2007, compared with GBP11.3 billion in 
2002. In 2007 the combined business voice and data market segments accounted for 
GBP6.5 billion of UK business telecoms revenues. Given the current concentration 
of UK mobile revenues among the five major mobile network operators, the 
Existing Directors believe that the fixed voice and corporate data segments 
represent the Enlarged Group's addressable market. 
 
 
British Telecom remains the UK's largest business telecommunications company 
with a 61 per cent. share of the network access and call revenues market, 
followed by Virgin Media, the second largest operator, with 4 per cent. (Ofcom 
2008). Other operators account for the remaining 35 per cent. of the market, 
with aggregate revenues of GBP1.2 billion in 2007. The Existing Directors 
believe that this category provides a useful indication of the size of the 
potential market consolidation opportunity for the Enlarged Group following 
Admission. 
 
 
The UK SME and mid-market telecommunications market is fragmented and includes 
many smaller operators which are typically privately owned. Freedom4 estimates 
that there are more than 25 licensed operators in the UK with revenues of 
between GBP10 million and GBP100 million focusing on the business 
telecommunications market. The Existing Directors also believe these smaller 
operators have typically focused on a more limited product proposition than the 
Enlarged Group's proposed offering. As a result, customers of acquired 
businesses could, in many cases, not have been offered a fully converged access, 
hosting, voice, managed services and mobile product offering on one bill and 
from a single customer service platform. 
 
 
15. Strategy of the Enlarged Group 
 
 
The strategy of the Enlarged Group is to create, through a combination of 
further acquisitions and organic growth, one of the largest UK providers to the 
SME and mid-market of telecommunications services and solutions. The Enlarged 
Group intends to provide its customers with a product set including access, 
hosting, voice, managed services and mobile. 
 
 
The Enlarged Group intends to provide a comprehensive portfolio of products from 
a single operating platform and on a single bill. The Directors believe that, 
with the exception of British Telecom, few, if any, other independent UK 
business telecommunications operators currently provide such a comprehensive 
offering to SME and mid-market customers. 
 
 
In addition, the Enlarged Group will seek to cross-sell new products to existing 
customers and to create a "one-stop-shop" for converged communications 
solutions. The Directors believe that such an offering will also help to reduce 
customer churn. 
 
 
The Enlarged Group will pursue two strategies in order to seek to achieve 
growth. Firstly, the Directors will seek to increase organic growth through a 
combination of improved customer management to reduce churn; a focus on 
cross-selling and up-selling to existing customers to encourage them to take 
more products; and through a focus on direct and indirect sales channels. 
 
 
Secondly, the Enlarged Group will seek to grow through targeted acquisitions, 
designed to increase customer scale and expand the product portfolio. The 
Directors believe that the Enlarged Group will benefit from acquisitions in two 
ways: through cost efficiencies and through opportunities to cross-sell and 
up-sell to new and existing customers. The Directors believe that several 
independent quoted and unquoted telecommunications operators could be potential 
acquisition targets and, given current economic conditions, such acquisitions 
may be achievable at competitive prices. 
 
 
The Directors are undertaking discussions which may lead to further acquisitions 
soon after Admission. The Directors expect that these acquisitions will be 
funded through the assumption of debt by the Enlarged Group and/or through the 
issue of further new Consolidated Ordinary Shares (both to raise cash and as 
consideration). 
 
 
The Directors believe the size of the Enlarged Group could enable it to 
negotiate improved supplier pricing and terms, the most important of which would 
be network products including lines, call minutes and data circuits. 
 
 
In the medium term the Enlarged Group will seek to create further growth 
opportunities through the migration of customers onto Next Generation IP 
products including hosted applications such as Voice over IP. The increased 
scale of the combined revenue and customer bases of the Enlarged Group will, the 
Directors believe, provide a stronger platform to take advantage of the take-up 
of these Next Generation IP products and services. 
 
