Ultra Electronics Holdings PLC Acquisition and Placing (4197K)

Share Name	Share Symbol	Market	Type	Share ISIN	Share Description
Ultra Electronics Holdings Plc	LSE:ULE	London	Ordinary Share	GB0009123323	ORD 5P

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	3,500.00	3,496.00	3,498.00				0.00	01:00:00

Industry Sector	Turnover	Profit	EPS - Basic	PE Ratio	Market Cap
	0	0		N/A	0

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RNS Number : 4197K

Ultra Electronics Holdings PLC

07 July 2017

7 July 2017

THIS ANNOUNCEMENT, INCLUDING THE APPICES AND THE INFORMATION IN THEM, IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, THE REPUBLIC OF SOUTH AFRICA, HONG KONG, SINGAPORE OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL. FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

Ultra Electronics Holdings plc ("Ultra")

Proposed Acquisition of Sparton Corporation ("Sparton")

And

Placing of New Ordinary Shares to raise GBP133.7m (net)

Ultra, the international defence, security, transport and energy company, is pleased to announce that it has entered into a conditional merger agreement to acquire New York Stock Exchange-listed Sparton for $23.50 per Sparton share in cash, valuing Sparton's total equity(1) at approximately $234.8m (GBP180.6m(2) ) (the "Acquisition"). As part of the Acquisition, Ultra will assume Sparton's net debt at Completion. Adjusting for the targeted cost savings, this equates to a pro forma FY2016 EV/EBITDA multiple of 7.6 times.

Sparton is a provider of design, development and manufacturing services for complex electromechanical devices, as well as sophisticated engineered products. Sparton has two reportable business segments: Engineered Components & Products ("ECP") and Manufacturing & Design Services ("MDS"). ECP is Ultra's 50/50 partner in the long-standing ERAPSCO joint venture, which develops, manufactures and supports all US sonobuoys supplied to the US Department of Defense ("US DoD"). Ultra's intention is to dispose of the MDS division by the end of Q1 2018 as it considers it to be non-core to the Combined Group going forward and is in advanced discussions with several interested parties in relation to this disposal.

Highlights of the Acquisition:

-- The ECP Division of Sparton is an excellent strategic fit with Ultra's existing activities in a segment in which the Ultra Group has extensive experience and well established customers

   --      Enhances Ultra's continuing relationship with a major customer 
   --      Increases exposure to the growing sonobuoy segment 
   --      Attractive financial returns for Ultra 
   --      Allows Ultra to secure an important revenue and earnings stream

Ultra also announces today the launch of a placing with institutional investors of 7,047,168 new ordinary shares of 5 pence each in the capital of Ultra (the "Placing Shares") at a price of 1,950 pence per Placing Share (the "Placing Price"), representing approximately 9.9% of Ultra's existing issued share capital (the "Placing"). The net proceeds of the Placing will be used to part-fund the Acquisition, with the remaining Acquisition consideration being funded through drawdown under the Ultra Group's existing bank facilities. The Placing is not conditional upon Completion. The Placing is subject to the terms and conditions set out in Appendix 1 (which forms part of this Announcement).

Rakesh Sharma, Chief Executive of Ultra, commented:

"I am pleased to announce today the proposed acquisition of Sparton and associated equity placing. The acquisition of Sparton brings strategic and financial benefits to Ultra and the Ultra Board recommends this Acquisition to our investors.

Ultra has worked with the ECP Division of Sparton, in a joint venture, for over 10 years. This close relationship has benefitted our major customer, the US DoD, through more effective use of the available engineering budget. Ultra's acquisition of Sparton "preserves the status quo" for the US Navy and ensures continuity and reliability of supply to it and our other international customers. The unified management structure and increased focus are expected, over time, to bring benefits beyond those that we have been able to achieve through the JV. On the completion of our acquisition of Sparton, I look forward to working with the people in Sparton to deliver these benefits and further our combined position as a leading supplier in the Underwater Warfare segment and as a supplier to the US DoD."

Joseph Hartnett, Interim Chief Executive of Sparton, commented:

"The combination of these two enterprises represents a unique opportunity to create a more robust supplier to the US DoD while simultaneously positioning the combined businesses to utilize assets in a much more efficient manner."

The Acquisition is subject to relevant anti-trust, regulatory and shareholder approvals, as described further in this Announcement. Since the Acquisition constitutes a Class 1 transaction for the purposes of the Listing Rules, these approvals include the approval of the Acquisition by Ultra Shareholders. Completion is targeted by 1 January 2018.

Ultra will in due course send a circular to Ultra Shareholders convening a general meeting to approve the Acquisition. The Ultra Board considers the Acquisition to be in the best interests of Ultra and the Ultra Shareholders as a whole. Accordingly, the Ultra Board intends to recommend that Ultra Shareholders vote in favour the resolution in respect of the Acquisition to be proposed at the Ultra General Meeting, as the Ultra Directors intend to do in respect of their own beneficial holdings of 351,409 Ultra Shares, representing, in aggregate, approximately 0.50% of the total issued share capital of Ultra as at 6 July 2017, being the Last Practicable Date.

A conference call for analysts and investors will be held today at 8:00a.m. For further details please call Susan McErlain (Ultra) or James White (MHP).

This summary should be read in conjunction with the full text of the following Announcement and its Appendices including, in particular, the risks and other factors that should be considered which are set out in Appendix 3. Capitalised terms used in this Announcement have the meanings given to them in Appendix 2.

Appendix 1 to this Announcement (which forms part of this Announcement) sets out the terms and conditions of the Placing. Persons who choose to participate in the Placing, by making an oral or written offer to acquire Placing Shares, will be deemed to have read and understood this Announcement in its entirety (including Appendix 1) and to be making such offer on the terms and subject to the conditions herein, and to be providing the representations, warranties, agreements, acknowledgements and undertakings contained in Appendix 1.

Notes:

   (1)   Valuation of Sparton's total equity is calculated on a fully-diluted basis 
   (2)   Conversion of $ figures to GBP in this Announcement are at an exchange rate of $1.30: GBP1.00

For further information contact:

 
 Ultra Electronics Holdings 
  plc                                  +44 (0) 20 8813 4300 
 Rakesh Sharma, Chief Executive 
 Amitabh Sharma, Group Finance 
  Director 
  Susan McErlain, Corporate 
  Affairs Director 
 
 Investec Bank plc (Sole Bookrunner 
  and Broker)                          +44 (0) 20 7597 5970 
 Christopher Baird / Keith 
  Anderson / Carlton Nelson 
 
 RBC (Financial Adviser)               +44 (0) 20 7489 1188 
 Mark Preston / Paul Betts 
  / Louise Melikian 
 
 Guggenheim Securities (Financial 
  Adviser)                             +1 212 739 0700 
 
 Jon Huerta / Drew Heimlich 
 
 MHP Communications                    +44 (0) 20 3128 8756 
 
 James White

The information contained within this Announcement is deemed by Ultra to constitute inside information as stipulated under the Market Abuse Regulation (EU) No.596/2014. By the publication of this Announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. The person responsible for arranging for the release of this Announcement on behalf of Ultra is Sharon Harris (Company Secretary and General Counsel).

About Ultra

Ultra Electronics is an internationally successful defence, security, transport and energy company with a long track record of development and growth. The Ultra Group manages a portfolio of specialist capabilities generating innovative solutions to customer needs. Ultra applies electronic and software technologies in demanding and critical environments ranging from military applications, through safety-critical devices in aircraft, to nuclear controls and sensor measurement. These capabilities have seen the Ultra Group's highly-differentiated products contributing to a large number of platforms and programmes.

Ultra has world-leading positions in many of its specialist capabilities and, as an independent, non-threatening partner, is able to support all of the main prime contractors in its sectors. As a result of such positioning, Ultra's systems, equipment or services are often mission or safety-critical to the successful operation of the platform to which they contribute. In turn, this mission-criticality secures Ultra's positions for the long-term which underpins the superior financial performance of the Ultra Group.

Ultra offers support to its customers through the design, delivery and support phases of a programme. Ultra businesses have a high degree of operational autonomy where the local management teams are empowered to devise and implement competitive strategies that reflect their expertise in their specific niches. The Ultra Group has a small head office and executive team that provide to the individual businesses the same agile, responsive support that they provide to customers, as well as formulating Ultra's overarching, corporate strategy.

Across the Ultra Group's three divisions, Ultra operates in the following eight market segments:

 
 -- Aerospace        -- C2ISR 
 -- Land             -- Nuclear 
 -- Communications   -- Infrastructure 
 -- Maritime         -- Underwater 
                      Warfare

IMPORTANT NOTICES

No action has been taken by Ultra or Investec or any of their respective affiliates, agents, directors, officers or employees that would permit an offer of the Placing Shares or possession or distribution of this Announcement or any other offering or publicity material relating to such Placing Shares in any jurisdiction where action for that purpose is required.

No prospectus will be made available in connection with the matters contained in this Announcement and no such prospectus is required (in accordance with the Prospectus Directive) to be published. Persons needing advice should consult an independent financial adviser.

THIS ANNOUNCEMENT, INCLUDING THE APPICES AND THE INFORMATION CONTAINED IN THEM, IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, THE REPUBLIC OF SOUTH AFRICA, HONG KONG, SINGAPORE OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL. FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION.THIS ANNOUNCEMENT HAS NOT BEEN APPROVED BY THE LONDON STOCK EXCHANGE, NOR IS IT INTED THAT IT WILL BE SO APPROVED.

The securities referred to herein have not been and will not be registered under the US Securities Act 1933, as amended (the "Securities Act") or under the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold directly or indirectly in or into the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with the securities laws of any state or any other jurisdiction of the United States. Any offering of the Placing Shares in the United States will be made to a limited number of "qualified institutional buyers" as defined in Rule 144A under the Securities Act, pursuant to an exemption from registration under the Securities Act in a transaction not involving any public offering. The Placing Shares are being offered and sold outside the United States in accordance with Regulation S under the Securities Act. No public offering of securities is being made in the United States. No money, securities or other consideration from any person inside the United States is being solicited and, if sent in response to the information contained in this Announcement, will not be accepted.

The relevant clearances have not been, nor will they be, obtained from the securities commission of any province or territory of Canada, no prospectus has been lodged with, or registered by, the Australian Securities and Investments Commission or the Japanese Ministry of Finance; the relevant clearances have not been, and will not be, obtained for the South Africa Reserve Bank or any other applicable body in the Republic of South Africa in relation to the Placing Shares and the Placing Shares have not been, nor will they be, registered under or offering in compliance with the securities laws of any state, province or territory of Australia, Canada, Hong Kong, Japan, New Zealand, Singapore or the Republic of South Africa. Accordingly, the Placing Shares may not (unless an exemption under the relevant securities laws is applicable) be offered, sold, resold or delivered, directly or indirectly, in or into Australia, Canada, Hong Kong, Japan, New Zealand, Singapore or the Republic of South Africa.

Certain statements contained in this Announcement, including those in Appendix 3, constitute "forward-looking statements" with respect to the financial condition, performance, strategic initiatives, objectives, results of operations and business of the Ultra Group, the Sparton Group and the Combined Group.

All statements other than statements of historical facts included in this Announcement are, or may be deemed to be, forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "targets", "plans", "believes", "expects", "aims", "intends", "anticipates", "estimates", "projects", "will", "may", "would", "could" or "should", or words or terms of similar substance or the negative thereof, are forward-looking statements. Forward-looking statements include statements relating to the following: (i) future capital expenditures, expenses, revenues, earnings, synergies, economic performance, indebtedness, financial condition, dividend policy, losses and future prospects; (ii) business and management strategies and the expansion and growth of the Ultra Group's, the Sparton Group's or the Combined Group's operations and potential synergies resulting from the Acquisition; and (iii) the effects of government regulation on the Ultra Group's, the Sparton Group's or the Combined Group's business.

Such forward-looking statements involve risks and uncertainties that could significantly affect expected results and are based on certain key assumptions. Many factors could cause actual results, performance or achievements to differ materially from those projected or implied in any forward-looking statements. The important factors that could cause the Ultra Group's, the Sparton Group's or the Combined Group's actual results, performance or achievements to differ materially from those in the forward-looking statements include, among others, economic and business cycles, the terms and conditions of the Ultra Group's, the Sparton Group's or the Combined Group's financing arrangements, foreign currency rate fluctuations, competition in the Ultra Group's, the Sparton Group's or the Combined Group's principal markets, acquisitions or disposals of businesses or assets and trends in the Ultra Group's, the Sparton Group's or the Combined Group's principal industries. Due to such uncertainties and risks, readers are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof.

Readers of this Announcement are advised to refer, in particular, to Appendix 3 of this Announcement for a more complete discussion of the factors that could affect the Ultra Group's, the Sparton Group's or the Combined Group's future performance and the industry in which the Ultra Group and the Sparton Group operate or the Combined Group would operate. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this Announcement may not occur.

The forward-looking statements contained in this Announcement speak only as of the date of this Announcement. Ultra, the Ultra Directors, Investec, RBC and Guggenheim Securities each expressly disclaim any obligation or undertaking to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by applicable law or regulation, the Listing Rules, the DTRs, the rules of the London Stock Exchange or the FCA.

Investec Bank plc ("Investec") and RBC Europe Limited ("RBC") are each authorised by the Prudential Regulatory Authority and regulated in the United Kingdom by the Prudential Regulation Authority and the Financial Conduct Authority and are each acting exclusively for Ultra and no one else in connection with the Acquisition, the Placing, the content of this Announcement and other matters described in this Announcement. Investec and RBC will not regard any other person as their respective clients in relation to the Acquisition, the Placing, the content of this Announcement and other matters described in this Announcement and will not be responsible to anyone (including any Placees) other than Ultra for providing the protections afforded to their respective clients or for providing advice to any other person in relation to the Acquisition, the Placing, the content of this Announcement or any other matters referred to in this Announcement.

Guggenheim Securities, LLC ("Guggenheim Securities"), a broker dealer registered with the United States Securities and Exchange Commission and a member of the U.S. Financial Industry Regulatory Authority, has been engaged by Ultra as its financial advisor in connection with the Acquisition. Guggenheim Securities is not acting for Ultra or anyone else in connection with the Placing or any other matter described in this Announcement. Guggenheim Securities will not regard any person other than Ultra as its client in relation to the Acquisition, will not regard any person (including any Placees) as its client in relation to the Placing or any other matter described in this Announcement and will not be responsible for providing advice or any of the protections afforded to its clients to any person other than Ultra in relation to the Acquisition or to any person in relation to the Placing or any other matter described in this Announcement.

No representation or warranty, express or implied, is or will be made as to, or in relation to, and no responsibility or liability is or will be accepted by Investec or by any of its respective affiliates or agents as to, or in relation to, the accuracy or completeness of this Announcement or any other written or oral information made available to or publicly available to any interested party or its advisers, and any liability therefore is expressly disclaimed.

This Announcement contains certain financial measures that are not defined or recognised under IFRS (International Financial Reporting Standards), including EBITDA (being earnings before interest, tax, depreciation, amortisation). Information regarding these measures are sometimes used by investors to evaluate the efficiency of a company's operation and its ability to employ its earnings toward repayment of debt, capital expenditures and working capital requirements. There are no generally accepted principles governing the calculation of these measures and the criteria upon which these measures are based can vary from company to company. These measures, by themselves, do not provide a sufficient basis to compare Ultra's performance with that of other companies and should not be considered in isolation or as a substitute for operating profit or any other measure as an indicator of operating performance, or as an alternative to cash generated from operating activities as a measure of liquidity.

No statement in this Announcement is intended as a profit forecast or estimate for any period and no statement in this Announcement should be interpreted to mean that earnings, earnings per share or income, cash flow from operations or free cash flow for the Ultra Group, the Sparton Group or the Combined Group, as appropriate, for the current or future years would necessarily match or exceed the historical published earnings, earnings per share or income, cash flow from operations or free cash flow for the Ultra Group, the Sparton Group or the Combined Group, as appropriate.

Neither the content of Ultra's website (or any other website) nor the content of any website accessible from hyperlinks on Ultra's website (or any other website) is incorporated into or forms part of this Announcement.

Proposed Acquisition of Sparton Corporation ("Sparton")

And

Placing of New Ordinary Shares to raise GBP133.7m (net)

   1.         Introduction

Ultra announces that it has entered into a Merger Agreement with Sparton, pursuant to which Ultra will acquire Sparton (the "Acquisition"). Sparton is a provider of design, development and manufacturing services for complex electromechanical devices, as well as sophisticated engineered products. Sparton operates through two business segments: Engineered Components & Products ("ECP") and Manufacturing & Design Services ("MDS"). Under the terms of the Acquisition, Sparton Shareholders will receive $23.50 in cash for each Sparton Share, valuing the total equity of Sparton at $234.8m (GBP180.6m). As part of the Acquisition, Ultra will assume Sparton's net debt at Completion. Adjusting for the targeted cost savings, this equates to a pro forma FY2016 EV/EBITDA multiple of 7.6 times. The Acquisition is to be implemented by way of a merger, on the terms and subject to the conditions of the Merger Agreement, the principal terms of which are described in more detail in paragraph 6 (Principal Terms of the Acquisition) of this Announcement. Ultra's intention is to dispose of the MDS division of Sparton by the end of Q1 2018 as it considers it to be non-core to the Combined Group going forward.

Ultra also announces the launch of a placing with institutional investors of 7,047,168 new ordinary shares of 5 pence each in the capital of Ultra (the "Placing Shares") at a price of 1,950 pence per Placing Share (the "Placing Price"), representing approximately 9.9% of Ultra's existing issued share capital (the "Placing"). The Acquisition will be part-funded by the net proceeds of the Placing, with the remaining Acquisition consideration being funded through drawdown under the Ultra Group's existing bank facilities. The Placing is subject to the terms and conditions set out in Appendix 1 (which forms part of this Announcement).

The Acquisition is subject to relevant anti-trust, regulatory and shareholder approvals, as described further in paragraph 6 (Principal Terms of the Acquisition) of this Announcement. Since the Acquisition constitutes a Class 1 transaction for the purposes of the Listing Rules, these approvals include the approval of the Acquisition by Ultra Shareholders.

Completion is targeted by 1 January 2018.

   2.         Background to and reasons for the Acquisition 
   2.1        Background to sonobuoys

Sonobuoys, amongst other technologies, are a long established element of underwater warfare within the world defence market and are a critical part of the Anti-Submarine Warfare ("ASW") mission for the US Navy and foreign militaries. A sonobuoy is an expendable device that is used to detect, identify, localise and track objects of interest that operate underwater, typically submarines. ASW may be performed covertly by using passive sonobuoys that listen for the sounds emanating from the submarine (propellers, pumps, hydraulic and electrical machinery) or more overtly by using sonobuoys that actively transmit acoustic signals into the water known as active sonar "pings". The returned echoes from these "pings" enable ASW personnel to localise the submarine's position. Sonobuoys are typically air-launched from ASW aircraft and helicopters and can be deployed to different water depths. Once activated, the sonobuoy continuously uplinks its information to the ASW platform where detailed analysis occurs enabling an estimate of submarine position, speed, direction of advance, depth and type to be determined.

