Gilde makes recommended public offer of EUR 7.25 in cash per share of Econosto

This is a joint public announcement of Koninklijke Econosto N.V. ("Econosto") and KENV Acquisition B.V. ("KENV Acquisition") pursuant to the provisions of Section 10 and Section 18 of the Dutch Decree on Public Takeover Bids (Besluit openbare biedingen Wft, the "Decree"). This announcement and related materials do not constitute an offer for any shares in Econosto the "Shares"). Any offer will be made only by means of the Offer Memorandum as defined below. Not for release, distribution or publication, in whole or in part, in or into the United States of America, Japan or Canada.

With reference to the press releases of 14 January 2008, 11 February 2008 and 25 February 2008, Econosto and KENV Acquisition, a indirectly wholly owned subsidiary of Gilde But-Out Fund III B.V. and Gilde Buy-Out Fund III C.V., hereby jointly announce that KENV Acquisition is making a recommended public offer for the entire issued and outstanding share capital of Econosto at an offer price of EUR 7.25 in cash per share (the "Offer"). Terms not defined herein shall have the meaning as set out in the Offer Memorandum, as defined below.

Highlights

  • The Offer is a recommended cash offer for the entire issued and outstanding share capital of Econosto of EUR 7.25 per share.
  • The acceptance period commences on 17 March 2008 at 09:00 hours CET and ends, subject to extension in accordance with Section 15 of the Decree, on 17 April 2008 at 18:00 hours CET.
  • In relation to the Offer, an Extraordinary General Meeting of Shareholders shall be held on 9 April 2008 at 10:00 hours CET at the offices of Econosto at Cypresbaan 63, (2908 LT) Capelle aan den IJssel, The Netherlands.
  • The Supervisory Board and the Management Board fully support the Offer and unanimously recommend the shareholders to accept the Offer.
  • The Offer shall be subject to the fulfilment of the offer conditions as set out in the Offer Memorandum, including, but not limited to, the condition that on the acceptance closing date the number of tendered, owned and committed Shares represents at least 95% of all issued shares.

The Offer
KENV Acquisition is making a recommended cash offer for all of the Shares, on the terms of and subject to the conditions and restrictions contained in the offer memorandum dated 14 March 2008 (the "Offer Memorandum"). The Offer Memorandum has been made available on Econosto's website (www.econosto.com) and copies will be available as further described below. Shareholders should refer to the Offer Memorandum for all of the terms and conditions of the Offer. Holders of Shares who accept the Offer shall, if the Offer is declared unconditional, receive, on the terms and subject to the conditions and restrictions of the Offer, a cash amount of EUR 7.25 per validly tendered (or defectively tendered, provided that such defect has been waived by KENV Acquisition) and delivered Share (the "Offer Price"). The offer price is cum dividend, which reflects that Econosto has committed not to declare any dividends or distributions on Shares prior to settlement of the Offer.

Extraordinary General Meeting of Shareholders
On 9 April 2008 at 10.00 hours CET, the Extraordinary General Meeting of Shareholders will be held at the offices of Econosto at Cypresbaan 63, (2908 LT) Capelle aan den IJssel, The Netherlands, in which meeting, among other matters, the Offer will be discussed in accordance with Section 18, paragraph 1 of the Decree.

Recommendation by the Supervisory Board and Management Board
The Supervisory Board and the Management Board fully support the Offer and unanimously recommend the Offer to Shareholders to accept the Offer.

Employee consultations
On 13 January 2008, Econosto informed the works council of Econosto Nederland B.V. (the "Works Council"). After a formal request for advice was sent on 30 January 2008, Econosto met with the Works Council on 6 February 2008, together with a representative of KENV Acquisition. The Works Council has rendered its positive advice on 22 February 2008 as required pursuant to Section 25 paragraph 1 of the Dutch Works Councils Act ( Wet op de ondernemingsraden). The Social Economic Council ( Sociaal Economische Raad) has been informed of the Offer in accordance with the SER Merger Code 2000 ( SER-besluit Fusiegedragsregels 2000).

Committed Shares
Janivo Beleggingen B.V., Dresdner VPV N.V., Gestion Deelnemingen V B.V. and TWE Beheer B.V. and certain other shareholders who collectively hold 51.2% of the share capital in Econosto support the Offer and have committed themselves to tender their Shares under the same terms and conditions of the Offer as described in the Offer Memorandum.

Acceptance Period
The acceptance period for the tendering of shares (the "Acceptance Period") begins on 17 March 2008 at 09:00 hours CET and ends, subject to extension in accordance with Section 15 of the Decree, on 17 April 2008 at 18:00 hours CET (the "Acceptance Closing Date").

If one or more of the Offer Conditions as described in Section 5.2 of the Offer Memorandum (the "Offer Conditions") is not satisfied, KENV Acquisition may extend the Acceptance Period for a minimum period of two weeks and a maximum period of ten weeks in order to satisfy or waive such Offer Conditions. Extension of the Acceptance Period may occur.

Shares tendered on or prior to the Acceptance Closing Date may not be withdrawn, subject to the right of withdrawal of any tendered Shares during any extension of the Acceptance Period in accordance with the provisions of Section 15 of the Decree. During any such extension of the Acceptance Period, any Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of each Shareholder to withdraw the Shares he or she has already tendered.