 
16. Lock-in arrangements 
 
 
Matthew Riley, Peter Dubens and the Vialtus Vendor have undertaken to the 
Company and Liberum, subject to certain exceptions (including the ability to 
accept a takeover offer for the Company and to give an irrevocable undertaking 
to accept a takeover offer for the Company), not to dispose of or transfer any 
Consolidated Ordinary Shares in which they are interested at Admission until one 
month following publication of the Company's audited accounts for the period 
ended 31 March 2010. 
 
 
The aggregate number of Consolidated Ordinary Shares subject to such lock-in 
arrangements is 100,385,276 representing approximately 39.0 per cent. of the 
Enlarged Share Capital. 
 
 
17. Dividend policy 
 
 
The Directors intend to retain earnings in the short term to fund the 
development and growth of the Enlarged Group's business. The Directors will 
consider whether to pay a dividend at an appropriate time. 
 
 
18. Corporate governance 
 
 
The Directors recognise the value of the Combined Code. Following Admission, the 
Enlarged Group will continue to endeavour to comply with the Combined Code, as 
appropriate for a company of its size and resources. The Company has an audit 
committee and a remuneration committee with formally delegated duties and 
responsibilities. 
 
 
Following Admission, the audit committee will be chaired by Laurence Blackall 
and its other members will be Ian McKenzie and Christina Kennedy. The audit 
committee receives and reviews reports from management and the Company's 
auditors relating to the annual and interim accounts and the accounting and 
internal control systems in use by the Company and its subsidiaries. 
 
 
Following Admission, the remuneration committee will be chaired by Christina 
Kennedy and its other members will be Laurence Blackall and Ian McKenzie. The 
remuneration committee reviews the scale and structure of the Directors' and 
senior managers' remuneration and the terms of their service contracts 
(including the grant of options to such persons under the Share Option Scheme). 
The remuneration and terms and conditions of appointment for the non executive 
Directors will be a matter for the New Board. 
 
 
The Company will take all reasonable steps to ensure compliance by the Directors 
and employees with the provisions of the AIM Rules relating to dealings in 
securities of the Company and the Company has adopted a share dealing code for 
this purpose. The New Board will comply with Rule 19 of the AIM Rules relating 
to directors' dealings and will take all reasonable steps to ensure compliance 
by the Enlarged Group's "applicable employees" (as defined in the AIM Rules). 
 
 
19. Share Options and Warrants 
 
 
The Directors recognise the importance of ensuring that employees of the 
Enlarged Group are well motivated and identify closely with the future success 
of the Enlarged Group. The Company has an existing share option scheme, being 
the Share Option Scheme, details of which are set out in paragraph 13 of Part 
VIII of this document. Following Admission, the Company intends to introduce new 
share based incentive arrangements for management and employees. The nature and 
structure of such arrangements have yet to be determined and the Company is 
currently taking advice on such matters. As at the date of grant of any options 
or warrants, the total number of Ordinary Shares which have been or may be 
issued under arrangements for the grant of warrants, the Share Option Scheme and 
any new share based incentive arrangements pursuant to options and warrants 
granted in the ten year period ending on the relevant date of grant may not 
exceed 15 per cent. of the issued ordinary share capital of the Company at that 
date. 
 