The capability of modern submarines in the hands of traditional and emerging adversaries poses a formidable and growing worldwide threat. The US Navy's sonobuoy budget has steadily increased over the past several years. This growth is forecast by the US DoD's five-year plan to continue into the future. The recently released US Navy budget request reflects a compound annual growth rate of 3.4% over the government fiscal years 2018-2022. Most US allied nations prefer to use US sonobuoys. These international sales have historically been approximately 25% of US domestic sonobuoy revenues and are forecast to increase over the next five years.

Ultra is a frontrunner in the sonobuoy business and has held a leading position in the UK, US and Canadian sonobuoy segment for decades. Ultra has grown its presence in the sonobuoy business both organically and by acquisition. Sonobuoys represent one of the Ultra Group's largest capabilities and sit within the Underwater Warfare segment, which accounted for 25% of the Ultra Group's 2016 revenue.

Ultra has had a long-standing interest (held through a wholly owned subsidiary) in a 50/50 joint venture with ECP, known as ERAPSCO. This US Navy-encouraged business relationship was originally formed in 1987 with Ultra subsequently acquiring its original interest in the ERAPSCO joint venture from Raytheon in 1998. Since that time, the business of ERAPSCO has expanded and today ERAPSCO develops, manufactures and supports all current production sonobuoys supplied to the US DoD.

Sonobuoys are complex electro-mechanical devices that are required to deploy and function reliably in harsh maritime operating environments after being launched from an ASW platform at altitude and speed. As they are expendable devices, there is considerable focus on delivering the necessary capabilities at the lowest unit cost. The Ultra Directors believe its USSI operation is pre-eminent in knowing how to build the various sonobuoy products and at a low unit cost. Ultra and Sparton produce tens of thousands of sonobuoys each year and they are two of the very few defence manufacturers of these large volume, high tech products. This has required a culture of working together with the co-operation of the US Navy to value engineer sonobuoy designs, a relationship not easily replicated. Current production sonobuoys are expected to be supplied by ERAPSCO for the next six years. In the future, the US Navy may choose for any new devices to be supplied by more than just ERAPSCO. Nevertheless, the Ultra Directors believe new entrants will require a period of time to design and produce sonobuoys under the rigorous performance standards of the customer. Sonobuoys are typically purchased pursuant to multi-year contract awards. A new entrant will likely have to wait for the next contracting cycle to compete for an award.

Ultra's existing US sonobuoy activities have delivered material annual revenue growth over the three years to 31 December 2016 driven primarily by an increase in the US government's sonobuoy budget and robust international sales.

   2.2        Reasons for the acquisition of ECP

Excellent strategic fit with Ultra's existing activities in a segment in which the Ultra Group has extensive experience and well established customers:

Ultra is a frontrunner in the sonobuoy segment. The designing, manufacturing and selling of sonobuoys is a core capability of the Ultra Group and the acquisition of ECP will enhance this core capability. Through the ERAPSCO joint venture, Ultra knows ECP's business very well and given this long-standing working relationship and the similarity of Ultra's and ECP's operations, the Ultra Board is confident in the Ultra Group's ability to integrate ECP's business. ECP's sonobuoy manufacturing sites will remain in place to ensure security of supply for the US Navy. It is expected that new product development will be consolidated into one location creating a centre of design excellence following the Acquisition.

Enhances Ultra's continuing relationship with a major customer:

Ultra's participation in the ERAPSCO joint venture has brought extensive knowledge, experience and proven performance to a major customer, the US DoD. The US Congress has expressed concerns that the long-running Sparton sale process could impact the continued supply of sonobuoys to the US fleet and require the US DoD to rely on a non-allied nation for the continuing supply of sonobuoys. Ultra is in a unique position to preserve the relationship with a major customer, with the Acquisition "preserving the status quo" for the US Navy and helping to ensure that the delivery of critical assets is not interrupted. The Ultra Board therefore expects the Acquisition not only to maintain ERAPSCO's long standing position as a leading provider of sonobuoy systems to the US Navy, but also to enhance Ultra's continuing relationship with the US DoD.

Increases exposure to the growing sonobuoy segment:

Internationally there is growing demand for sonobuoys as advanced ASW capabilities are required to address rising global tensions, mostly in the Asia Pacific region. The US Navy P-8 Maritime Patrol Aircraft is being sold in increasing numbers to US allies, and is only compatible with US Navy high altitude sonobuoys. While some international suppliers, such as those based in Japan and South Korea, have shown interest in supplying to their domestic sonobuoy segment, they lack the economies of scale, US Navy qualification, proven quality track record, and compatibility with US Navy platforms to be able to supply to the US. These factors present significant barriers to entry.

The US Navy sonobuoy requirement represents more than 50% of the total world sonobuoy budget and the latest budget released by the US President forecasts steady increases in US Navy sonobuoy acquisitions. Ultra's current US operations (i.e. excluding Sparton) have an addressable budget that is estimated at approximately $80m which has shown steady and consistent growth in recent years and is expected to grow modestly each year over the period 2018-2022.

Attractive financial returns for Ultra:

The Acquisition is expected to be earnings enhancing and to deliver returns in excess of Ultra's cost of capital in a timely manner.

Allows Ultra to secure an important revenue and earnings stream:

The revenue and earnings that Ultra generates from the ERAPSCO joint venture are an important part of the Ultra Group's financial performance. Acquiring Sparton secures this existing revenue and earnings and helps support Ultra's position in the underwater warfare segment.

   2.3        The Integration of ECP

Following Completion, Ultra would report ECP's results as part of the Maritime & Land Division, under the leadership of its Divisional President. Ultra's Maritime & Land Division's external revenues would increase from 41% to approximately 48% of the Ultra Group total (based on the audited 2016 results of Ultra and ECP).

In June 2015, Ultra announced the acquisition of the Electronics Products Division (formerly Herley Industries Inc.) of Kratos Defense & Security Solutions. Herley's results are now reported under Ultra's C2ISR segment in the Communications and Security Division, under the leadership of its Divisional President. The cost savings included in the Herley acquisition case are currently running ahead of schedule and the Ultra Group has the management capacity for integrating ECP.

   2.4        The proposed disposal of MDS

Sparton's business comprises two divisions - ECP and MDS. MDS, which specialises in the manufacturing and refurbishing of printed circuit card assemblies and integration of medical devices, is considered non-core to Ultra. If the Acquisition Completes, Ultra intends to sell MDS by the end of Q1 2018, leaving Ultra with ECP only. Ultra is in advanced discussions with several interested parties in relation to this disposal.

Discussions regarding a sale of MDS have been continuing for some time. Sparton had considered a sale of MDS when exploring a range of strategic alternatives, whilst Ultra has undertaken a number of rounds of a process to dispose of MDS.

   2.5        Equity funding

The Ultra Directors intend to maintain a prudent funding structure for the Ultra Group and have a medium-term target range for a net debt to EBITDA ratio of below 1.5 times.

The Acquisition and the disposal of MDS are not expected to alter Ultra's objective of returning to a through-cycle target of 85% cash conversion in the medium term.

Had the Acquisition been financed entirely by debt and completed as at 31 December 2016, the Ultra Group's net debt to EBITDA ratio would have been 3.2 times. The Ultra Directors consider it is therefore appropriate to issue equity to part fund the proposed Acquisition and to raise equity funding at the time of the Announcement of the Acquisition in order to provide certainty of that equity funding.

In the event that the Acquisition does not Complete, the Ultra Directors would consider, in light of circumstances at the time, the appropriate use of the funds raised, including the extent to which they should be retained for general purposes or used in relation to other capital investments and the extent to which return of them to Ultra Shareholders would be appropriate.

   3.         Information on Sparton 
   3.1        Overview of Sparton

Listed for many years on the New York Stock Exchange and adhering to the SEC's disclosure requirements, Sparton is a company with a market capitalisation of approximately $221.6m, as at the Last Practicable Date. Sparton has two reportable business segments, ECP and MDS.

On 16 March 2016, Sparton announced that the Sparton Board had been exploring a range of strategic alternatives and on 27 April 2016 announced it had authorised Wells Fargo Securities LLC to conduct a process to identify parties interested in acquiring Sparton. That sale process has continued since then and Ultra has participated in the process.

In the year-ended 3 July 2016, Sparton had revenues of $419m, operating income (before $64m impairment of goodwill) of $12m, profit before tax (before $64m impairment of goodwill) of $9m and as at 3 July 2016, gross assets were $246m. At 3 July 2016, Sparton employed 1,853 people, including 156 contractors.

   3.2        ECP and ERAPSCO

ECP develops, designs and manufactures proprietary defence and security products in three core business areas: Undersea Warfare Solutions; Rugged Electronics; Precision Sensing and Measurement. It serves the US DoD and allied foreign militaries, civil government agencies, prime contractors and tier 1 suppliers with key customers including the US Navy, the US Naval AWC, NUWC, Raytheon, DARPA, General Dynamics, SNC, L3, DRS, BAESYSTEMS, Northrup Grumman, Boeing, Rockwell Collins. Sales to the US Navy accounted for 61% of ECP's fiscal 2016 revenues. In 2014, ERAPSCO was awarded an indefinite delivery indefinite quantity contract by the US Navy which runs until 2019. $644m of purchase orders have been received in the first four years and a further $160m of purchase orders are expected to be added in FY18. ECP operates three facilities located across eastern North America and employs approximately 600 people across the division. ECP's revenues in the last three audited years ended 3 July 2016 were $109.1m, $136.3m and $154.6m while operating income (prior to allocation of corporate overheads) was $19.9m, $25.0m and $25.9m. Its long-term contracts provide ECP with good forecast visibility and continuing revenue streams supported by a backlog of $124.4m as at 2 April 2017. ECP has good order cover for its domestic sonobuoys with 94% coverage of revenue for the year-ending June 2018.

ECP is Ultra's 50/50 partner in ERAPSCO which develops, manufactures and supports all current US production sonobuoys supplied to the US DoD. In concept and in practice, ERAPSCO serves as a pass-through entity maintaining no funds or assets. While ERAPSCO provides the opportunity to maximise efficiencies in the design and development of sonobuoys, both of the joint venture partners function independently as subcontractors; therefore there is no separate entity to be accounted for or consolidated. In response to any customer request for proposal ("RFP") that ERAPSCO will bid on, the board of directors of ERAPSCO approves both the composition of a response to the RFP and the corresponding bid to be submitted to the customer. The board of directors of ERAPSCO strives to divide the aggregate contract awards at a 50/50 ratio between the joint venture partners, in accordance with their respective technological expertise. Each joint venture partner is responsible to ERAPSCO for the successful execution of its respective scope of work under its subcontract and each joint venture partner is individually accountable for the profit or losses sustained in the execution of that subcontract. Historically, the agreed-upon products included under the joint venture were generally developmental sonobuoys. In 2007, ERAPSCO expanded to include all future sonobuoy development and substantially all US derivative sonobuoy products for customers outside of the United States. ERAPSCO was further expanded three years later to include all sonobuoy products for the US Navy, beginning with the US Navy's 2010 fiscal year contracts.

   3.3        MDS

MDS comprises contract design, manufacturing and aftermarket repair and refurbishment of sophisticated printed circuit card assemblies, sub-assemblies, full product assemblies and cable/wire harnesses for customers seeking to bring their intellectual property to market. Additionally, MDS is a developer of embedded software quality assurance services in connection with medical devices and diagnostic equipment. Customers of MDS include original equipment manufacturers and emerging technology customers serving the medical & biotechnology market, the military & aerospace market and industrial & commercial markets. MDS operates nine sites across the US and a facility in Vietnam. MDS Division revenues in the last three audited years ended 3 July 2016 were $246.1m, $263.9m and $282.1m; operating income (prior to allocation of corporate overheads) was $17.0m, $9.5m and $2.4m (before $64m impairment of goodwill). Ultra's intention is to dispose of the MDS division by the end of Q1 2018 as it considers it to be non-core to the Combined Group going forward.

   3.4        Sparton financial information 
 
            Summary of certain financial statements from 30 
                     June 2014 to 2 April 2017 ($m) 
 
                           Year        Year        Year      9 months 
 Summarised financial      Ended       ended       ended       ended 
  statements 
                         30-Jun-14   30-Jun-15   03-Jul-16   02-Apr-17 
 Net Sales                 336.5       382.1       419.4       293.2 
 Adjusted EBITDA           35.0        34.3        33.5        17.0 
 Adjusted Operating 
  income                   25.0        21.8        16.3        11.7 
 Profit Before 
  Tax                      19.6        15.0        -55.5       -0.2 
 Total assets              199.0       337.6       246.0       227.5 
 Net debt                  33.0        139.6       97.1        86.6

Note: The above figures are taken from Sparton's US GAAP SEC filings for the relevant periods and so are presented under Sparton's US GAAP accounting policies.

   4.         Financial effects of the Acquisition

Ultra has entered into the Merger Agreement to acquire Sparton for $23.50 per Sparton share in cash, valuing Sparton's total equity at approximately $234.8m (GBP180.6m). As part of the Acquisition, Ultra will assume Sparton's net debt at Completion. The Acquisition will be part-funded by the proceeds of the Placing, with the remaining Acquisition consideration being funded through drawdown under the Ultra Group's existing bank facilities.

Cost savings and integration

The Ultra Directors believe there is the potential to achieve cost savings within Sparton of $6m in the year-ending 31 December 2018, rising to $9m for the year-ending 31 December 2019.

Ultra has, together with its advisers, conducted due diligence on the Sparton Group, including inter alia, certain site visits and discussions with senior management, all of which has supplemented Ultra's existing knowledge of ECP, obtained through Ultra's involvement in the ERAPSCO joint venture. This diligence process, coupled with Ultra's prior knowledge of ECP, has enabled Ultra's executive team to prepare an integration plan for the two companies which will be implemented once the Acquisition Completes. The Ultra Directors believe that the cost savings identified below will be delivered through the implementation of this integration plan. Over time, there may be the potential to further optimise the cost structure of ECP by including it within Ultra's standardisation and shared services programme and achieve other cost savings.

The Ultra Directors believe that these cost savings out of unallocated overheads will be achieved in the following broad areas:

 
 ($m)                  Year-ending 
                        31-Dec-19 
 Headcount                 3.4 
 Legal/professional 
  fees                     2.3 
 Facilities                0.8 
 Board related 
  costs                    0.5 
 Other costs               2.0 
 Total                     9.0 
                      ------------

Note: This assumes Ultra disposes of MDS by the end of Q1 2018. Should the disposal of MDS not occur, or take materially longer than expected, the level of anticipated costs savings will be lower in the year-ending 31 December 2018. The date of disposal of MDS is not expected to reduce the level of earnings accretion.

There will be a one-off cost to achieving these cost savings of approximately $4m in the year-ending 31 December 2018. These cost savings enable the Ultra Directors to target an operating margin for ECP in 2019 that is above the Ultra Group's average. ECP's 2016 pro forma operating margin was below Ultra's USSI equivalent. These estimated financial benefits set out above are contingent on the Acquisition and could not be achieved independently. Such estimated financial benefits reflect both the beneficial elements and relevant costs.

Earnings per share and ROIC vs WACC

The Ultra Directors expect the combined impact of the Acquisition and subsequent disposal of MDS to be accretive to underlying earnings per share in the year-ending 31 December 2018. If MDS is not disposed of in a timely manner, the Acquisition is still expected to be accretive to underlying earnings per share in the year-ending 31 December 2018. Prior to the estimated Completion of the Acquisition on 1 January 2018, and pending their utilisation to part fund the Acquisition, the net proceeds of the Placing will be used to repay part of Ultra's current indebtedness; therefore, during that period, the additional shares issued in the Placing will be slightly dilutive to earnings per share.

The Ultra Directors expect the Acquisition (regardless of whether the disposal of MDS Completes) to generate a post-tax return on invested capital in excess of Ultra's weighted average cost of capital in the year-ending 31 December 2019.

Following Completion and prior to the disposal of the MDS Division and assuming the Placing had completed, the pro forma leverage as at 31 December 2016 for the Combined Group would have been 2.4x. The Ultra Directors are targeting a net debt to EBITDA ratio of approximately 1.5x by the end of 2018 following Completion and prior to the disposal of the MDS Division.

Ultra's next results after the Completion will include the estimated net assets at the date of Completion at their provisional fair value and will be subject to the finalisation of the fair value exercise. Ultra's total transaction costs are expected to be approximately GBP15m.

Other financial information

The Ultra Directors are targeting revenue growth in ECP of approximately 3% p.a. for the medium term. Additionally, the Ultra Directors consider that in the event of increased geo-political tensions there is potential for sonobuoy revenue growth of approximately 10% p.a. for a period of time.

In the nine month period through to the end of March 2017, Sparton's intra quarter month end average net debt was approximately $10m higher than at the 3 July 2016 period end date. The Ultra Directors believe that ECP had a 52%:48% H1/H2 revenue split and a 60%:40% H1/H2 operating profit split (prior to allocation of central overheads) in calendar year 2016.

For the year-ending 31 December 2018 and assuming the Acquisition and disposal of MDS complete as expected, the increases in Ultra's capital expenditure, depreciation, research & development, and finance charge are anticipated to be GBP2m, GBP2m, GBP2m and GBP1m, respectively. The Combined Group's effective tax rate is expected to increase from 21.5% to 22.8% given the increased proportion of US earnings.

The Ultra Directors believe that, on average, Sparton has been cash generative in recent years. The Acquisition of Sparton and the disposal of MDS, if completed, are not expected to alter Ultra's objective of returning to a through-cycle target of 85% cash conversion in the medium term.

Dividend policy

Following Completion and subject to the Combined Group's trading prospects being satisfactory, the Ultra Board will continue Ultra's policy whereby dividends are covered by between 2.5 to 3.0 times underlying earnings and paid in an approximate one third (interim dividend) and two thirds (final dividend) split.

Debt Financing

Ultra is party to (i) a GBP100m multi-currency revolving credit facility; and (ii) a GBP200m multi-currency revolving credit facility, each with a syndicate of lenders. In accordance with the terms of these facilities, neither of which prohibits Ultra from drawing down funds to finance the Acquisition, Ultra will finance the Acquisition in part by drawing down under these facilities. The Ultra Group intends to enter into a $250m foreign exchange forward contract with a maturity date of 31 October 2017. Assuming the Acquisition has not completed prior to the date of maturity, this forward contract will be extended as the Completion date of the Acquisition becomes clearer. If the Acquisition does not Complete, the forward contract could be used to repay part of Ultra's dollar-denominated borrowings or, to the extent amounts acquired under the forward contract are required or preferred to be converted back to sterling, closed out.

   5.         Trading information 
   5.1        Ultra

Ultra released the following statement on 22 June 2017.

"The Group's half-year trading performance is in line with management expectations. As previously indicated, 2017 will be more heavily weighted to the second half than normal. As stated in the 6 March 2017 results Announcement and based on the same GBP/$ assumption, the Board remains confident of making further progress in 2017; our expectations for the full year remain unchanged. Full year cash conversion remains in-line with previous guidance.

Market conditions remain as noted on 6 March 2017. The US 2017 budget was approved in early May and prior to this the US Government had been operating under a Continuing Resolution ("CR"). The delay in approving the budget has meant that US orders have been deferred to the end of the first half and second half of this year, resulting in the second half bias mentioned above. Despite the CR there has been positive momentum in the order intake, with the book-to-bill ratio reaching a pleasing 1.1 times as at the end of May 2017."

Ultra's trading remains in line with the contents of that announcement.

The Ultra Directors believe the Ultra Group has a good record of taking out costs both within its existing operations and in an acquired business. This continued focus on delivery of cost efficiencies within its businesses has assisted the Ultra Group in achieving profitability targets even when market conditions and/or order delays have impacted near term revenues.

   5.2        Sparton

Sparton published its third quarter results on 9 May 2017. The following three paragraphs are derived from that announcement.

Sparton commented that for MDS while its Medical facilities continued to perform well in the quarter ended 2 April 2017, certain Mil/Aero and industrial facilities experienced delays in a couple of customer programs. Conversely, ECP's performance during the same period improved significantly over the prior quarter.

Trading in the ECP division in the third quarter saw the margin benefits of increased foreign sonobuoy sales offset by a weaker performance in rugged electronics. Production of the Q53G sonobuoy has recovered following delays experienced in the second quarter of the current financial year and remains the key driver for forecast revenue growth in the short term. The MDS division is forecast to partly mitigate the impact of certain customer losses affecting both the Milpitas and Frederick facilities with increased revenues driven by new Medical customer contracts.

As of 9 May 2017, Sparton expected revenues for the fourth quarter of fiscal 2017 of between $97m and $101m at a gross margin of approximately 18%. Appendix 4 in this announcement sets out the basis for this statement.

Sparton expects revenue growth in 2018 at the ECP division and the MDS division is expected to remain relatively flat on revenues.

   6.         Principal terms of the Acquisition 
   6.1        Summary of the Acquisition

Ultra, Ultra Electronics Aneira Inc. (an indirect wholly-owned subsidiary of Ultra) ("Ultra Aneira") and Sparton have today entered into the Merger Agreement in respect of the Acquisition, pursuant to which Ultra has agreed, on the terms and subject to the conditions of the Merger Agreement, to acquire Sparton. The Acquisition will be implemented by way of a merger, in accordance with the relevant laws of the State of Ohio, whereby Ultra Aneira will merge with and into Sparton, with Sparton continuing as the surviving company and becoming an indirect wholly-owned subsidiary of Ultra.

Under the terms of the Merger Agreement, which is governed by the laws of the State of Ohio, Sparton Shareholders will receive, subject to the Conditions and the other terms contained in the Merger Agreement, $23.50 in cash for each Sparton Share held.

   6.2        Conditions to Completion

Completion is conditional upon, among other things:

-- approval of the Acquisition as a "Class 1 transaction" for the purposes of the Listing Rules by a simple majority of Ultra Shareholders (the "Ultra Shareholder Approval");

-- a vote to adopt the Merger Agreement by at least two-thirds of Sparton Shareholders (the "Sparton Shareholder Approval");

-- competition clearances from relevant anti-trust authorities, including the US anti-trust authorities in accordance with the requirements of the HSR Act;

   --        completion of the CFIUS, DSS and Investment Canada Act review processes; and

-- expiry or waiver of any applicable prior notice period under ITAR relating to the Acquisition.

If the Conditions to Completion have not been satisfied (or, where applicable, waived) on or before 31 January 2018 (the "Initial Long Stop Date"), either Ultra or Sparton may terminate the Merger Agreement. The Initial Long Stop Date may, however, be extended by either party in certain circumstances until 31 March 2018 (and further extended by Ultra until 31 July 2018) in the event that the Conditions summarised above (other than the Ultra Shareholder Approval and Sparton Shareholder Approval Conditions) have not been satisfied by the Initial Long Stop Date (or by 31 March 2018 if either party has elected to extend the Initial Long Stop Date) (the Initial Long Stop Date, if and as extended, being the "Long Stop Date").

Under the terms of the Merger Agreement, Ultra and Sparton are obliged to co-operate and use reasonable best efforts to Complete the Acquisition as soon as practicable. No member of the Ultra Group is, however, required to make divestments or to take any action that limits the freedom of, or alters or restricts the commercial practices of, members of the Combined Group, save that Ultra has agreed that, if requested by a governmental authority or regulator in order to obtain relevant anti-trust or regulatory consents, Ultra will agree to dispose of MDS or assets of the Sparton Group that (i) do not relate to the sonobuoy business of the Sparton Group and (ii) are not material (individually or in aggregate) in any respect to the Sparton Group. Further, while Ultra retains the right to defend any proceedings brought by governmental authorities, courts or tribunals in connection with Completion, it is not obliged to defend (or initiate) those proceedings.

   6.3        Termination fees

The Merger Agreement contains certain termination rights and associated fees.

Upon termination of the Merger Agreement, in certain circumstances Sparton will be required to pay Ultra a fee of $7.5m where:

-- Sparton terminates the Merger Agreement prior to obtaining the Sparton Shareholder Approval in order to accept, and enter into an acquisition agreement with respect to, an unsolicited proposal from a third party to acquire more than 50% of Sparton (other than by way of an acquisition of MDS) which the Sparton Board determines, among other things, to result in a more favourable transaction to Sparton Shareholders from a financial point of view than the Acquisition (a "Superior Proposal"); or

   --        The following conditions are satisfied:

o prior to the Sparton Shareholder Meeting, a third party publicly announces or discloses (and does not withdraw) an offer or proposal to acquire more than 50% of Sparton (other than by way of an acquisition of MDS) (an "Acquisition Proposal");

o subsequently, either Sparton or Ultra terminates the Merger Agreement on account of the Sparton Shareholder Approval having been sought and not obtained; and

o either: (i) within 12 months of such termination, Sparton enters into an agreement with respect to an Acquisition Proposal which is subsequently completed; or (ii) an Acquisition Proposal is otherwise completed within 12 months of such termination; or

   --        The following conditions are satisfied:

o prior to the Long Stop Date, an Acquisition Proposal is publicly announced or disclosed to the Sparton Board (and not withdrawn) and, at the Long Stop Date, Ultra would have been entitled to terminate the Merger Agreement on account of Sparton's breach of its terms;

o either Sparton or Ultra terminates the Merger Agreement on account of the Acquisition not having Completed on or before the Long Stop Date; and

   --        Ultra terminates the Merger Agreement in circumstances where either:

o the Sparton Board has (i) withdrawn, failed to make or modified (in a manner adverse to Ultra) its recommendation in favour of the Acquisition; or (ii) approved, adopted or recommended any Alternative Proposal (as defined below), unless, at the relevant time, the Sparton Shareholder Approval has been obtained; or

o the Sparton Group or its representatives have breached the Non-solicitation Restriction (as defined below) in any material respect unless, at the relevant time, the Sparton Shareholder Approval has been obtained.

Separately, upon termination of the Merger Agreement, in certain circumstances Ultra will be required to pay Sparton a fee of $7.5m where:

-- the Merger Agreement is terminated by either party because the Ultra Shareholders have voted upon, but have not approved, the Acquisition; or

   --        Sparton terminates the Merger Agreement in circumstances where either:

o the Ultra Board has withdrawn, failed to make or modified (in a manner adverse to Sparton) its recommendation in favour of the Acquisition, unless, at the relevant time, the Ultra Shareholder Approval has been obtained; or

o prior to 24 January 2018, the Ultra General Meeting has not been held or the Ultra General Meeting has been held but the Ultra Shareholders have not voted upon the resolution to be proposed at the Ultra General Meeting in respect of the Acquisition, and in either scenario the Ultra Board has not withdrawn, failed to make or modified (in a manner adverse to Sparton) its recommendation in favour of the Acquisition prior to that date.

   6.4        Non-solicitation

The Merger Agreement prohibits members of the Sparton Group and their representatives from, subject to certain exceptions, soliciting any offer or proposal to acquire MDS or more than 15% of Sparton (an "Alternative Proposal"), engaging in discussions or providing non-public information in connection with an Alternative Proposal, or entering into any agreement relating to an Alternative Proposal (the "Non-Solicitation Restriction").

If, prior to obtaining the Sparton Shareholder Approval, Sparton receives an unsolicited Alternative Proposal which the Sparton Board determines to be a Superior Proposal, Sparton may either (i) withdraw, fail to make or modify its recommendation of the Acquisition or approve, adopt or recommend the Superior Proposal, or (ii) terminate the Merger Agreement in order to enter into an agreement with respect to that Superior Proposal, provided that, before doing so: (a) Sparton notifies Ultra and gives Ultra at least 4 business days to propose amendments to the terms and conditions of the Acquisition and (b) taking account of any amendments proposed by Ultra, the Sparton Board determines that the Alternative Proposal remains a Superior Proposal and that a failure to take such action would be inconsistent with its fiduciary duties.

   7.         The Placing

Under the terms of the Placing, Ultra will place 7,047,168 Placing Shares, representing approximately 9.9% of the current issued ordinary share capital of Ultra, with existing institutional shareholders and new institutional investors at the Placing Price of 1,950 pence per Placing Share, raising approximately GBP137.4m (gross) (approximately GBP133.7m (net)). The Placing is being underwritten by Investec.

The Placing Price represents a discount of approximately 2.1% to the closing mid-market price of 1,991 pence per ordinary share of 5 pence each in the capital of Ultra (the "Ordinary Shares") on 6 July 2017, being the Last Practicable Date.

The Placing Shares, when issued, will rank pari passu in all respects with each other and with the Ordinary Shares, including the right to receive all dividends and other distributions declared, made or paid on the Ordinary Shares after the date of issue.

Applications will be made to the FCA for admission of the Placing Shares to the premium listing segment of the Official List and to London Stock Exchange for admission to trading on its main market for listed securities (together, "Admission"). It is expected that Admission will become effective on or around 11 July 2017 and that dealings in the Placing Shares will commence at that time. The Placing is conditional, among other things, upon Admission becoming effective and the placing agreement between Ultra and Investec (the "Placing Agreement") not being terminated in accordance with its terms. Appendix 1 (which forms part of this Announcement) sets out further information relating to the Placing Agreement and the terms and conditions of the Placing.

The Placing is not conditional upon Completion of the Acquisition. In the event that the Acquisition does not Complete, the Ultra Directors would consider, in light of circumstances at the time, the appropriate use of the funds raised, including the extent to which they should be retained for general purposes or used in relation to other capital investments and the extent to which return of them to Ultra Shareholders would be appropriate.

Investec is acting as sole bookrunner, broker and underwriter in respect of the Placing. The book will open with immediate effect following this Announcement. The timing of the closing of the book and allocations are at the discretion of Investec and Ultra.

Your attention is drawn to the detailed terms and conditions of the Placing set out in Appendix 1.

   8.         Placing Statistics 
 
 Number of Ordinary Shares in issue before the Placing                   70,658,862 
 Number of Placing Shares to be issued pursuant to the Placing            7,047,168 
 Placing Price                                                           1,950 pence 
 Gross proceeds of the Placing                                            GBP137.4m 
 Estimated net proceeds of the Placing                                    GBP133.7m 
 Number of Ordinary Shares in issue immediately following the Placing    77,706,030 
 Placing Shares as a percentage of the enlarged share capital               9.1% 
 
   9.         Further information

Further details in relation to the Acquisition will be set out in the Circular which is expected to be published in due course.

   10.        Recommendation

The Ultra Board has received financial advice from Guggenheim Securities, Investec and RBC in relation to the Acquisition. In providing their financial advice to the Ultra Board, Guggenheim Securities, Investec and RBC have taken into account the Ultra Board's commercial assessment of the Acquisition.

The Ultra Board considers the Acquisition to be in the best interests of Ultra and the Ultra Shareholders taken as a whole. Accordingly, the Ultra Board intends to recommend that Ultra Shareholders vote in favour of the resolution in respect of the Acquisition to be proposed at the Ultra General Meeting, as the Ultra Directors intend to do (or seek to procure to be done) in respect of their own beneficial holdings of 351,409 Ultra Shares, representing, in aggregate, approximately 0.50% of the total issued share capital of Ultra as at the Last Practicable Date.

APPIX 1 - TERMS AND CONDITIONS OF THE PLACING

IMPORTANT INFORMATION FOR INVITED PLACEES (AS DEFINED BELOW) ONLY REGARDING THE PLACING (AS DEFINED BELOW).

THIS ANNOUNCEMENT, INCLUDING THIS APPIX AND THE INFORMATION CONTAINED HEREIN (TOGETHER THE "ANNOUNCEMENT") IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, AUSTRALIA, NEW ZEALAND, CANADA, THE REPUBLIC OF SOUTH AFRICA, HONG KONG, SINGAPORE OR JAPAN OR ANY OTHER JURISDICTION IN WHICH SUCH PUBLICATION, RELEASE OR DISTRIBUTION WOULD BE UNLAWFUL. FURTHER, THIS ANNOUNCEMENT IS FOR INFORMATION PURPOSES ONLY AND IS NOT AN OFFER OF SECURITIES IN ANY JURISDICTION IN WHICH THE SAME WOULD BE UNLAWFUL.THIS ANNOUNCEMENT HAS NOT BEEN APPROVED BY THE LONDON STOCK EXCHANGE, NOR IS IT INTED THAT IT WILL BE SO APPROVED.

MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. SAVE FOR LIMITED EXCEPTIONS AND AT THE SOLE DISCRETION OF ULTRA. THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT IN THIS APPIX ARE FOR INFORMATION PURPOSES ONLY AND ARE DIRECTED ONLY AT: (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA ("EEA") WHO ARE QUALIFIED INVESTORS WITHIN THE MEANING OF ARTICLE 2(1)(E) OF THE EU DIRECTIVE 2003/71/EC (AND AMMENTS THERETO, INCLUDING THE 2010 PROSPECTUS DIRECTIVE AMING DIRECTIVE (DIRECTIVE 2010/73/EC) AND TO THE EXTENT IMPLEMENTED IN THE RELEVANT MEMBER STATE (THE "PROSPECTUS DIRECTIVE") ("QUALIFIED INVESTORS"); (B) IF IN THE UNITED KINGDOM, PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS WHO FALL WITHIN THE DEFINITION OF "INVESTMENT PROFESSIONALS" IN ARTICLE 19(5) (INVESTMENT PROFESSIONALS) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005, AS AMED (THE "ORDER"), OR ARE HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS OR PARTNERSHIPS OR TRUSTEES OF HIGH VALUE TRUSTS AS DESCRIBED IN ARTICLE 49(2) OF THE ORDER AND (II) ARE "QUALIFIED INVESTORS" AS DEFINED IN SECTION 86 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000, AS AMED ("FSMA"), AND OTHERWISE (C) TO PERSONS TO WHOM IT MAY OTHERWISE BE LAWFULLY COMMUNICATED (ALL SUCH PERSONS IN (A), (B) OR (C) TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS").

THIS ANNOUNCEMENT, THIS APPIX AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS. PERSONS DISTRIBUTING THIS ANNOUNCEMENT MUST SATISFY THEMSELVES THAT IT IS LAWFUL TO DO SO. ANY INVESTMENT OR INVESTMENT ACTIVITY TO WHICH THIS APPIX AND THE TERMS AND CONDITIONS SET OUT HEREIN RELATE IS AVAILABLE ONLY TO RELEVANT PERSONS AND WILL BE ENGAGED IN ONLY WITH RELEVANT PERSONS. THIS ANNOUNCEMENT AND THIS APPIX DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN ULTRA.

THE SECURITIES REFERRED TO IN THIS ANNOUNCEMENT HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OF 1933, AS AMED (THE "SECURITIES ACT") OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND MAY NOT BE OFFERED OR SOLD DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH THE SECURITIES LAWS OF ANY STATE OR ANY OTHER JURISDICTION OF THE UNITED STATES. ANY OFFERING OF THE PLACING SHARES IN THE UNITED STATES WILL BE MADE TO A LIMITED NUMBER OF QUALIFIED INSTITUTIONAL BUYERS (EACH A "QIB") AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT IN A TRANSACTION NOT INVOLVING ANY PUBLIC OFFERING. THE PLACING SHARES ARE BEING OFFERED AND SOLD OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.

EACH PLACEE SHOULD CONSULT WITH ITS ADVISERS AS TO LEGAL, TAX, BUSINESS AND RELATED ASPECTS OF AN ACQUISITION OF PLACING SHARES. THE DISTRIBUTION OF THIS ANNOUNCEMENT, ANY PART OF IT OR ANY INFORMATION CONTAINED IN IT MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS, AND ANY PERSON INTO WHOSE POSSESSION THIS ANNOUNCEMENT, ANY PART OF IT OR ANY INFORMATION CONTAINED IN IT COMES SHOULD INFORM THEMSELVES ABOUT, AND OBSERVE, SUCH RESTRICTIONS.

This Announcement or any part of it does not constitute or form part of any offer to issue or sell, or the solicitation of an offer to acquire, purchase or subscribe for, any securities in the United States (including its territories and possessions, any state of the United States and the District of Columbia), Australia, New Zealand, Canada, the Republic of South Africa, Hong Kong, Singapore, Japan or any other jurisdiction in which the same would be unlawful. No public offering of the Placing Shares is being made in any such jurisdiction.

All offers of the Placing Shares will be made pursuant to an exemption under the Prospectus Directive from the requirement to produce a prospectus. In the United Kingdom, this Announcement is being directed solely at persons in circumstances in which section 21(1) of the Financial Services and Markets Act 2000 (as amended) ("FSMA") does not apply.

The Placing Shares have not been approved or disapproved by the US Securities and Exchange Commission, any State securities commission or other regulatory authority in the United States, nor have any of the foregoing authorities passed upon or endorsed the merits of the Placing or the accuracy or adequacy of this Announcement. Any representation to the contrary is a criminal offence in the United States.

The Placing Shares are being offered and sold outside the United States in accordance with Regulation S under the Securities Act. Any offering to be made in the United States will be made to a limited number of QIBs pursuant to an exemption from registration under the Securities Act in a transaction not involving any public offering.

Persons (including, without limitation, nominees and trustees) who have a contractual right or other legal obligations to forward a copy of this Announcement should seek appropriate advice before taking any action.

This Announcement should be read in its entirety. In particular, you should read and understand the information provided in this Appendix.

By participating in the Placing, each person who is invited to and who chooses to participate in the Placing, by making an oral or written offer to acquire Placing Shares, including any individuals, funds or others on whose behalf a commitment to acquire Placing Shares is given (a "Placee"), will be deemed to have read and understood this Announcement in its entirety and to be making such offer on the terms and conditions, and to be providing the representations, warranties, indemnities, acknowledgements and undertakings contained in this Appendix.