 
Certain of the Existing Directors and others hold Existing Warrants to subscribe 
for Unconsolidated Ordinary Shares of the Company. Details of the Existing 
Warrants are set out in paragraph 19.1 of Part VIII of this document. The Board 
has agreed with the Existing Directors who hold Existing Warrants that, subject 
to Completion occurring, the Existing Warrants held by the Existing Directors 
shall be cancelled and that the Existing Directors concerned shall be granted 
New Warrants in respect of an aggregate 2,000,000 Consolidated Ordinary Shares. 
In addition, the Board has agreed with Matthew Riley and with Ian McKenzie that, 
subject to Completion occurring, they shall be granted New Warrants in respect 
of 2,500,000 and 112,500 Consolidated Ordinary Shares respectively. Details of 
the New Warrants are set out in paragraph 19.1 of Part VIII of this document. 
Resolution 5 includes authority for the Directors to allot shares pursuant to 
the New Warrants and Resolution 6 includes a waiver of statutory pre-emption 
rights in connection with the issue of the New Warrants. Upon Completion 
occurring, the outstanding options held by certain of the Existing Directors 
will be cancelled and will not at that time be replaced. The New Warrants are 
designed as an incentivisation related to the future performance of the 
Company's share price. The Existing Warrants were granted at an early stage in 
the process of establishing Freedom4 as a leading provider of broadband and web 
hosting services. This process culminated in the sale by Freedom4 of its 
subsidiaries carrying on a broadband and voice business to Tiscali UK Limited in 
2007 and the sale of the Host Europe Group to Oakley L.P. in 2008. The 
remuneration committee of the Company considers that, in the light of the 
proposed Acquisitions and the Company's strategy to become one of the largest UK 
providers of telecommunications services and solutions to the SME and midmarket, 
it is appropriate for the Existing Warrants and options for certain Directors to 
be cancelled and for the New Warrants to be issued at a time and on terms which 
reflect the beginning of a new strategic direction for the Company and the 
addition of new management to the Board. 
 
 
Options have been granted under the Share Option Scheme in respect of 40,587,666 
Unconsolidated Ordinary Shares. Following Admission and the cancellation of the 
options held by the Existing Directors, options will remain outstanding under 
the Share Option Scheme in respect of 10,500 Consolidated Ordinary Shares. 
Existing Warrants have been granted under the Existing Warrant Instruments in 
respect of 66,580,000 Unconsolidated Ordinary Shares. Following Admission and 
the cancelation of the Existing Warrants held by the Existing Directors and the 
grant of the New Warrants, Existing Warrants and New Warrants will remain 
outstanding under respectively certain of the Existing Warrant Instruments and 
the New Warrant Instruments in respect of 4,906,500 Consolidated Ordinary 
Shares. 
 
 
20. General Meeting 
 
 
Set out at the end of this document is a notice convening the General Meeting of 
the Company to be held at the offices of SJ Berwin LLP, 10 Queen Steet Place, 
London, EC4R 1BE at 10.00 a.m. on 20 July 2009 at which the following 
resolutions will be proposed as ordinary or special resolutions (as the case may 
be): 
 
 
  1.  to approve the Share Consolidation (ordinary resolution); 
  2.  to increase the authorised share capital of the Company (ordinary resolution); 
  3.  to approve the Daisy Acquisition (ordinary resolution); 
  4.  to approve the Vialtus Acquisition (ordinary resolution); 
  5.  to authorise the Directors generally to allot shares (including for the purposes 
  of the Placing, the Acquisitions and the issue of the New Warrants) (ordinary 
  resolution); 
  6.  to waive statutory pre-emption rights in connection with the allotment of 
  Consolidated Ordinary Shares pursuant to the above authority (special 
  resolution); and 
  7.  to change the name of the Company to Daisy Group plc (special resolution) 
 
 
 
The attention of Shareholders is also drawn to the section entitled "Irrevocable 
Undertakings" below and to the recommendations and voting intentions of the 
Existing Directors as set out in the section entitled "Action to be taken" 
below. 
 
 
21. Irrevocable Undertakings 
 
 
Irrevocable undertakings to vote in favour of the Resolutions to approve and 
implement the Proposals have been received from the Existing Directors (other 
than Peter Dubens) and their connected persons in respect of their entire 
aggregate holding of 167,100 Unconsolidated Ordinary Shares (representing 
approximately 0.02 per cent. of the Existing Ordinary Shares). 
 