In particular, each such Placee represents, warrants, undertakes, agrees and acknowledges (amongst other things) that:

1. it is a Relevant Person (as defined above) and undertakes that it will acquire, hold, manage or dispose of any Placing Shares that are allocated to it for the purposes of its business;

2. it is acquiring the Placing Shares for its own account or for an account with respect to which it exercises sole investment discretion and has the authority to make and does make the representations, warranties, indemnities, acknowledgements, undertakings and agreements contained in this Announcement (including this Appendix); and

3. if it is in a member state of the EEA and/or if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, that any Placing Shares acquired by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of securities to the public other than an offer or resale in a member state of the EEA which has implemented the Prospectus Directive to Qualified Investors, or in circumstances in which the prior consent of Ultra has been given to each such proposed offer or resale;

4. it understands (or if acting for the account of another person, such person has confirmed that such person understands) the resale and transfer restrictions set out in this Appendix;

5. it acknowledges that the Placing Shares have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction of the United States and may not be offered, sold or transferred, directly or indirectly, within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States;

6. except for a limited number of QIBs as defined in Rule 144A under the Securities Act ("Rule 144A") who have executed and delivered to Ultra and Investec a US investor letter substantially in the form provided to it, (i) it and the person(s), if any, for whose account or benefit it is acquiring the Placing Shares are purchasing the Placing Shares in an "offshore transaction" as defined in Regulation S under the Securities Act; (ii) it is aware of the restrictions on the offer and sale of the Placing Shares pursuant to Regulation S; and (iii) the Placing Shares have not been offered to it by means of any "directed selling efforts" as defined in Regulation S;

7. Ultra and Investec will rely on the truth and accuracy of the foregoing representations, acknowledgements and agreements.

No prospectus

No offering document or prospectus has been or will be submitted to be approved by the Financial Conduct Authority ("FCA") in relation to the Placing.

Placees' commitments will be made solely on the basis of the information contained in this Announcement. Each Placee, by accepting a participation in the Placing, agrees that the content of this Announcement and all other publicly available information previously or simultaneously published by Ultra by notification to a Regulatory Information Service or otherwise filed by Ultra is exclusively the responsibility of Ultra and confirms that it has neither received nor relied on any other information, representation, warranty or statement made by or on behalf of Ultra or Investec or any other person and none of Investec or Ultra nor any other person will be liable for any Placee's decision to participate in the Placing based on any other information, representation, warranty or statement which the Placees may have obtained or received. Each Placee acknowledges and agrees that it has relied on its own investigation of the business, financial or other position of Ultra in accepting a participation in the Placing. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.

Details of the Placing Agreement and the Placing Shares

Investec has today entered into a placing agreement (the "Placing Agreement") with Ultra under which, on the terms and subject to the conditions set out in the Placing Agreement, Investec has agreed as agent for and on behalf of Ultra to use its reasonable endeavours to procure Placees to take up the Placing Shares at a price of 1,950 pence per share (the "Placing Price") or, failing which, itself to subscribe for such Placing Shares at the Placing Price on the date on which the transactions effected by the Placing Agreement will be settled (the "Closing Date").

The Placing Shares will, when issued, be subject to the Articles of Association and credited as fully paid and will rank pari passu in all respects with the existing issued ordinary shares of Ultra ("Ordinary Shares"), including the right to receive all dividends and other distributions declared, made or paid after the date of issue.

As part of the Placing, Ultra has agreed that it will not offer, issue, sell, contract to sell, grant options in respect of or otherwise dispose of any Ordinary Shares (or any interest therein or in respect thereof) or any other securities exchangeable for, or convertible into, or substantially similar to, Ordinary Shares or enter into any transaction having substantially the same effect or agree to do any of the foregoing (i) for a period of 180 calendar days from the date of Admission other than with the prior written consent of Investec (acting in good faith) and (ii) for a period of 45 calendar days from the date of Completion without first having consulted with Investec (to the extent practicable).

Application for admission to trading

Application will be made to the FCA for admission of the Placing Shares to the premium listing segment of the Official List of the UK Listing Authority and to the London Stock Exchange for admission to trading of the Placing Shares on its main market for listed securities ("Admission").

It is expected that Admission of the Placing Shares will become effective at or around 8.00 a.m. on 11 July 2017 and that dealings in the Placing Shares will commence at that time.

Participation in, and principal terms of, the Placing

1. Investec is acting as sole bookrunner and underwriter to the Placing as agent for and on behalf of Ultra. Investec is authorised in the United Kingdom by the Prudential Regulation Authority ("PRA") and regulated by the FCA and the PRA, is acting exclusively for Ultra and no one else in connection with the matters referred to in this Announcement and will not be responsible to anyone other than Ultra for providing the protections afforded to the customers of Investec or for providing advice in relation to the matters described in this Announcement.

2. Participation in the Placing will only be available to persons who may lawfully be, and are, invited to participate by Investec. Investec and its affiliates are entitled to participate in the Placing as principal.

3. The price per Placing Share (the "Placing Price") is fixed at 1,950 pence and is payable to Investec (as agent for Ultra) by all Placees.

4. Each Placee's allocation is determined by Investec in its discretion following consultation with Ultra and has been or will be confirmed orally to such Placee by Investec, as agent for Ultra ("Oral Confirmation") and a contract note will be dispatched as soon as possible thereafter. The Oral Confirmation will give rise to an irrevocable, legally binding commitment by that person (who at that point will become a Placee) in favour of Ultra and Investec to acquire the number of Placing Shares allocated to it at the Placing Price and on the terms and subject to the conditions set out in this Appendix and in accordance with Ultra's articles of association. Except with Investec's consent, such commitment will not be capable of variation or revocation after the time at which it is submitted.

5. Each Placee's allocation and commitment will be evidenced by a contract note issued to such Placee by Investec which will confirm the number of Placing Shares allocated, the Placing Price and the aggregate amount owed by such Placee to Investec. The terms of this Appendix will be deemed incorporated in that contract note.

6. Each Placee will also have an immediate, separate, irrevocable and binding obligation, owed to Investec (as agent for Ultra), to pay on Admission to Investec (or as it may direct) in cleared funds an amount equal to the product of the Placing Price and the number of Placing Shares such Placee has agreed to acquire and Ultra has agreed to allot and issue to that Placee.

7. Irrespective of the time at which a Placee's allocation(s) pursuant to the Placing is/are confirmed, settlement for all Placing Shares to be acquired pursuant to the Placing will be required to be made at the same time, on the basis explained below under "Registration and Settlement".

8. All obligations under the Placing will be subject to fulfilment or (where applicable) waiver of the conditions referred to below under "Conditions of the Placing" and to the Placing not being terminated on the basis referred to below under "Right to terminate under the Placing Agreement".

9. By participating in the Placing, each Placee will agree that its rights and obligations in respect of the Placing will terminate only in the circumstances described below and will not be capable of rescission or termination by the Placee after confirmation (oral or otherwise) by Investec.

10. To the fullest extent permissible by law and applicable FCA rules, neither Ultra, Investec nor any of their respective affiliates, agents, directors, officers, consultants nor in respect of Investec only, any other person connected with Investec as defined in FSMA, shall have any responsibility or liability (whether in contract, tort or otherwise and including to the extent permissible by law, any fiduciary duties) to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, neither Ultra, Investec nor any of their respective affiliates shall have any responsibility or liability (whether in contract, tort or otherwise and including, to the extent permissible by law, any fiduciary duties) in respect of Investec's conduct of the Placing or of such alternative method of effecting the Placing as Investec and Ultra may agree.

Registration and Settlement

Settlement of transactions in the Placing Shares (ISIN: GB0009123323) following Admission will take place within the CREST system. Subject to certain exceptions, Investec and Ultra reserve the right to require settlement for and delivery of the Placing Shares to Placees by such other means that they deem necessary if delivery or settlement to Placees is not practicable within the CREST system within the timetable set out in this Announcement or would not be consistent with regulatory requirements in a Placee's jurisdiction.

Following close of the Placing, each Placee allocated Placing Shares will be sent a contract note in accordance with the standing arrangements in place with Investec, stating the number of Placing Shares allocated to it at the Placing Price, the aggregate amount owed by such Placee to Investec and settlement instructions.

Each Placee will be deemed to agree that it will do all things necessary to ensure that delivery and payment is completed as directed by Investec in accordance with either the standing CREST or certificated settlement instructions in respect of the Placing Shares that it has in place with Investec.

Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above, in respect of either CREST or certificated deliveries, at the rate of 2 percentage points above prevailing LIBOR as determined by Investec.

Each Placee is deemed to agree that, if it does not comply with these obligations, Investec may sell any or all of the Placing Shares allocated to that Placee on such Placee's behalf and retain from the proceeds, for the account and benefit of Investec, an amount equal to the aggregate amount owed by the Placee plus any interest due. The relevant Placee will, however, remain liable for any shortfall below the aggregate amount owed by it and may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of their Placing Shares on such Placee's behalf.

If Placing Shares are to be delivered to a custodian or settlement agent, Placees must ensure that, upon receipt, the conditional contract note is copied and delivered immediately to the relevant person within that organisation.

Insofar as Placing Shares are registered in a Placee's name or that of its nominee or in the name of any person for whom a Placee is contracting as agent or that of a nominee for such person, such Placing Shares should, subject as provided below, be so registered free from any liability to United Kingdom stamp duty or stamp duty reserve tax.

Placees will not be entitled to receive any fee or commission in connection with the Placing.

Conditions of the Placing

The Placing is conditional upon the Placing Agreement becoming unconditional and not having been terminated in accordance with its terms.

The obligations of Investec under the Placing Agreement are, and the Placing is, conditional on customary terms and conditions, including among others:

(a) in the opinion of Investec (acting in good faith), no Material Adverse Effect having occurred or having been made public since the execution of the Placing Agreement as a result of which Investec considers (acting in good faith) it to be impracticable, inappropriate or inadvisable to proceed with the Placing;

(b) Ultra allotting, subject to Admission, the Placing Shares in accordance with the Placing Agreement;

(c) the execution of the Merger Agreement by the parties thereto and the Merger Agreement not having lapsed or been terminated or rescinded, no condition thereto having become incapable of satisfaction and no event having arisen which gives any party to the Merger Agreement a right to terminate it, in each case prior to Admission;

(d) publication by Ultra of the Placing Results Announcement through a Regulatory Information Service by 7.30 a.m. (London time) on the Business Day following the date of the Placing Agreement;

(e) Admission having occurred by 8.00 a.m. (London time) on 11 July 2017 (or such later date as Investec and Ultra may agree).

If (i) any of the conditions set out in the Placing Agreement are not fulfilled or (where applicable) waived by Investec by the required time(s) (or such later time and/or date as Ultra and Investec may agree) or (ii) any such condition becomes incapable of being satisfied or (iii) the Placing Agreement is terminated in the circumstances specified below under "Right to terminate under the Placing Agreement", the Placing will lapse and the Placee's rights and obligations shall cease and terminate at such time and each Placee agrees that no claim can be made by or on behalf of the Placee (or any person on whose behalf the Placee is acting) in respect thereof.

By participating in the Placing, each Placee agrees that its rights and obligations cease and terminate only in the circumstances described above and under "Right to terminate under the Placing Agreement below" below and will not be capable of rescission or termination by it.

Certain conditions may be waived in whole or in part by Investec, in its absolute discretion and upon such terms as it considers appropriate by notice in writing to Ultra and Investec may also agree in writing with Ultra to extend the time for satisfaction of any condition save that conditions (b), (c), (d) and (e) above may not be waived. Any such extension or waiver will not affect Placees' commitments as set out in this Announcement.

None of Investec, Ultra nor any of their respective affiliates, agents, directors, officers or employees shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision any of them may make as to whether or not to waive or to extend the time and/or date for the satisfaction of any condition to the Placing nor for any decision any of them may make as to the satisfaction of any condition or in respect of the Placing generally and by participating in the Placing each Placee agrees that any such decision is within the absolute discretion of Investec.

Right to terminate under the Placing Agreement

Investec may terminate the Placing Agreement, in accordance with its terms, at any time prior to Admission if, among other things:

(a) any of the conditions in the Placing Agreement have not been satisfied or (to the extent capable of being waived) waived in accordance with the terms of the Placing Agreement by the required time(s) (if any) or have become incapable of satisfaction;

(b) any of the warranties given by Ultra contained in the Placing Agreement are not true, accurate and not misleading in any respect at the date of the Placing Agreement and at Admission, in each case by reference to the facts and circumstances then existing;

(c) in the opinion of Investec, any matter has arisen which may adversely affect its ability to perform its functions under Chapter 8 of the Listing Rules;

(d) there has been any failure by Ultra to perform any of the undertakings or agreements in the Placing Agreement (save in any respect that Investec (acting in good faith) determines not to be material in the context of the Placing);

(e) any statement contained in any document or announcement issued or published by or on behalf of Ultra in connection with the Placing (the "Placing Documents") is or has become untrue, incorrect or misleading in any respect, or any matter has arisen, which would, if the Placing were made at that time, constitute an omission from the Placing Documents or an omission from or inaccuracy in certain publicly available information of Ultra (as specified in the Placing Agreement), or any of them, and which (in each case) Investec (acting in good faith) considers to be material in the context of the Placing or the underwriting of the Placing Shares, Admission or any of the transactions contemplated by the Placing Agreement;

(f) there has occurred (a) any material adverse change in the financial markets in the United States or the United Kingdom or in the international financial markets, (b) any outbreak or escalation of hostilities, act of terrorism or other calamity or crisis, which (in each case) is material, or (c) any change or development involving a prospective material adverse change in US, UK or international political, financial or economic conditions, or relevant currency exchange rates, in each case the effect of which is such as to make it, in the judgement of Investec (acting in good faith), impracticable or inadvisable to proceed with the Placing

(g) if admission to listing or trading of the Ordinary Shares on the London Stock Exchange has been withdrawn, or the listing or trading in any Ordinary Shares has been suspended or materially limited by the UK Listing Authority or the London Stock Exchange, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by such system or by order of the regulatory authorities of the United Kingdom or any other governmental or self-regulatory authority with jurisdiction, or a material disruption has occurred in commercial banking or share settlement or clearance services in the United Kingdom or the United States; or

(h) if a banking moratorium has been declared by the authorities of any of the United States or the United Kingdom.

If the Placing Agreement is terminated in accordance with its terms, the rights and obligations of each Placee in respect of the Placing as described in this Announcement shall cease and terminate at such time and no claim can be made by any Placee in respect thereof.

By participating in the Placing, each Placee agrees with Ultra and Investec that the exercise by Ultra or Investec of any right of termination or any other right or other discretion under the Placing Agreement shall be within the absolute discretion of Ultra or Investec and that neither of Ultra nor Investec need make any reference to such Placee and that none of Investec, Ultra, or any of their respective affiliates, agents, directors, officers or employees shall have any liability to such Placee (or to any other person whether acting on behalf of a Placee or otherwise) whatsoever in connection with any such exercise.

By participating in the Placing, each Placee agrees that its rights and obligations terminate only in the circumstances referred to above and under the "Conditions of the Placing" section above and will not be capable of rescission or termination by it after the issue by Investec of a contract note confirming each Placee's allocation and commitment in the Placing.

Representations, warranties and further terms

By participating in the Placing, each Placee (and any person acting on such Placee's behalf) irrevocably acknowledges, confirms, undertakes, represents, warrants and agrees (for itself and for any such prospective Placee and in each case as a fundamental term of their application for Placing as set out below) that:

1. it has read and understood this Announcement (including the Appendix) in its entirety and that its acquisition of the Placing Shares is subject to and based upon all the terms, conditions, representations, warranties, indemnities, acknowledgements, agreements and undertakings and other information contained herein and that it has not relied on, and will not rely on, any information given or any representations, warranties or statements made at any time by any person in connection with Admission, the Placing, Ultra, the Placing Shares or otherwise, other than the information contained in this Announcement or any information publicly announced to a Regulatory Information Service by or on behalf of Ultra prior to the date of this Announcement (the "Publicly Available Information");

2. no offering document or prospectus has been prepared in connection with the Placing and represents and warrants that it has not received a prospectus or other offering document in connection herewith;

3. the Ordinary Shares are listed on the premium listing segment of the Official List of the UK Listing Authority and admitted to trading on the main market of the London Stock Exchange, and that Ultra is therefore required to publish certain business and financial information in accordance with the rules and practices of the FCA Rules, which includes a description of the nature of Ultra's business and Ultra's most recent balance sheet and profit and loss account and that it is able to obtain or access such information without undue difficulty, and is able to obtain access to such information or comparable information concerning any other publicly traded company, without undue difficulty;

4. it has made its own assessment of the Placing Shares and has relied on its own investigation of the business, financial or other position of Ultra in accepting a participation in the Placing and none of Investec, Ultra or any of their respective affiliates, agents, directors, officers or employees or any person acting on behalf of any of them has provided, and will not provide, it with any material regarding the Placing Shares or Ultra or any other person other than the information in this Announcement, or any Publicly Available Information; nor has it requested Investec, Ultra, any of their respective affiliates, agents, directors, officers or employees or any person acting on behalf of any of them to provide it with any such information;

5. none of Investec, Ultra or any of their respective affiliates, agents, directors, officers or employees or any person acting on behalf of any of them has provided, nor will provide it, with any material regarding the Placing Shares or Ultra other than this Announcement; nor has it requested Investec, Ultra, any of their respective affiliates, agents, directors, officers or employees or any person acting on behalf of any of them to provide it with any such information;

6. (a) the only information on which it is entitled to rely on and on which such Placee has relied in committing itself to acquire Placing Shares is contained in this Announcement and in any Publicly Available Information, such information being all that such Placee deems necessary to make an investment decision in respect of the Placing Shares (b) none of Investec, Ultra or any of their respective affiliates, agents, directors, officers or employees has made any representation or warranty to it, express or implied, with respect to Ultra, the Placing or the Placing Shares or the accuracy, completeness or adequacy of any Publicly Available Information; (c) it has conducted its own investigation of Ultra, the Placing and the Placing Shares, satisfied itself that the information is still current and relied on that investigation for the purposes of its decision to participate in the Placing; and (d) has not relied on any investigation that Investec or any person acting on its behalf may have conducted with respect to Ultra, the Placing or the Placing Shares;

7. the content of this Announcement is exclusively the responsibility of Ultra and that neither Investec nor any persons acting on its behalf is responsible for or has or shall have any liability for any information, representation, warranty or statement relating to Ultra contained in this Announcement or any Publicly Available Information nor will they be liable for any Placee's decision to participate in the Placing based on any information, representation, warranty or statement contained in this Announcement or otherwise. None of Investec, Ultra or any of their respective affiliates, agents, directors, officers or employees has made any representation or warranty to it, express or implied, with respect to Ultra, the Placing Shares or the accuracy, completeness or adequacy of any Publicly Available Information or any other information. Nothing in this Appendix shall exclude any liability of any person for fraudulent misrepresentation;

   8.         it and/or each person on whose behalf it is participating: 
   a)         is entitled to acquire the Placing Shares under the laws and regulations of all relevant jurisdictions; 
   b)         has fully observed such laws and regulations;

c) has capacity and authority and is entitled to enter into and perform its obligations as an acquirer of Placing Shares and will honour such obligations; and

d) has obtained all necessary consents and authorities (including, without limitation, in the case of a person acting on behalf of a Placee, all necessary consents and authorities to agree to the terms set out or referred to in this Appendix) under those laws or otherwise and complied with all necessary formalities to enable it to enter into the transactions contemplated hereby and to perform its obligations in relation thereto and, in particular, if it is a pension fund or investment company it is aware of and acknowledges it is required to comply with all applicable laws and regulations with respect to its subscription for Placing Shares;

9. with respect to any Placing Shares offered to or purchased by it in the United States or for and on behalf of persons in the United States, it understands and agrees: (1) that it is a QIB within the meaning of Rule 144A under the U.S. Securities Act of 1933, as amended (the "Securities Act"); (2) that the Placing Shares are being offered and sold to it in accordance with the exemption from registration under the Securities Act for transactions by an issuer not involving a public offering of securities in the United States and that the Placing Shares have not been, and will not be, registered under the Securities Act or with any State or other jurisdiction of the United States; (3) that the Placing Shares may not be reoffered, resold, pledged or otherwise transferred by it except (a) outside the United States in an offshore transaction pursuant to Rule 903 or Rule 904 of Regulation S under the Securities Act ("Regulation S"), (b) in the United States to a person whom the seller reasonably believes is a QIB to whom notice is given that the offer, sale or transfer is being made in reliance on Rule 144A, pursuant to Rule 144A under the Securities Act, (c) pursuant to Rule 144 under the Securities Act (if available), (d) to Ultra, (e) pursuant to an effective registration statement under the Securities Act, or (f) pursuant to another available exemption, if any, from registration under the Securities Act, in each case in compliance with all applicable laws; (4) that the Placing Shares are "restricted securities" as defined in Rule 144(a)(3) under the Securities Act; (5) to notify any transferee to whom it subsequently reoffers, resells, pledges or otherwise transfers the Placing Shares of the foregoing restrictions on transfer; (6) for so long as the Placing Shares are "restricted securities" (within the meaning of Rule 144(a)(3) under the Securities Act), it will segregate such Placing Shares from any other shares that it holds that are not restricted securities, shall not deposit such shares in any depositary facility established or maintained by a depositary bank and will only transfer such Placing Shares in accordance with this paragraph; (7) if it is acquiring the Placing Shares as a fiduciary or agent for one or more investor accounts, each such account is a QIB, it has sole investment discretion with respect to each such account and it has full power and authority to make the acknowledgements, representations, warranties and agreements herein on behalf of each such account; (8) it is acquiring such Placing Shares for its own account (or the account of a QIB as to which it has sole investment discretion) for investment purposes and (subject to the disposition of its property being at all times within its control) not with a view to any distribution of the Placing Shares; and (9) that no representation has been made as to the availability of the exemption provided by Rule 144 or any other exemption under the Securities Act for the reoffer, resale, pledge or transfer of the Placing Shares;

10. it understands, and each account it represents has been advised that, (i) the Placing Shares have not been and will not be registered under the Securities Act or under the applicable securities laws of any state or other jurisdiction of the United States; (ii) the Placing Shares are being offered and sold only (a) to persons reasonably believed to be QIBs in transactions exempt from, the registration requirements of the Securities Act or (b) in "offshore transactions" within the meaning of and pursuant to Regulation S under the Securities Act; and (iii) no representation has been made as to the availability of any exemption under the Securities Act or any relevant state or other jurisdiction's securities laws for the reoffer, resale, pledge or transfer of the Placing Shares;

11. it (and any account for which it is purchasing) is not acquiring the Placing Shares with a view to any offer, sale or distribution thereof within the meaning of the Securities Act;

12. if it is a person in a member state of the EEA, it is a "qualified investor" (as defined in the Prospectus Directive in a member state of the EEA (each, a "Relevant Member State") that has implemented the Prospectus Directive and, to the extent applicable, any funds on behalf of which it is acquiring the Placing Shares that are located in a Relevant Member State are each such a qualified investor. For these purposes, the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU;

13. it is not, and any person who it is acting on behalf of is not, and at the time the Placing Shares are acquired will not be, a resident of, or with an address in, or subject to the laws of, Australia, Canada, Hong Kong, Japan, New Zealand, Singapore or the Republic of South Africa, and it acknowledges and agrees that the Placing Shares have not been and will not be registered or otherwise qualified under the securities legislation of Australia, Canada, Hong Kong, Japan, New Zealand, Singapore or the Republic of South Africa and may not be offered, sold, or acquired, directly or indirectly, within those jurisdictions;

14. it will not distribute, forward, transfer or otherwise transmit this Announcement or any part of it, or any other presentational or other materials concerning the Placing in or into or from the United States (including electronic copies thereof) to any person, and it has not distributed, forwarded, transferred or otherwise transmitted any such materials to any person;

15. neither Investec, nor its affiliates, agents, directors, officers or employees and any person acting on behalf of any of them is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing and that participation in the Placing is on the basis that it is not and will not be a client of Investec and Investec has no duties or responsibilities to it for providing the protections afforded to its clients or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities contained in the Placing Agreement nor for the exercise or performance of any of its rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

16. it (and any person acting on its behalf) will make payment to Investec in respect of the Placing Shares allocated to it in accordance with this Appendix on the due time and date set out herein, failing which the relevant Placing Shares may be placed with others on such terms as Investec may, in its absolute discretion, determine without liability to such Placee, who will remain liable for any amount by which the net proceeds of such sale falls short of the product of the Placing Price and the number of Placing Shares allocated to it and may be required to bear any stamp duty, stamp duty reserve tax or other similar taxes (together with any interest or penalties) which may arise upon the sale of such Placee's Placing Shares;

17. no action has been or will be taken by any of Ultra, Investec or any person acting on their behalf that would, or is intended to, permit a public offer of the Placing Shares in the United States or in any country or jurisdiction where any such action for that purpose is required;

18. the person whom it specifies for registration as holder of the Placing Shares will be: (a) itself; or (b) its nominee, as the case may be. Neither Investec nor Ultra will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement ("Indemnified Taxes"). Each Placee and any person acting on behalf of such Placee agrees to participate in the Placing and it agrees to indemnify Ultra and Investec on an after-tax basis in respect of any Indemnified Taxes;

19. it is acting as principal only in respect of the Placing or, if it is acting for any other person, (a) it is duly authorised to do so and has full power to make the acknowledgments, representations and agreements herein on behalf of each such person and (b) it is and will remain liable to Ultra and Investec for the performance of all its obligations as a Placee in respect of the Placing (regardless of the fact that it is acting for another person);

20. the allocation, allotment, issue and delivery to it, or the person specified by it for registration as holder, of Placing Shares will not give rise to a liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986 (depository receipts and clearance services) and that it is not participating in the Placing as nominee or agent for any person or persons to whom the allocation, allotment, issue or delivery of Placing Shares would give rise to such a liability and that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to issue or transfer Placing Shares into a clearance service;

21. it and any person acting on its behalf (if within the United Kingdom) falls within Article 19(5) and/or 49(2) of the Order and undertakes that it will acquire, hold, manage and (if applicable) dispose of any Placing Shares that are allocated to it for the purposes of its business only;

22. it has not offered or sold and will not offer or sell any Placing Shares to persons in the United Kingdom prior to the expiry of a period of six months from Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the United Kingdom within the meaning of section 85(1) of FSMA;

23. if in the United Kingdom, that it is a person (i) who has professional experience in matters relating to investments falling within Article 19(5) of the Order, (ii) falling within Article 49(2)(A) to (D) ("High Net Worth Companies, Unincorporated Associations, etc") of the Order, or (iii) to whom this Announcement may otherwise be lawfully communicated;

24. it has not offered or sold and will not offer or sell any Placing Shares to persons in the EEA prior to the expiry of a period of six months from Admission except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their business or otherwise in circumstances which have not resulted and which will not result in an offer to the public in the EEA within the meaning of the Prospectus Directive;

25. it has only communicated or caused to be communicated and it will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) relating to Placing Shares in circumstances in which section 21(1) of FSMA does not require approval of the communication by an authorised person and it acknowledges and agrees that Investec has not approved this Announcement in its capacity as authorised person under section 21 of FSMA and it may not therefore be subject to the controls which would apply if it were made or approved as financial promotion by an authorised person;

26. it has complied and it will comply with all applicable laws with respect to anything done by it or on its behalf in relation to the Placing Shares (including all relevant provisions of FSMA in respect of anything done by it in, from or otherwise involving, the United Kingdom);

27. if it is a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive (including any relevant implementing measure in any member state), the Placing Shares acquired by it in the Placing will not be acquired on a non-discretionary basis on behalf of, nor will they be acquired with a view to their offer or resale to, persons in a member state of the EEA which has implemented the Prospectus Directive other than Qualified Investors, or in circumstances in which the express prior written consent of Investec has been given to the offer or resale;

28. it has neither received nor relied on any confidential price sensitive information concerning Ultra in accepting this invitation to participate in the Placing and it is not purchasing Placing Shares on the basis of such information ;

29. none of Investec, its affiliates, or any person acting on behalf of any of them has or shall have any liability for any information, representation or statement contained in this Announcement or for any information previously published by or on behalf of Ultra or any other written or oral information made available to or filed information or any representation, warranty or undertaking relating to Ultra, and will not be liable for its decision to participate in the Placing based on any information, representation, warranty or statement contained in this Announcement or elsewhere, provided that nothing in this paragraph shall exclude any liability of any person for fraud;

30. none of (i) Investec, its affiliates, or any person acting on behalf of any of them, or (ii) Ultra, its affiliates or any person, or any person acting on behalf of any of them is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing nor providing advice in relation to the Placing nor in respect of any representations, warranties, acknowledgements, agreements, undertakings, or indemnities contained in the Placing Agreement nor the exercise or performance of Investec's rights and obligations thereunder including any rights to waive or vary any conditions or exercise any termination right;

31. Investec may, in accordance with applicable legal and regulatory provisions, engage in transactions in relation to the Placing Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise and, except as required by applicable law or regulation, Investec will not make any public disclosure in relation to such transactions;

32. Investec and each of its respective affiliates, each acting as an investor for its or their own account(s), may bid or subscribe for and/or purchase Placing Shares and, in that capacity, may retain, purchase, offer to sell or otherwise deal for its or their own account(s) in the Placing Shares, any other securities of Ultra or other related investments in connection with the Placing or otherwise. Accordingly, references in this Announcement to the Placing Shares being offered, subscribed, acquired or otherwise dealt with should be read as including any offer to, or subscription, acquisition or dealing by Investec and/or any of its respective affiliates, acting as an investor for its or their own account(s). Neither Investec nor Ultra intend to disclose the extent of any such investment or transaction otherwise than in accordance with any legal or regulatory obligation to do so;

33. it has complied with its obligations in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002, the Terrorism Act 2000, the Terrorism Act 2006 and the Money Laundering Regulations 2007 (together, the "Regulations") and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations;

34. it is aware of the obligations regarding insider dealing in the Criminal Justice Act 1993, section 118 of FSMA, and in connection with money laundering and terrorist financing under the Proceeds of Crime Act 2002 (as amended), the Terrorism Act 2000, the Terrorism Act 2006, the Money Laundering Regulations 2007 (the "Regulations") and the Money Laundering Sourcebook of the FCA and confirms that it has and will continue to comply with those obligations and, if making payment on behalf of a third party, that satisfactory evidence has been obtained and recorded by it to verify the identity of the third party as required by the Regulations;

35. in order to ensure compliance with the Money Laundering Regulations 2007, Investec (for itself and as agent on behalf of Ultra) or Ultra's registrars may, in their absolute discretion, require verification of its identity. Pending the provision to Investec or Ultra's registrars, as applicable, of evidence of identity, definitive certificates in respect of the Placing Shares may be retained at Investec's absolute discretion or, where appropriate, delivery of the Placing Shares to it in uncertificated form may be delayed at Investec or Ultra's registrars', as the case may be, absolute discretion. If, within a reasonable time after a request for verification of identity, Investec (each for itself and as agent on behalf of Ultra) or Ultra's registrars have not received evidence satisfactory to them, Investec and/or Ultra may, at its absolute discretion, terminate its commitment in respect of the Placing, in which event the monies payable on acceptance of allotment will, if already paid, be returned without interest to the account of the drawee's bank from which they were originally debited;

36. acknowledges that its commitment to acquire Placing Shares on the terms set out in this Announcement and in the contract note will continue notwithstanding any amendment that may in future be made to the terms and conditions of the Placing and that Placees will have no right to be consulted or require that their consent be obtained with respect to Ultra's or Investec's conduct of the Placing;

37. it has knowledge and experience in financial, business and international investment matters as is required to evaluate the merits and risks of subscribing for the Placing Shares. It further acknowledges that it is experienced in investing in securities of this nature and is aware that it may be required to bear, and is able to bear, the economic risk of, and is able to sustain, a complete loss in connection with the Placing. It has relied upon its own examination and due diligence of Ultra and its affiliates taken as a whole, and the terms of the Placing, including the merits and risks involved;

38. it irrevocably appoints any duly authorised officer of Investec as its agent for the purpose of executing and delivering to Ultra and/or its registrars any documents on its behalf necessary to enable it to be registered as the holder of any of the Placing Shares agreed to be taken up by it under the Placing;

39. Ultra, Investec and others (including each of their respective affiliates, agents, directors, officers or employees) will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements, agreements and undertakings, which are given to Ultra and Investec on its own behalf and on behalf of Ultra and are irrevocable;

40. if it is acquiring the Placing Shares as a fiduciary or agent for one or more investor accounts, it has full power and authority to make, and does make, the foregoing representations, warranties, acknowledgements, agreements and undertakings on behalf of each such accounts;

   41.        time is of the essence as regards its obligations under this Appendix;

42. any document that is to be sent to it in connection with the Placing will be sent at its risk and may be sent to it at any address provided by it to Investec;

43. the Placing Shares will be issued subject to the terms and conditions of this Appendix; and

   44.        that any agreements entered into by it pursuant to these terms and conditions, and all non-contractual or other obligations arising out or in connection with them, shall be governed by and construed in accordance with English law and it submits (on behalf of itself and on behalf of any person on whose behalf it is acting) to the exclusive jurisdiction of the English courts in relation to any claim, dispute or matter arising out of any such contract, except that enforcement proceedings in respect of the obligation to make payment for the Placing Shares (together with any interest chargeable thereon) may be taken by Ultra or Investec in any jurisdiction in which the relevant Placee is incorporated or in which any of its securities have a quotation on a recognised stock exchange.

By participating in the Placing, each Placee (and any person acting on such Placee's behalf) agrees to indemnify and hold Ultra, Investec and each of their respective affiliates, agents, directors, officers and employees harmless from any and all costs, claims, liabilities and expenses (including legal fees and expenses) arising out of or in connection with any breach of the representations, warranties, acknowledgements, agreements and undertakings given by the Placee (and any person acting on such Placee's behalf) in this Appendix or incurred by Investec, Ultra or each of their respective affiliates, agents, directors, officers or employees arising from the performance of the Placee's obligations as set out in this Announcement, and further agrees that the provisions of this Appendix shall survive after the completion of the Placing.

The agreement to allot and issue Placing Shares to Placees (or the persons for whom Placees are contracting as agent) free of stamp duty and stamp duty reserve tax in the United Kingdom relates only to their allotment and issue to Placees, or such persons as they nominate as their agents, direct from Ultra. Such agreement is subject to the representations, warranties and further terms above and assumes that the Placing Shares are not being acquired in connection with arrangements to issue depositary receipts or to transfer the Placing Shares into a clearance service. If there are any such arrangements, or the settlement related to any other dealings in the Placing Shares, stamp duty or stamp duty reserve tax may be payable. In that event, the Placee agrees that it shall be responsible for such stamp duty or stamp duty reserve tax and neither Ultra nor Investec shall be responsible for such stamp duty or stamp duty reserve tax (including any interest and penalties relating thereto). If this is the case, each Placee should seek its own advice and they should notify Investec accordingly. In addition, Placees should note that they will be liable for any capital duty, stamp duty and all other stamp, issue, securities, transfer, registration, documentary or other duties or taxes (including any interest, fines or penalties relating thereto) payable outside the United Kingdom by them or any other person on the acquisition by them of any Placing Shares or the agreement by them to acquire any Placing Shares and each Placee, or the Placee's nominee, in respect of whom (or in respect of the person for whom it is participating in the Placing as an agent or nominee) the allocation, allotment, issue or delivery of Placing Shares has given rise to such non-United Kingdom stamp, registration, documentary, transfer or similar taxes or duties undertakes to pay such taxes and duties, including any interest and penalties (if applicable), forthwith and to indemnify on an after-tax basis and to hold harmless Ultra and Investec in the event that either Ultra and/or Investec has incurred any such liability to such taxes or duties.

The acknowledgments, representations, warranties, acknowledgements undertakings and confirmations contained in this Appendix are given for the benefit of each of Ultra and Investec (for their own benefit and, where relevant, the benefit of their respective affiliates and any person acting on their behalf) and are irrevocable.

Each Placee and any person acting on behalf of the Placee acknowledges that Investec does not owe any fiduciary or other duties to any Placee in respect of any representations, warranties, undertakings, acknowledgements, agreements or indemnities in the Placing Agreement.

Each Placee and any person acting on behalf of the Placee acknowledges and agrees that Investec may (at its absolute discretion) satisfy its obligations to procure Placees by itself agreeing to become a Placee in respect of some or all of the Placing Shares or by nominating any connected or associated person to do so.

When a Placee or any person acting on behalf of the Placee is dealing with Investec, any money held in an account with Investec on behalf of the Placee and/or any person acting on behalf of the Placee will not be treated as client money within the meaning of the relevant rules and regulations of the FCA made under FSMA. Each Placee acknowledges that the money will not be subject to the protections conferred by the client money rules: as a consequence this money will not be segregated from Investec's money (as applicable) in accordance with the client money rules and will be held by it under a banking relationship and not as trustee.

References to time in this Announcement are to London time, unless otherwise stated.

All times and dates in this Announcement may be subject to amendment.

No statement in this Announcement is intended to be a profit forecast, and no statement in this Announcement should be interpreted to mean that earnings per share of Ultra for the current or future financial years would necessarily match or exceed the historical published earnings per share of Ultra.

The price of shares and any income expected from them may go down as well as up and investors may not get back the full amount invested upon disposal of the shares. Past performance is no guide to future performance, and persons needing advice should consult an independent financial adviser.

The Placing Shares to be issued or sold pursuant to the Placing will not be admitted to trading on any stock exchange other than the London Stock Exchange.

The rights and remedies of Ultra and Investec under these Terms and Conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise of one will not prevent the exercise of others.

Neither the content of Ultra's website nor any website accessible by hyperlinks on Ultra's website is incorporated in, or forms part of, this Announcement.