 
An irrevocable undertaking to vote in favour of the Resolutions (other than the 
resolution numbered 4 to approve the Vialtus Acquisition in respect of which 
Peter Dubens has agreed not to vote) has also been received from Peter Dubens in 
respect of his entire holding of 58,333,334 Unconsolidated Ordinary Shares 
(representing approximately 5.64 per cent. of the Existing Ordinary Shares). 
 
 
Irrevocable undertakings to vote in favour of the Resolutions to approve and 
implement the Proposals have also been received from certain other Shareholders 
in respect of 272,194,968 Unconsolidated Ordinary Shares (representing 
approximately 26.30 per cent. of the Existing Ordinary Shares). 
 
 
In addition, non-binding letters of intent to vote in favour of the Resolutions 
to approve and implement the Proposals have been received from certain other 
Shareholders in respect of 162,634,005 Unconsolidated Ordinary Shares 
(representing approximately 15.70 per cent. of the Existing Ordinary Shares). 
 
 
Accordingly, irrevocable undertakings to vote in favour of the Resolutions 
(other than the Resolution numbered 4 to approve the Vialtus Acquisition) to 
approve and implement the Proposals have been received in respect of a total of 
330,695,402 Unconsolidated Ordinary Shares (representing approximately 31.96 per 
cent. of the Existing Ordinary Shares). Irrevocable undertakings and non-binding 
letters of intent to vote in favour of the Resolutions (other than Resolution 4 
to approve the Vialtus Acquisition) to approve and implement the Proposals have 
been received in respect of a total of 493,329,407 Unconsolidated Ordinary 
Shares (representing approximately 47.67 per cent. of the Existing Ordinary 
Shares). Irrevocable undertakings to vote in favour of the Resolution numbered 4 
to approve the Vialtus Acquisition have been received in respect of a total of 
272,362,068 Unconsolidated Ordinary Shares (representing approximately 26.32 per 
cent. of the Existing Ordinary Shares). Irrevocable undertakings and non-binding 
letters of intent to vote in favour of Resolution 4 to approve the Vialtus 
Acquisition have been received in respect of a total of 434,996,073 
Unconsolidated Ordinary Shares (representing approximately 42.03 per cent. of 
the Existing Ordinary Shares). 
 
 
22. Taxation 
 
 
If you are in any doubt as to your tax position, or are subject to tax in a 
jurisdiction other than the United Kingdom, you should contact your professional 
adviser immediately. 
 
 
23. Treasury shares 
 
 
On 30 June 2009 the Company cancelled 41,138,559 ordinary shares held in 
treasury therefore the Company's total issued share capital at today's date is 
1,034,867,898 ordinary shares of 0.1 pence each and holds no ordinary shares in 
treasury. 
 
 
 
 
24. Recommendation and voting intentions 
 
 
Given the extent of his interests in the Vialtus Acquisition, Peter Dubens, the 
Non Executive Chairman of the Company, has not participated in the Board's 
deliberations with regard to the Vialtus Acquisition. 
 
 
The Existing Directors consider that the Daisy Acquisition, the Placing and the 
Share Consolidation are in the best interests of the Company and Shareholders as 
a whole. The Independent Directors consider that the Vialtus Acquisition is in 
the best interests of the Company and Shareholders as a whole. 
 
 
Accordingly, the Independent Directors unanimously recommend that Shareholders 
vote in favour of the Resolution numbered 4 to approve the Vialtus Acquisition 
to be proposed at the General Meeting, as they have irrevocably undertaken to do 
in respect of their own shareholdings, which in aggregate amount to 0.02 per 
cent. of the Existing Ordinary Shares. 
 
 
The Existing Directors unanimously recommend that Shareholders vote in favour of 
the Resolutions (other than the Resolution numbered 4 to approve the Vialtus 
Acquisition) to be proposed at the General Meeting, as they have irrevocably 
undertaken to do in respect of their own shareholdings, which in aggregate 
amount to 5.56 per cent. of the Existing Ordinary Shares. 
 
 
 
 
 
 
 
 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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