APPIX 2 - DEFINITIONS

The following definitions apply throughout this Announcement unless the context otherwise requires:

 
 Acquisition               means the proposed 
                            acquisition of Sparton 
                            by Ultra, as described 
                            in this Announcement; 
 Admission                 means admission of 
                            the Placing Shares 
                            to the premium listing 
                            segment of the Official 
                            List and to the London 
                            Stock Exchange for 
                            admission to trading 
                            on its main market 
                            for listed securities; 
 Announcement              means this announcement 
                            (including its appendices); 
 Articles of               means the articles 
  Association               of association of 
                            Ultra, as amended 
                            from time to time;

 Break Fee                 means any of the circumstances 
  Trigger                   described in paragraph 
                            6.3 of this Announcement 
                            pursuant to which 
                            Ultra would be obliged 
                            to disburse a termination 
                            fee of $7.5m to Sparton; 
 CFIUS                     means the Committee 
                            on Foreign Investment 
                            in the United States; 
 Circular                  means the circular 
                            to be published by 
                            Ultra for the purposes 
                            of convening the Ultra 
                            General Meeting to 
                            consider and, if thought 
                            fit, approve the Acquisition; 
 Combined Group            means the combined 
                            group, comprising 
                            the Ultra Group and 
                            the Sparton Group; 
 Completion                means the completion 
                            of the Acquisition 
                            in accordance with 
                            the terms of the Merger 
                            Agreement (and "Complete" 
                            shall be construed 
                            accordingly); 
 Conditions                means the conditions 
                            to Completion as set 
                            out in the Merger 
                            Agreement, including 
                            those summarised at 
                            paragraph 6.2 of this 
                            Announcement; 
 CREST                     means the relevant 
                            system (as defined 
                            in the Uncertificated 
                            Securities Regulations 
                            2001 (SI 2001 No. 
                            3755)) in respect 
                            of which Euroclear 
                            is the Operator (as 
                            defined in such Regulations) 
                            in accordance with 
                            which securities may 
                            be held and transferred 
                            in uncertificated 
                            form; 
 DSS                       means the Defense 
                            Security Service of 
                            the US DoD; 
 DTRs                      means the Disclosure 
                            Guidance and Transparency 
                            Rules made by the 
                            FCA pursuant to Part 
                            VI of FSMA; 
 EBITDA                    means earnings before 
                            interest tax, depreciation 
                            and amortization; 
 ECP or ECP                means the Engineered 
  Division                  Components & Products 
                            Division of the Sparton 
                            Group; 
 ERAPSCO                   means the Indiana 
                            general partnership 
                            between USSI and SDS, 
                            governed by the terms 
                            of the ERAPSCO JVA; 
 ERAPSCO JVA               means the joint venture 
                            agreement between 
                            USSI and SDS for the 
                            supply of anti-submarine 
                            warfare products, 
                            dated 31 January 2007 
                            (as amended and restated 
                            as at 25 May 2016); 
 Euroclear                 means Euroclear UK 
                            & Ireland Limited, 
                            a company incorporated 
                            under the laws of 
                            England and Wales; 
 FCA or Financial          means the UK Financial 
  Conduct Authority         Conduct Authority; 
 FSMA                      means the Financial 
                            Services and Markets 
                            Act 2000 (as amended); 
 Guggenheim                means Guggenheim Securities, 
  Securities                LLC; 
 HSR Act                   means the Hart-Scott-Rodino 
                            Antitrust Improvements 
                            Act; 
 Investec                  means Investec Bank 
                            plc; 
 ITAR                      means the US Department 
                            of State's International 
                            Traffic in Arms Regulations; 
 Last Practicable          6 July 2017 (being 
  Date                      the latest practicable 
                            date prior to the 
                            date of this Announcement); 
 Listing Rules             means the rules and 
                            regulations made by 
                            the Financial Conduct 
                            Authority in its capacity 
                            as the UKLA under 
                            FSMA, and contained 
                            in the UKLA's publication 
                            of the same name; 
 LSE or London             means London Stock 
  Stock Exchange            Exchange plc; 
 Material Adverse          means a material adverse 
  Effect                    change in, or any 
                            development reasonably 
                            likely to result in 
                            a material adverse 
                            change in the condition 
                            (financial, operational 
                            or otherwise), earnings, 
                            management, business 
                            affairs or financial 
                            prospects of Ultra 
                            or the Ultra Group, 
                            taken as a whole, 
                            whether or not arising 
                            in the ordinary course 
                            of business; 
 MDS or MDS                means the Manufacturing 
  Division                  & Design Services 
                            Division of the Sparton 
                            Group; 
 Merger Agreement          means the agreement 
                            and plan of merger 
                            dated the same date 
                            as this Announcement 
                            and entered into between 
                            Ultra, Ultra Aneira 
                            and Sparton; 
 Placing                   means the placing 
                            of the Placing Shares 
                            by Investec for the 
                            purposes of financing 
                            the Acquisition in 
                            part, as more particularly 
                            described in paragraph 
                            7 of this Announcement; 
 Placing Agreement         has the meaning given 
                            in paragraph 7 of 
                            this Announcement; 
 Placing Results           means the announcement 
  Announcement              in the agreed form 
                            giving details of 
                            the results of the 
                            Placing; 
 Placing Shares            has the meaning given 
                            in this Announcement; 
 PRA or Prudential         means the UK Prudential 
  Regulation                Regulation Authority; 
  Authority 
 RBC                       means RBC Europe Limited; 
 Regulatory                means any of the services 
  Information               set out in Appendix 
  Service                   3 of the Listing Rules; 
 SDS                       means Sparton Deleon 
                            Springs, LLC, a member 
                            of the Sparton Group; 
 SEC                       means the United States 
                            Securities and Exchange 
                            Commission; 
 Sparton                   means Sparton Corporation, 
                            a company incorporated 
                            under the laws of 
                            Ohio; 
 Sparton Board             means the board of 
                            Directors of Sparton; 
 Sparton Directors         means the directors 
                            of Sparton; 
 Sparton Group             means Sparton and 
                            Sparton's subsidiaries 
                            and subsidiary undertakings; 
 Sparton Shareholder       means the meeting 
  Meeting                   of Sparton Shareholders 
                            to be convened for 
                            the purposes of considering 
                            and, if thought fit, 
                            adopting the Merger 
                            Agreement; 
 Sparton Shareholders      means holders of Sparton 
                            Shares (any such holder 
                            being a "Sparton Shareholder"); 
 Sparton Shares            means the shares of 
                            common stock, with 
                            a par value of US$1.25 
                            per share, of Sparton 
                            (any such share being 
                            a "Sparton Share"); 
 subsidiary                has the meaning given 
                            to that term in the 
                            Companies Act 2006; 
 subsidiary                has the meaning given 
  undertaking               to that term in the 
                            Companies Act 2006; 
 UK or United              means the United Kingdom 
  Kingdom                   of Great Britain and 
                            Northern Ireland; 
 UK Listing                means the UK Listing 
  Authority                 Authority, being the

  or UKLA                   Financial Conduct 
                            Authority acting in 
                            its capacity as the 
                            competent authority 
                            for the purposes of 
                            Part VI of FSMA; 
 Ultra                     means Ultra Electronics 
                            Holdings plc, a company 
                            registered in England 
                            and Wales with the 
                            number 02830397 whose 
                            registered office 
                            is at 417 Bridport 
                            Road, Greenford, Middlesex 
                            UB6 8UA; 
 Ultra Aneira              means Ultra Electronics 
                            Aneira Inc., an Ohio 
                            corporation and an 
                            indirect wholly-owned 
                            subsidiary of Ultra; 
 Ultra Board               the board of Directors 
                            of Ultra; 
 Ultra Directors           the directors of Ultra; 
 Ultra General             means the general 
  Meeting                   meeting of Ultra to 
                            be convened for the 
                            purposes of considering 
                            and, if thought fit, 
                            approving the Acquisition; 
 Ultra Group               means Ultra and Ultra's 
                            subsidiaries and subsidiary 
                            undertakings; 
 Ultra Shareholder         means a holder of 
                            Ultra Shares; 
 Ultra Shares              means ordinary shares 
                            with a nominal value 
                            of 5 pence each in 
                            the capital of Ultra; 
 uncertificated            means in respect of 
  or in uncertificated      a share or other security, 
  form                      where that share or 
                            other security is 
                            recorded on the relevant 
                            register of the share 
                            or security concerned 
                            as being held in uncertificated 
                            form in CREST and 
                            title to which may 
                            be transferred by 
                            means of CREST; 
 United States             means the United States 
  or US                     of America, its territories 
                            and possessions, any 
                            state of the United 
                            States of America, 
                            the District of Columbia 
                            and all other areas 
                            subject to its jurisdiction 
                            and any political 
                            sub-division thereof; 
 US DoD                    means the United States 
                            Department of Defense; 
                            and 
 USSI                      means UnderSea Sensor 
                            Systems, Inc., a member 
                            of the Ultra Group.

Unless otherwise indicated in this Announcement, all references to "GBP", "GBP", "pounds", "pound sterling", "sterling", "p", "penny" or "pence" are to the lawful currency of the UK.

Unless otherwise indicated in this Announcement, all references to "$", "US$", "USD", "US Dollars", "US dollar" or "cents" are to the lawful currency of the United States.

APPIX 3 - RISK FACTORS

PART A: MATERIAL RISKS RELATING TO THE ACQUISITION

Completion is subject to a number of Conditions which may not be satisfied or waived and may result in Completion of the Acquisition being delayed or in the Acquisition not Completing

The implementation of the Acquisition is subject to the satisfaction (or waiver, if applicable) of the Conditions, including, among others:

-- approval of the transactions contemplated by the Merger Agreement by Ultra Shareholders at the Ultra General Meeting;

   --    adoption of the Merger Agreement by Sparton Shareholders at the Sparton Shareholder Meeting;

-- applicable antitrust clearances and approvals having been obtained, including from the US authorities in accordance with the requirements of the HSR Act;

   --    completion of the CFIUS, DSS and Investment Canada Act review processes; and

-- expiry or waiver of any applicable prior notice period under ITAR relating to the Acquisition.

There is no guarantee that the Conditions will be satisfied in the necessary time frame (or waived, if applicable) and the Acquisition may, therefore, be delayed or not Complete. Delay in Completing the Acquisition will prolong the period of uncertainty for the Ultra Group and the Sparton Group and both delay and failure to Complete may result in the accrual of additional costs to their businesses (for example, there may be an increase in costs in relation to the preparation and issue of documentation or other elements of the planning and implementation of the Acquisition and/or, in the event of a failure to Complete the Acquisition, the Ultra Group may be exposed to adverse foreign exchange fluctuations to the extent US Dollar-denominated amounts acquired in order to settle the Acquisition consideration are subsequently required to be converted back to pound sterling) without any of the potential benefits of the Acquisition having been achieved. In addition, Ultra's and Sparton's management would have spent time in connection with the Acquisition, which could otherwise have been spent more productively in connection with the other activities of the Ultra Group and the Sparton Group, as applicable. Therefore, the aggregate consequences of a material delay in Completing or failure to Complete the Acquisition may have a material adverse effect on the business, results of operations and financial condition of the Ultra Group, the Sparton Group and, in the case of a material delay only, the Combined Group. Ultra would also, to the extent that a Break Fee Trigger occurs, be required to disburse a termination fee of $7.5m to Sparton.

Furthermore, if any of the Conditions are not satisfied and Completion does not occur or is delayed, Ultra's ability to improve shareholder value and to implement the Board's strategic objectives may be adversely affected and this may, in turn, have an adverse impact on Ultra's prospects. In particular, if the Acquisition fails to Complete:

-- one or more third parties may acquire control of Sparton or acquire the Sparton Group's existing interest in the ERAPSCO joint venture (in respect of which Ultra is the sole co-joint venture party). ERAPSCO is a leading provider of sonobuoy systems to the US Navy and the revenue and earnings that Ultra generates from the ERAPSCO joint venture are an important part of the Ultra Group's financial performance. If one or more third parties acquires control of Sparton or acquires the Sparton Group's existing interest in the ERAPSCO joint venture, there is no guarantee that ERAPSCO's position as a leading provider of sonobuoy systems to the US Navy will continue, and this may have a material adverse effect on the business, financial condition and/or results of operations of the Ultra Group. It is also possible that, if a third party were to acquire the Sparton Group's interest in ERAPSCO, Ultra or the relevant third party may consider invoking its termination rights under the ERAPSCO JVA. Any such termination may also have a material adverse effect on the business, financial condition and/or results of operations of the Ultra Group; and

-- the ability of the Ultra Group to utilise amounts raised pursuant to the Placing (the "Placing Proceeds") may not be unrestricted. This is because, among other things, 3,523,584 Placing Shares, representing 4.9% of the existing issued ordinary share capital of Ultra immediately prior to completion of the Placing, were issued by Ultra as part of the Placing on a non pre-emptive basis pursuant to a power granted to the Ultra Board at the most recent annual general meeting of Ultra. The terms of that power provide that any such issuance of new Ultra Shares must be made only for the purposes of financing a transaction which the Ultra Board determines to be an acquisition or other permitted capital investment. Accordingly, if the Acquisition fails to Complete, the Ultra Directors will be required to consider, in light of the circumstances at the time, the appropriate use of the Placing Proceeds, including the extent to which they should be retained for general purposes or used in relation to other capital investments and the extent to which return of them to Ultra Shareholders would be appropriate. To the extent the Placing Proceeds are retained by the Ultra Group but their utilisation is restricted, this could introduce capital inefficiency into the Ultra Group, potentially impacting metrics such as earnings per share and, by extension, the market price of Ultra Shares.

The Placing may not complete

Completion of the Placing is conditional, among other things, upon Admission becoming effective and the Placing Agreement not being terminated in accordance with its terms. The Placing Agreement provides that the obligations of Investec (including its obligation to use its reasonable endeavours to procure placees for the Placing Shares or, to the extent that it fails to do so, itself subscribe for the relevant Placing Shares) will cease, and that Investec may terminate the Placing Agreement, in the event that, among other things, Investec considers that there has been a material adverse change concerning Ultra or the Ultra Group. In the event that the Placing does not complete, Ultra would not have raised equity funding pursuant to the Placing but would nevertheless remain obliged to Complete the Acquisition. In such circumstances, Ultra would be reliant on one or more alternative sources of funding to Complete the Acquisition, which might not be available at all or not available on terms which the Ultra Directors consider to be satisfactory. If Ultra fails to procure alternative funding, Ultra may be unable to satisfy its obligation to pay the consideration amount under the Merger Agreement (constituting a breach by Ultra of the Merger Agreement) which could have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Ultra Group. If Ultra secures alternative funding, but on terms which the Ultra Directors do not consider to be satisfactory and the Acquisition Completes, this could have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Combined Group.

The Ultra Group must obtain governmental, antitrust and regulatory consents, including from US authorities, to complete the Acquisition which, if delayed, not granted or granted on terms not satisfactory to Ultra, may jeopardise the Acquisition, result in additional expenditures of money and resources and/or reduce the anticipated benefits of the Acquisition

The Acquisition is conditional upon, among other things, the receipt of governmental, antitrust and regulatory clearances from authorities with jurisdiction over the operations of the Ultra Group and/or the Sparton Group, including the U.S. anti-trust authorities, CFIUS and the DSS. The authorities from which Ultra is seeking these clearances have discretion in administering the governing statutes and regulations. As a condition to their clearance of the transactions contemplated by the Acquisition, these authorities may propose requirements, limitations, require divestitures or compulsory licensing of tangible or intangible assets or place other restrictions on the conduct of the Combined Group's business. Any such requirements, limitations, divestitures, licences or restrictions could jeopardise or delay Completion or may reduce the anticipated benefits of the Acquisition.

The outcome of the various governmental, antitrust and regulatory consent applications is not yet known and is not within the control of the Ultra Group or the Sparton Group. As a result, there can be no assurance that the corresponding Conditions will be satisfied or, if applicable, waived or that any termination rights will not be exercised, and therefore there can be no assurance that the Acquisition will be Completed as contemplated or at all. Potential risks arising from a failure to Complete are set out in the immediately preceding risk factor (Completion is subject to a number of Conditions which may not be satisfied or waived and may result in Completion of the Acquisition being delayed or in the Acquisition not Completing).

Ultra or Sparton may waive one or more of the Conditions without resoliciting shareholder approval for the Acquisition

Certain Conditions may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of Ultra and Sparton. In the event that any such waiver does not require resolicitation of shareholders, the parties will have the discretion to Complete the Acquisition without seeking further shareholder approval. Those Conditions requiring Sparton Shareholder and/or Ultra Shareholder approval cannot be waived.

Appraisal Rights under Ohio law

Under Ohio law, Sparton Shareholders who do not vote in favour of adopting the Merger Agreement will have the right to seek appraisal of the fair value of their shares if they have submitted a written demand for appraisal prior to the vote being taken at the Sparton Shareholder Meeting. The appraised value could be more than, the same as, or less than the consideration under the Merger Agreement of $23.50 per Sparton Share. Should a material number of Sparton Shareholders exercise appraisal rights and should it be determined that the fair value of each Sparton Share as to which appraisal rights have been exercised is materially greater than the Acquisition consideration of US$23.50 per Sparton Share, it could have a material adverse effect on the financial condition and results of operations of the Combined Group.

Strategic benefits and financial returns achieved from the Acquisition may differ from those anticipated

There is no assurance that the Acquisition will achieve the strategic benefits (including, through the enhancement of Ultra's continuing relationship with a major customer, the securing of an important revenue and earnings stream for the Ultra Group and increased exposure to the growing sonobuoy segment and/or financial returns (including through potential cost savings within the Sparton Group) that Ultra anticipates. Ultra believes that the consideration for the Acquisition is justified in part by the strategic benefits and financial returns it expects to achieve by acquiring Sparton. However, these expected strategic benefits and financial returns may not develop and other assumptions upon which Ultra determined to pursue the Acquisition may prove to be incorrect. In particular, the statements contained in this Announcement relating to the expected enhancement of Ultra's continuing relationship with a major customer, increased exposure to the growing sonobuoy segment, securing an important revenue and earnings stream and potential cost savings within the Sparton Group relate to future actions and circumstances which, by their nature, involve assumptions, uncertainties and contingencies. As a result, these anticipated benefits may not be achieved, or those achieved could be materially different from those anticipated.

While the Ultra Directors believe that the benefits of the Acquisition have been reasonably estimated, unanticipated events, liabilities, tax impacts or unknown pre-existing issues may arise or become apparent which could result in the costs of the Acquisition being higher and the realisable benefits being lower than expected, resulting in a material adverse effect on the business, financial condition and results of operations of the Combined Group. No assurance can be given that the Acquisition will deliver all or substantially all of the anticipated benefits.

Ultra and Sparton may not successfully integrate

If the Acquisition Completes, achieving the anticipated benefits of the Acquisition will depend in part upon whether Ultra and Sparton integrate their businesses in an effective and efficient manner. While the Ultra Board is confident in its ability to integrate ECP's business (given the long-standing working relationship between the Ultra Group and the Sparton Group through ERAPSCO and the similarity of Ultra's and ECP's operations), there is nevertheless a material risk that Ultra and Sparton may not be able to accomplish this integration process successfully, either in full or in part, which could have a material adverse effect on the Combined Group's results of operations, financial condition and/or prospects. The integration of businesses is complex and time-consuming. The difficulties that could be encountered include the following:

-- integrating personnel, operations and systems, while maintaining focus on selling and promoting existing and newly acquired or produced products;

   --    co-ordinating a greater number of geographically dispersed organisations;

-- distraction of management and employees from operations, including, in the case of Ultra, from the implementation of its standardisation and shared services programme;

   --    changes or conflicts in corporate culture; 
   --    management's inability to manage a significant increase in the number of employees;

-- management's inability to train and integrate personnel, who may have limited experience with the respective companies' business lines and products;

   --    retaining existing customers and attracting new customers; 
   --    retaining existing employees and attracting new employees; 
   --    maintaining business relationships; and

-- inefficiencies associated with the integration and management of the operations of the Combined Group.

In addition, there will be integration costs and non-recurring transaction costs (such as fees paid to legal, financial, accounting and other advisers and other fees paid in connection with the Acquisition and the proposed disposal of MDS), including costs associated with combining the operations of the Ultra Group and the Sparton Group and achieving the potential cost savings within the Sparton Group that have been identified by Ultra, and such costs may be significant.

An inability to realise the full extent of the anticipated benefits of the Acquisition, including potential cost savings within the Sparton Group that have been identified by Ultra, as well as any delays encountered in the integration process and realising such benefits, could have an adverse effect upon the revenues, level of expenses and operating results of the Combined Group, which may materially adversely affect the value of the Ultra Shares after Completion.

Certain of the Sparton Group agreements contain change of control provisions which, if not waived and the Acquisition Completes, could have material adverse effects on the Combined Group

Members of the Sparton Group are party to various agreements with third parties, including the ERAPSCO JVA, a credit and guarantee agreement with certain lenders, certain commercial agreements and employee arrangements that contain change of control provisions that may be triggered upon Completion. Agreements with change of control provisions typically provide for or permit the termination of the agreement upon the occurrence of a change of control of one of the parties which can be waived by the relevant counterparties. In the event that Ultra determines that there is such a contract or arrangement requiring a consent or waiver in relation the Acquisition, there can be no assurance that such consent will be obtained at all or on favourable terms. The inability to obtain waivers from one or more relevant counterparties could, if the Acquisition Completes, have a material adverse effect on the Combined Group.

Employment arrangements with change of control provisions may provide for the vesting of outstanding awards and/or change of control payments upon the occurrence of a change of control. If the Acquisition would constitute a change of control of Sparton, any such employment arrangements could require Sparton and, by extension (following Completion), the Combined Group to commit significant financial resources to satisfying the liabilities arising as a result of the Acquisition.

Ultra will incur additional indebtedness in connection with the Acquisition, which may decrease its ability to fund expansionary initiatives. All of Ultra's debt obligations will have priority over the Ultra Shares with respect to payment in the event of a liquidation

Ultra is party to a GBP100,000,000 revolving credit facility and a GBP200,000,000 revolving credit facility which it is proposed be drawn down in order to finance (in part) the Acquisition. While neither of these facilities prohibit drawing down funds to finance the Acquisition (subject to satisfaction of customary conditions precedent to draw down), each facility includes customary representations and warranties, covenants and events of default. These events of default include (subject to customary grace periods and materiality thresholds): (i) failure to satisfy any financial covenants contained in the relevant facility; (ii) misrepresentation under certain designated documents relating to each facility; (iii) certain insolvency events or proceedings; and (iv) material adverse changes in the business or financial conditions of Ultra and its guarantors, taken as a whole. Were an event of default to occur under either facility prior to Completion of the Acquisition, Ultra would not be entitled to draw down under the relevant facility but would nevertheless remain obliged to Complete the Acquisition. In such circumstances, Ultra would be reliant on one or more alternative sources of funding to Complete the Acquisition, which might not be available at all or not available on terms which the Ultra Directors consider to be satisfactory. If an event of default occurs under either facility prior to Completion of the Acquisition, Ultra may be unable to satisfy its obligation to pay the consideration amount under the Merger Agreement (constituting a breach by Ultra of the Merger Agreement) which could have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Ultra Group. If Ultra secures alternative funding, but on terms which the Ultra Directors do not consider to be satisfactory and the Acquisition Completes, this could have a material adverse effect on the business, financial condition, results of operations and/or prospects of the Combined Group.

Further, while the Ultra Board still expects to be able to invest in targeted acquisitions following Completion to further strengthen its portfolio, the Combined Group's increased indebtedness following Completion could reduce funds available to fund expansionary initiatives, including for capital expenditure and acquisitions and may create competitive disadvantages for the Combined Group relative to other companies with lower indebtedness levels.

In any liquidation, dissolution or winding-up of Ultra, Ultra Shares would rank behind all debt claims against Ultra or any of its subsidiaries. In addition, any convertible or exchangeable securities or other equity securities that Ultra may issue in the future may have rights, preferences and privileges more favourable than those of Ultra Shares. As a result, holders of Ultra Shares will not be entitled to receive any payment or other distribution of assets upon any liquidation or dissolution until after Ultra's obligations to its debt holders and holders of equity securities which rank senior to the Ultra Shares have been satisfied.

Representations and warranties contained in the Merger Agreement may provide limited protection for Ultra

The Merger Agreement contains warranties and representations on the part of Sparton, which, as is usual in such a transaction, are provided by Sparton and cannot be enforced after Completion. Accordingly, Ultra may not have an effective ability to recover damages or compensation in the event of an undisclosed liability of Sparton arising after Completion. Limitations in the ability of Ultra to enforce the representations and warranties in the Merger Agreement could result in Ultra assuming undisclosed liabilities as a result of the Acquisition and/or realising a lower value from the Acquisition than anticipated.

Lawsuits may be filed, against, among others, Ultra and/or Sparton challenging the Acquisition, and an adverse ruling in any such lawsuit may delay or prevent Completion or result in an award of damages against Ultra or Sparton

Lawsuits arising out of or relating to the Merger Agreement or the Acquisition may be filed in the future. The results of complex legal proceedings are difficult to predict and could delay or prevent Completion. The existence of litigation relating to the Acquisition could impact the likelihood of obtaining the shareholder approvals from either Ultra or Sparton. Moreover, any future litigation could be, time-consuming and expensive and could divert Ultra's and Sparton's respective management's attention away from their regular business.

One of the Conditions to Completion is the absence of any law or judgment issued by any court or tribunal of competent jurisdiction that restrains, enjoins or otherwise prohibits Completion. Accordingly, if a plaintiff is successful in obtaining a judgment prohibiting Completion, then such judgment may prevent Completion, or Completion within the expected time frame.

The market price of Ultra Shares may decline as a result of the Acquisition

The market price of Ultra Shares may decline as a result of the Acquisition if, among other reasons:

-- Ultra is unable to dispose of MDS (either at all or on terms which are commercially beneficial to the Combined Group);

-- Completion is delayed or does not occur on the terms and subject to the Conditions envisaged in the Merger Agreement;

   --    the integration of Sparton's ECP Division is delayed or unsuccessful;

-- Ultra does not achieve the expected benefits of the Acquisition as rapidly or to the extent it anticipates or to the extent anticipated by analysts and/or investors;

-- the effect of the Acquisition on the Ultra Group's financial results is not consistent with Ultra's expectations or the expectations of analysts and/or investors; or

   --    Ultra Shareholders sell a significant number of Ultra Shares following Completion.

In addition, these factors could also make it more difficult for the Combined Group to raise funds through future offerings of Ultra Shares.

PART B: MATERIAL NEW RISKS TO THE ULTRA GROUP OR THE SPARTON GROUP AS A RESULT OF THE ACQUISITION

The MDS spin-off arrangements

As at the date of this Announcement, the Ultra Group has not entered into a binding agreement to dispose of MDS and no assurance can be given that a suitable buyer will be found within a reasonable time-period, at an acceptable price or on acceptable terms to Ultra, or at all. Any disposal of MDS, if agreed, may also be subject to the satisfaction or (if applicable) waiver of a number of conditions. No assurance can be given that any such conditions would be satisfied or waived within any applicable time-frame, in which case any such disposal may be delayed or may not complete. A delay in the completion of any such disposal may also divert management attention away from focussing on normal business operations. The tax consequences of a disposal of MDS are not yet known but there could be a tax liability on a disposal of MDS. The Ultra Board believes the disposal of MDS to be in the best interests of the Ultra Shareholders because the business in which MDS specialises (manufacturing and refurbishing of printed circuit card assemblies and integration of medical devices) is considered

non-core to the business of Ultra. If the Ultra Group is unable to dispose of MDS, the Ultra Group's ability to deliver shareholder value, to deliver value for MDS or to implement the Ultra Group's stated strategy may be prejudiced. In particular, should the disposal of MDS not occur, or take materially longer than expected (Ultra's intention being to dispose of MDS by the end of Q1 2018), the level of anticipated costs savings described in paragraph 4 of this Announcement will be lower in the year-ending 31 December 2018.

Any agreement to dispose of MDS may be expected to contain certain representations, warranties and/or indemnities given by Ultra in favour of the buyer of MDS under such agreement. If Ultra is required in the future to make payments under any of these representations, warranties and/or indemnities this could have an adverse effect on the Combined Group's cash flow and financial condition.

If a disposal of MDS does not proceed, the Ultra Group's management and employees may be affected and key management or employees may choose to leave MDS as a result of the uncertainty that would be caused were such a disposal to fail to complete. This may have a negative effect on the performance of MDS under the Ultra Group's ownership. To maintain shareholder value, the Ultra Group's management would be required to continue to allocate time and cost to the ongoing supervision and to the development of MDS. It would also be appropriate to determine the ongoing investment plans and undertake a review of MDS's cost structure. MDS currently has a certain amount of excess property capacity, which may require a provision to be taken in the future.

Sparton may not perform in line with expectations

If the results and cash flows generated by the combination of the operations of the Sparton Group with those of the Ultra Group are not in line with the Ultra Directors' expectations, a write-down may be required against the carrying value of the Ultra Group's investment in Sparton. Such a write-down may reduce the Combined Group's ability to generate distributable reserves and consequently affect its ability to pay dividends or return capital to Ultra Shareholders.

The Sparton Group is and, if the Acquisition Completes, the Combined Group will be liable for remediation costs to address known contamination at a former site of the Sparton Group

The Sparton Group is liable for certain remediation costs in respect of hazardous waste generated at an electronics manufacturing facility previously used by the Sparton Group and based in New Mexico, United States. The Sparton Group believes that remediation work at the site will be substantially complete by 2030 and in its most recent audited consolidated financial statements booked a liability of approximately $6.1m in respect of certain remediation costs that may be incurred as a result of contamination at the site. While the Sparton Group may be able to recover certain amounts in respect of eligible site-related remediation costs from the US Department of Energy (the "DOE") in the event the final amount of the remediation costs exceeds the amount of the relevant liability and/or the DoE does not provide reimbursement (in part or at all), such costs could have a material adverse effect on the business, financial condition and results of operations of the Sparton Group and, if the Acquisition Completes, the Combined Group.

The Sparton Group may default under its existing credit facility agreement prior to Completion

The Sparton Group is party to an Amended and Restated Credit and Guaranty Agreement (the "Sparton Credit Facility") with a syndicate of lenders (the "Sparton Lenders"), which includes representations, covenants and events of default that are customary for financings of this nature. The Sparton Credit Facility is secured against substantially all of the assets of Sparton and relevant members of the Sparton Group (the "Security"). Under the terms of the Sparton Credit Facility, in the event that any of the financial covenants contained therein are breached, a default under the terms of the Sparton Credit Facility could be triggered.

In light of a potential failure of Sparton to comply with financial covenants in the Sparton Credit Facility concerning the total funded debt to EBITDA ratio of relevant members of the Sparton Group (the "Leverage Covenants"), on 30 June 2017 Sparton entered into an amendment agreement with the Sparton Lenders in respect of the Sparton Credit Facility (the "Amendment Agreement"), pursuant to which, among other things, the Sparton Lenders have agreed amendments to the Leverage Covenants which increase permitted leverage for the fiscal quarters ended June 2017, September 2017 and December 2017 and have waived any event of default that may have occurred solely as a result of Sparton's failure to comply with the unamended Leverage Covenants for the test period ending on the last day of Sparton's fiscal quarter June 2017.

Notwithstanding the Amendment Agreement, if during the period prior to Completion of the Acquisition Sparton breaches financial covenants (including any of the Leverage Covenants) contained in the Sparton Credit Facility, this could trigger a default under the terms of the facility, which would permit the Sparton Lenders to restrict Sparton's (and relevant members of the Sparton Group) ability to borrow under the Sparton Credit Facility, cause all of the Sparton Group's outstanding obligations to the Sparton Lenders to become immediately due and repayable and permit the Sparton Lenders to enforce the Security. Cross-default provisions of other agreements of the Sparton Group could also be triggered as a result of this. In such circumstances, Ultra may nevertheless remain obliged to Complete the Acquisition, unless the underlying circumstances gave rise to a right to terminate the Merger Agreement or to invoke a Condition under the Merger Agreement. If a default were to occur under the Sparton Credit Facility prior to Completion and Ultra were nevertheless to Complete the Acquisition, the anticipated benefits of the Acquisition may be materially less than those anticipated by the Ultra Directors, which could result in a material adverse effect on the business, financial condition, results of operations and/or prospects of the Combined Group.

PART C: EXISTING MATERIAL RISKS TO THE ULTRA GROUP OR THE SPARTON GROUP WHICH WILL BE IMPACTED BY THE ACQUISITION

Future operating results are dependent on the growth in customers' businesses and/or capabilities

The Ultra Group has a strategic objective to maintain year-on-year growth. The continued growth of the Ultra Group and the Sparton Group is, and if the Acquisition Completes, the Combined Group's growth will be, dependent (in part) on the growth in the sales of its customers' products and on the expansion of their capabilities as well as the development by its customers of new products and/or capabilities. If the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group fail to respond to changing market dynamics (including changes in technology), win new business, anticipate changes in their customers' businesses and their changing product needs, their results of operations and financial position could be negatively impacted. It is not certain that the markets that the Ultra Group and the Sparton Group serve and, if the Acquisition Completes, the Combined Group will serve will grow in the future, that their existing and new products will meet the requirements of these markets or that they can maintain adequate gross margins or profits in these markets. A decline in demand in one or several of their end-user markets could have a material adverse impact on the demand for their products and have a material adverse effect on business, results of operations and financial condition of the Ultra Group, the Sparton Group and, if the Acquisition completes, the Combined Group.

Delivering change within the Combined Group's business

As part of the Ultra Group's ongoing business and operations, major change programmes are being implemented in order to enhance the Ultra Group's operational performance. In particular, Ultra management is currently focussed on streamlining the Ultra Group's finance, information technology, human resources, sourcing and property functions into a single global business services function as part of a major change programme, known as the standardisation and shared services programme. The effective delivery of these major change programmes relies upon, among other things, the focus, oversight and input of Ultra's management. Completion, delivery and implementation of the Acquisition could, however, for a number of reasons (including the challenges presented by the integration of Ultra's and Sparton's respective businesses and the enhanced scale of the Combined Group), result in the management and employees of the Combined Group being unable to devote sufficient focus, oversight and input to these major change programmes. If major change programmes are not successfully delivered, the anticipated benefits of those programmes may not be realised, the costs of those programmes may increase and the Combined Group's business performance may be adversely impacted, potentially resulting in a material adverse effect on the business, results of operations and financial condition of the Ultra Group and, if the Acquisition Completes, the Combined Group.

Reliance on, and potential inability to attract, retain and develop highly skilled personnel

The success of the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group's strategy is and will be dependent on their ability to attract, develop and retain talented and skilled employees, including a qualified team of engineers and employees in managerial, technical, marketing and information technology support positions. Competition for such key personnel is intense, and the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group cannot be assured of their ability to successfully attract and retain such employees. Employee retention may be particularly challenging following mergers or divestures, such as the Acquisition, as the Combined Group must continue to motivate employees (of both the Ultra Group and the Sparton Group) and keep them focused on its strategies and goals, which may be particularly difficult due to potential distractions related to integrating the Sparton Group. Failure to retain or loss of all the skills necessary to execute on growth plans and deliver key customer programmes is likely to result in reduced customer confidence and the Combined Group's business, results of operations and financial condition could be materially adversely affected.

Risks associated with information technology systems

The Ultra Group and the Sparton Group rely and, if the Acquisition Completes, the Combined Group will rely on their information technology ("IT") systems which are an integral part of their businesses. A serious disruption to the IT systems could significantly limit the Ultra Group's, the Sparton Group's and, if the Acquisition Completes, the Combined Group's ability to manage and operate their businesses efficiently, which in turn could have a material adverse effect on their businesses, results of operations and financial condition.

The Ultra Group and the Sparton Group also face and, if the Acquisition Completes, the Combined Group will face various cyber security threats, including cyber security attacks to IT infrastructure and attempts to gain access to proprietary or sensitive information. Although various procedures and controls are utilised to monitor these threats and mitigate exposure to such threats, there can be no assurance that these procedures and controls will be sufficient to prevent cyber security threats from materialising. If any of these threats were to materialise, the operations may be disrupted and the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group may experience a loss in sales or increased costs arising from the implementation of additional security measures. A cyber security breach may also result in legal claims or proceedings and could damage the Ultra Group, the Sparton Group and, following Completion of the Acquisition, the Combined Group's reputation.

Reliance on subcontractors and key suppliers

The Ultra Group and the Sparton Group rely upon subcontractors to deliver upon their customer commitments and, if the Acquisition Completes, the Combined Group will rely upon subcontractors to deliver upon their customer commitments. This reliance on subcontractors involves significant risks, including lack of control over capacity allocation, delivery schedules, the resolution of technical difficulties and the development of new processes. Disputes regarding the ownership of or rights in certain third-party intellectual property may preclude subcontractors from fulfilling the Ultra Group's, the Sparton Group's and, if the Acquisition Completes, the Combined Group's requirements at a reasonable cost or, in some cases, at all. A shortage of raw materials or production capacity could lead any subcontractors to allocate available capacity to other customers, or to internal uses.

If these subcontractors fail to perform their obligations in a timely manner or at satisfactory quality and cost levels, the Combined Group's ability to bring products to market and its reputation could suffer, its costs could increase and, where such failure causes the Combined Group to be in breach of any of its obligations to its end customer, it could result in the Combined Group incurring liability. For example, during a market upturn, contract manufacturers may be unable to meet demand requirements, which may preclude the Ultra Group, the Sparton Group and, following Completion of the Acquisition, the Combined Group from fulfilling customers' orders on a timely basis, which could lead to a loss in sales and/or liability for breach of contract. The ability of these subcontractors to perform is largely outside of the control of Ultra and Sparton.

The Ultra Group and the Sparton Group also purchase and, if the Acquisition Completes, the Combined Group will purchase various types of raw materials and component parts from suppliers, and may be materially and adversely affected by the failure of those suppliers to perform as expected. This non-performance may consist of delivery delays or failures caused by production issues or delivery of non-conforming products. The risk of non-performance may also result from the insolvency or bankruptcy of one or more suppliers. Further, the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group, may occasionally seek to engage new suppliers with which they have little or no experience; this can pose technical, quality and other risks. Efforts to protect against and to minimise these risks may not always be effective.

The Ultra Group and the Sparton Group have, and if the Acquisition Completes, the Combined Group will have, a complex supply chain. There may be reputational challenges faced by customers and other stakeholders if the Ultra Group, the Sparton Group or, if the Acquisition Completes, the Combined Group is unable to sufficiently verify the origins for minerals originating from the conflict zones of the Democratic Republic of Congo and adjoining countries used in their products. The Ultra Group, the Sparton Group, and if the Acquisition Completes, the Combined Group may also encounter challenges satisfying those customers who require that all of the components of their products are certified as conflict free and, if so, customers may choose to disqualify them as a supplier.

Failure to comply with laws, regulations and restrictions

The Ultra Group and the Sparton Group operate and, if the Acquisition Completes, the Combined Group, will operate in a highly regulated environment and are and will be subject to the laws, regulations and restrictions of many jurisdictions, including those of the US, the UK and other countries. These include anti-bribery provisions, import and export controls, and government contracting rules. Sanctions for failure by the Ultra Group, the Sparton Group or, if the Acquisition Completes, the Combined Group, or their sales intermediaries, or others acting on their behalf, to comply with these laws, regulations and restrictions could include fines, penalties, legal claims, suspension or debarment from future government contracts for a period of time, as well as having an impact on reputation. Such sanctions could have an impact on the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group's businesses, financial position and future operations and prospects. New legislation, changes in existing legislation and/or regulatory or enforcement policies may also result in delays or additional costs or restrictions. The risks described in this paragraph are particularly relevant in the US, where a significant proportion of the Sparton Group's revenues derive, and in the UK, where Ultra is incorporated. Following completion of the Acquisition, the Combined Group's exposure to such risks is likely to be higher than that of the current Ultra Group or the current Sparton Group in isolation. For example, if the Acquisition Completes there is a greater risk that the activities of the Sparton Group will come within the territorial scope of the UK Bribery Act 2010, thus increasing the Combined Group's exposure to that legislation. Ultra has and, if the Acquisition Completes, the Combined Group will have policies and procedures in place, which are regularly reviewed and audited, including procedures related to the use of sales and marketing representatives, anti-bribery and anticorruption, gifts and hospitality, whistleblowing and investigation of ethics and compliance concerns. Mandatory training is and will be also undertaken on a variety of compliance related subjects, including anti-bribery and corruption.

In addition to the foregoing, the Ultra Group and the Sparton Group are and, if the Acquisition Completes, the Combined Group will be subject to a significant number and growing range of laws and regulations including, amongst others, those relating to data protection (including, in the future, the European Union's General Data Protection Regulation ("GDPR")). Data protection laws impact the records held by the Ultra Group on its employees and personnel. Ultra requires that all members of the Ultra Group are compliant with data protection laws in respect of such records. Accordingly, if the Acquisition Completes, the increased scale of the Combined Group will mean the relevant data protection laws and regulations to which the Combined Group will be subject, and with which it will be obliged to comply, will increase. A failure to comply with any such laws or regulations could have a material adverse effect on the business, results of operations and financial condition of the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group, on account of, among other things, the imposition of substantial fines and/or other penalties, exposure to regulatory investigations, litigation and/or reputational damage.

Increased scale of the business and exposure to the United States

If the Acquisition completes, the scale of the Combined Group will be increased. The greater scale of the Combined Group may present different or enhanced challenges to those currently faced by the Ultra Group, including greater exposure to market volatility in the US particularly in light of the recent change in administration which may lead to greater political, economic and operational risks.

In particular, if the Acquisition completes, the Combined Group will have a significantly expanded presence in, and exposure to, the US, as a significant portion of the Sparton Group's revenue is derived from operations in that country. As a result, the risks highlighted above will be particularly significant for the Combined Group in the US. The regulatory landscape in the US is undergoing certain changes under the new administration, particularly in the defence sector. In addition, whilst the US Navy's sonobuoy budget is currently forecast to continue to grow under the US DoD five year plan, there can be no guarantee that such growth will continue. Therefore, to a greater extent than for the Ultra Group's current operations, the US business of the Combined Group may be adversely affected by changes to US laws and regulations (including those related to trade restrictions, defence and foreign investment) and changes to defence budgets of the US DoD and US Navy, particularly to the extent changes in such laws and/or budgets affect sonobuoys or any other products of the Combined Group.

Risks associated with the Combined Group's US operations also include changes in economic conditions (including potential slowdowns in the US economy, wage and cost inflation, currency exchange rates, consumer spending and employment levels), changes in tax rates, potential tariffs, duties and other trade barriers and increased competitive promotional activity. Moreover, the Combined Group's success in the US depends on its ability to predict, identify, interpret and react to changes in US government policy in respect of the sector in which the Combined Group will operate and the products it trades in.

If the Combined Group cannot effectively manage exposure to these challenges, this could have a material adverse effect on the Combined Group's business, financial condition, results of operations and prospects.

Deterioration in the macroeconomic environment and cyclicality of end user markets

The Ultra Group's and the Sparton Group's revenue is and, if the Acquisition Completes, the Combined Group's revenue will be derived from global defence and security and commercial sectors. The level and type of spending in such sectors is dependent on a complex mix of macroeconomic, fiscal and strategic defence and security imperatives. Changes in government spending could lead to programme terminations or delays, or changes in sector growth. Deterioration in demand affecting short cycle business or a fundamental shift in how customers procure products or services could also have an adverse effect on the Combined Group's future results.

In addition, many of the sectors that the Combined Group will serve, including defence, have historically been cyclical and have experienced periodic downturns. The factors leading to and the severity and length of a downturn are difficult to predict and there can be no assurance that the Combined Group will appropriately anticipate changes in these underlying end-markets, or that any increased levels of business activity would continue as a trend into the future. If the Combined Group does not anticipate changes in the end-market in which it serves, its business, results of operations and financial condition could be materially adversely affected.

Risks associated with products and services provided by the Combined Group

The Ultra Group and the Sparton Group design, develop and deliver and, if the Acquisition Completes, the Combined Group will design, develop and deliver, products and services that are often customised, utilising complex technologies, under fixed price contracts that are sometimes long term in nature. This gives rise to the risks of failure to execute the contract profitably, the supply of a defective or delayed product, the incurrence of other contractually related liabilities, or damage to reputation and commercial relationships.

In addition, the future success of the Combined Group is dependent on the timely development and introduction of competitive new products at acceptable margins; this carries design and operational risks. Delays in commencing or maintaining volume shipments of new products, the discovery of product, process, software, or programming defects or failures and any related product returns could each have a material adverse effect on the business, financial condition and results of operation of the Combined Group.

Failure to execute or deliver a contract gives rise to increased programme costs, contract penalties, litigation and other financial liabilities, reduced future profitability and reputational risk. The Combined Group may not be able to anticipate all of the possible performance or reliability problems that could arise with its new or existing products, which could result in significant product liability or warranty claims. Any defects found in the products could result in a loss of sales or market share, failure to achieve market acceptance, damage to reputation, indemnification claims, litigation, increased insurance costs and increased service costs, any of which could also discourage customers from purchasing its products. Occurrence of any of the foregoing could have an adverse effect on the Ultra Group's, the Sparton Group's and, if the Acquisition Completes, the Combined Group's business, financial condition, results of operations and prospects.

The Ultra Group and the Sparton Group operate in a highly competitive industry, and inability to successfully compete could result in loss of market share and decline in revenues

The Ultra Group and the Sparton Group operate and, if the Acquisition Completes, the Combined Group will operate in a highly competitive industry. Current and prospective customers for their products evaluate their capabilities against the merits of direct competitors. The Ultra Group and the Sparton Group compete and, following Completion of the Acquisition, the Combined Group will compete, primarily on the basis of technology and performance. For certain products, they also compete on price. There can be no assurance that the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group will be able to maintain their current market share with respect to any of their products. A loss of market share to competitors could have a material adverse effect on the business, results of operations and financial condition of the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group.

Exchange rate fluctuations could negatively impact the Combined Group

Ultra's reporting currency is in pound sterling and its principal foreign currency exposure relates to movements in the US dollar - pound sterling exchange rate, due to its US operations, and US dollar-denominated costs in the UK. This exposure can adversely affect profits, cash flows and balance sheet positions, such as net debt. Ultra implements policies to manage these exposures on an ongoing basis. The Acquisition will increase the amount of Ultra's (and therefore the Combined Group's) US Dollar earnings, cash flows and balance sheet values. The primary impact of fluctuations in exchange rates for the Combined Group is expected to be translational (i.e. the translation of foreign earnings and assets and liabilities into pounds sterling for reporting purposes). An appreciation of pounds sterling against the US dollar (or other currencies) could result in a significant negative translational impact on the Combined Group's results of operations, as the contribution of its overseas operations, and the value of overseas earnings and assets, when translated into pounds sterling, would decline. The Combined Group will continue to be exposed to transactional currency risk, which arises when commercial transactions or recognized assets or liabilities are denominated in a currency that is not the functional currency of the relevant member of the Combined Group. While policies will be adjusted to take account of these increased exposures in the Combined Group, there can be no assurance that the financial performance and condition of the Combined Group will not be adversely affected by movements in the US dollar/pound sterling exchange rate or other exchange rates.

The pound sterling experienced sharp depreciation following the United Kingdom's referendum on 23 June 2016 (the "Referendum"), falling to its lowest levels since the 1980s, with one pound sterling equal to $1.29 as at 6 July 2016 (as derived from Bloomberg), compared to $1.48 as at 23 June 2016 (before the result of the Referendum was known). Although the pound sterling exchange rate has stabilised in recent months, its movements continue to be influenced by political as well as economic factors, including, but not limited to, the results of the general election in the United Kingdom on 8 June 2017, and there can be no assurance that pounds sterling will not experience further significant volatility against other major currencies.

As a result of all of the above, adverse movements in currency exchange rates, if not effectively managed by the Combined Group, could adversely affect its reported results of operations and financial condition.

Long term contract exposures to inflation, interest rate changes, the availability of capital markets and commodity pricing fluctuations

The Ultra Group and the Sparton Group are, and if the Acquisition Completes, the Combined Group will be, dependent on managing macro financial risks, including inflation, interest rate changes, the availability of capital markets and commodity prices. Failure to manage financial risks can impact operating profit through higher costs or lower revenue and result in the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group failing to meet their forecasted financial results.

Significant business interruptions

The Ultra Group's, the Sparton Group's and, if the Acquisition Completes, the Combined Group's businesses could be impacted by numerous inherent risks, particularly unplanned events such as inclement weather, explosions, fires, terrorist acts and other accidents. While insurance coverage could offset losses relating to some of these types of events, the Ultra Group, the Sparton Group and, following Completion of the Acquisition, the Combined Group's business, results of operations and financial condition could be materially adversely affected to the extent that any such losses are not covered by insurance.

Reliance on sales to federal government

The Ultra Group and the Sparton Group derive a significant portion of their revenues from contracts with agencies of the US federal government or contractors or subcontractors of the federal government. The loss or significant curtailment of any government contracts or subcontracts, or failure to exercise renewal options or enter into new contracts or subcontracts, could have a material adverse effect on the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group's business, results of operations and financial condition.

Continuation and the exercise of renewal options on existing government contracts and subcontracts and new government contracts and subcontracts are, among other things, contingent upon the availability of adequate funding for the various federal government agencies with which the Sparton Group and Ultra Group and prime government contractors do business. Changes in federal government spending could directly affect the financial performance of the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group.

The federal government can terminate or modify any of its contracts either for its convenience or for a default by the Ultra Group, the Sparton Group or, if the Acquisition Completes, the Combined Group, as applicable, under the terms of the contract. A termination for convenience could adversely affect the Combined Group's revenues and results of operations.

A termination arising from default could expose the Combined Group to liability and have a material adverse effect on its reputation and ability to compete for future contracts and subcontracts, which could materially and adversely affect its business and results of operations. Failure to replace sales generated from terminated or modified contracts would result in lower sales and could adversely affect revenue, which could have a material and adverse effect on its business, results of operations and financial condition.

In addition, ERAPSCO is currently contracted to provide all of the sonobuoys required by the US Navy. There is a possibility that at some point in the future, the US DoD will choose to support a new provider. Such a decision could have a material and adverse effect on the business, results of operations and financial condition of ERAPSCO and therefore, after Completion, the Combined Group.

U.S. government audits and investigations

Federal government agencies, including the Defense Contract Audit Agency and the Defense Contract Management Agency, routinely audit and evaluate government contracts and government contractors' administrative processes and systems. These agencies review the Ultra Group's and the Sparton Group's and, if the Acquisition Completes, will review the Combined Group's performance on contracts, pricing practices, cost structure, financial capability and compliance with applicable laws, regulations and standards. They also review the adequacy of the Ultra Group's and the Sparton Group's and, if the Acquisition Completes, will review the Combined Group's internal control systems and policies, including their purchasing, accounting, estimating, compensation and management information processes and systems.

If such an audit, evaluation or review were to uncover improper or illegal activities, then the Ultra Group and the Sparton Group and, if the Acquisition Completes, the Combined Group could be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S. government. In addition, responding to governmental audits or investigations may involve significant expenses and divert management attention away from focussing on normal business operations. If any of the foregoing were to occur, it could have a material adverse effect on the business, results of operations and financial condition of the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group.

Protection of intellectual property rights

The Ultra Group and the Sparton Group rely and, if the Acquisition Completes, the Combined Group will rely on patents, trademarks, copyrights, trade secrets, and proprietary know-how and concepts. The Combined Group will attempt to protect its intellectual property rights, in the UK, the US and elsewhere, through a combination of patent, trademark, copyrights and trade secret laws, as well as confidentiality agreements. Failure to obtain or maintain adequate protection of intellectual property rights for any reason could have a material adverse effect on the business, results of operations and financial condition of the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group.

While the protection afforded by patent, trademark, copyright and trade secret laws may provide some advantages, the competitive position of participants in their industry is principally determined by such factors as the technical and creative skills of personnel, the frequency of their new product developments and ability to anticipate and rapidly respond to evolving market requirements. To the extent that a competitor effectively uses its intellectual property portfolio, including patents, to prevent the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group from selling products that allegedly infringe such competitor's products, its results of operations could be materially adversely affected.

The Ultra Group and the Sparton Group also rely and, if the Acquisition completes, the Combined Group will rely on unpatented proprietary technology. It is possible that others will independently develop the same or similar technology or otherwise obtain access to such unpatented technology. To protect trade secrets and other proprietary information, employees, consultants, advisors and collaborators are required to enter into confidentiality agreements. It cannot be assured that these agreements will provide meaningful protection for trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information. If the Ultra Group, the Sparton Group and, if the Acquisition Completes, the Combined Group are unable to maintain the proprietary nature of their technologies, their sales could decrease and this could have a material adverse effect on its business, results of operations and financial condition.

   PART D:    RISKS RELATING TO THE ULTRA SHARES

Ultra's share price may fluctuate and may not deliver a return

The share prices of publicly quoted companies can be highly volatile and shareholdings illiquid. The market price of the Ultra Shares may be subject to wide fluctuations in response to many factors, including variations in the operating results of Ultra, divergence in financial results from stock market analysts' expectations, changes in earnings estimates by stock market analysts, general economic conditions, legislative changes in the Ultra Group's and, if the Acquisition Completes, the Combined Group's sector and other events and factors outside of Ultra's control. Ultra Shares may not be a suitable investment for all prospective shareholders and before acquiring the Ultra Shares, investors should take their own independent advice. In the event of a winding-up of Ultra, the Ultra Shares will rank behind any liabilities of Ultra and therefore any return for Ultra Shareholders will depend on Ultra's assets being sufficient to meet the prior entitlements of creditors.

Shareholders may be exposed to fluctuations in currency exchange rates

The Ultra Shares, and any dividends to be announced in respect of such Ultra Shares, will be quoted in pound sterling. An investment in Ultra shares by an investor in a jurisdiction whose principal currency is not pound sterling exposes such investor to foreign currency exchange rate risk. Any depreciation of the pound sterling in relation to such foreign currency will reduce the value of the investment in the Ultra Shares in foreign currency terms and may adversely impact the value of any dividends.

Substantial future sales or offerings of Ultra Shares could impact the market price of Ultra Shares

Ultra cannot predict what effect, if any, future sales of Ultra Shares, or the availability of Ultra Shares for future sale, will have on the market price of Ultra Shares. It is also possible that Ultra may decide to offer additional Ultra Shares in the future (for example to finance corporate acquisitions) which would dilute investors' shareholding in Ultra. Sales or offerings of substantial amounts of Ultra Shares in the future, or the perception or any announcement that such sales or offerings could occur, could adversely affect the market price of Ultra Shares and may make it more difficult for investors to sell their Ultra Shares at a time and price which they deem appropriate.

Ultra's ability to pay dividends on the Ultra Shares in the future is not guaranteed

While the Ultra Directors intend that, if the Acquisition Completes and subject to the Combined Group's trading prospects being satisfactory, the Ultra Board will continue Ultra's policy whereby dividends are covered by between 2.5 to 3.0 times underlying earnings, the declaration and payment of any dividends in the future and the amount of any future dividends will depend upon the Combined Group's results of operations, financial conditions, cash requirements, future prospects and such other factors as may be relevant at the time, as well as Ultra's profits available for distribution at such time.

APPENDIX 4 - SPARTON FINANCIAL STATEMENT

In its announcement of its Third Quarter Results published on 9 May 2017, Sparton stated that:

"Sparton expects revenues for the fourth quarter of fiscal 2017 of between $97m and $101m at a gross margin of approximately 18%".

Basis of preparation

The above statement was prepared by Sparton management in accordance with its US GAAP accounting policies, which are consistent with the accounting policies adopted by Ultra in the preparation of its audited financial statements for the year-ended 31 December 2016.

Principal assumptions

The above statement has been compiled on the basis of the following assumptions:

-- Assumptions which are outside the influence of Sparton management and the Sparton Directors:

-- There will be no material change in the operational strategy or current management of Sparton;

-- There will be no material change in the current trading environment and economic conditions;

-- There will be no material change in the competitive environment in which the Sparton Group operates;

-- There will be no material change in customer preferences and resulting purchase commitments;

   --      There will be no material change in U.S. Congressional budgetary allocations;

-- There will be no material change in any applicable federal, state, provincial, local and foreign regulatory environment;

-- There will be no material business disruptions, including natural disasters and political or industrial instability.

   --      Assumptions which are within the influence of Sparton management and the Sparton Directors: 
   --      There will be no acquisitions or disposals during the quarter ending June 30, 2017; 
   --      There will be no material change in the management and efficiency of Sparton's operations; 
   --      There will be no material change in internal controls and financial reporting policies.

This information is provided by RNS

The company news service from the London Stock Exchange

END

ACQRRMATMBAMMBR

(END) Dow Jones Newswires

July 07, 2017 02:00 ET (06:00 GMT)

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ULE Ultra Electronics Holdings Plc