If all Offer Conditions are satisfied or, where appropriate, waived, KENV Acquisition will accept all Shares that have been validly tendered (or defectively tendered provided that such defect has been waived by KENV Acquisition) and not previously withdrawn pursuant to the terms of the Offer in accordance with, for the Shares, the procedures set forth in Section 6.2 of the Offer Memorandum (Acceptance by Shareholders through an Admitted Institution).

Declaring the Offer Unconditional ( gestanddoening)
The Offer shall be subject to the fulfilment of the Offer Conditions, including, but not limited to, the Offer Condition that at least 95% of the issued and outstanding ordinary share capital of Econosto has been tendered under the Offer as set out in the Offer Memorandum. KENV Acquisition reserves the right to waive certain Offer Conditions if permitted by law. It may unilaterally waive the above mentioned Offer Condition at an acceptance level of at least 66.67% or with the prior written consent of Econosto at a level below 66.67%. If KENV Acquisition wishes to waive or reduce one or more Offer Conditions, it will inform Shareholders that it waives or reduces such Offer Conditions by such means as required by the Decree.

Unless the Acceptance Period is extended, KENV Acquisition will, in accordance with Section 16, paragraph 1 of the Decree, announce within three Business Days after the Acceptance Closing Date, whether or not it declares the Offer unconditional. In the event the Offer will not be declared unconditional KENV Acquisition will motivate such decision. In the event that KENV Acquisition announces that the Offer is declared unconditional ( gestand wordt gedaan) KENV Acquisition will accept for payment all Shares validly tendered (or defectively tendered provided that such defect has been waived by KENV Acquisition) and may continue the Offer by way of a post Acceptance Period.

Extension and post Acceptance Period
KENV Acquisition may extend the Offer past the Acceptance Closing Date. If the Acceptance Period is extended, a public announcement to that effect shall be made in accordance with the Decree. Section 15, paragraph 2 of the Decree requires that such announcement is made not later than the third business day following the initial Acceptance Closing Date.

In the event that KENV Acquisition announces that the Offer is declared unconditional ( gestand wordt gedaan) KENV Acquisition may, within three business days after declaring the Offer unconditional, announce a post Acceptance Period to enable Shareholders that did not tender their Shares in the Acceptance Period to tender their Shares under the same terms and conditions as the Offer. Such post Acceptance Period shall commence on the first Business Day following the announcement of a post Acceptance Period for a period of no longer than two weeks. KENV Acquisition shall continue to accept for payment all Shares validly tendered (or defectively tendered provided that such defect has been waived by KENV Acquisition) during such period and shall pay for such Shares within three business days following the end of the post Acceptance Period.

Settlement of the Offer
In the event KENV Acquisition announces that the Offer is declared unconditional ( gestand wordt gedaan), Shareholders who have tendered and delivered their Shares for acceptance pursuant to the Offer prior to or on the Acceptance Closing Date will receive on the Settlement Date the Offer Price in respect of each Share validly tendered (or defectively tendered provided that such defect has been waived by KENV Acquisition) and delivered ( geleverd).

Acceptance by Shareholders through an Admitted Institution
Shareholders who hold their Shares through an Admitted Institution are requested to make their acceptance known via their bank or stockbroker no later than 18:00 hours CET on 17 April 2008, unless the Acceptance Period is extended. Your custodian, bank or stockbroker may set an earlier deadline for communication by Shareholders in order to permit the custodian, bank or stockbroker to communicate its acceptances to the Settlement Agent in a timely manner.

Subject to Section 15, paragraph 3 of the Decree, the tendering of Shares in acceptance of the Offer shall constitute irrevocable instructions to block any attempt to transfer the Shares tendered, so that on or prior to the Settlement Date no transfer of such Shares may be effected (other than to the Settlement Agent on or prior to the Settlement Date if the Offer has been declared unconditional ( gestand wordt gedaan) and the Shares have been accepted for purchase) and to debit the securities account in which such Shares are held on the Settlement Date in respect of all of the Shares tendered, against payment by the Settlement Agent of the Offer Price in respect of those Shares.

Offer Memorandum and further information
Shareholders are advised to review the Offer Memorandum (including all documents incorporated by reference therein) and in particular Section 5.7.3 (Legal structure of Econosto following the Offer) thoroughly and completely and to seek independent advice where appropriate in order to reach a balanced judgment with respect to the Offer and the Offer Memorandum. Shareholders who consider not to tender their Shares are advised to review Section 4.10 (Summary of risk factors following the Offer). With due reference to all statements, terms, conditions and restrictions included in the Offer Memorandum, Shareholders are hereby invited to tender their Shares under the Offer in the manner and subject to the terms, conditions and restrictions set out in the Offer Memorandum.

Availability of copy documentation
Digital copies of the Offer Memorandum are available on the website of Econosto (www.econosto.com). Econosto's website does not constitute a part of, and is not incorporated by reference into, the Offer Memorandum. Copies of the Offer Memorandum are furthermore available free of charge at the head office of Econosto in Capelle aan den IJssel, The Netherlands, and at the office of the Settlement Agent (Kempen & Co N.V.) at the addresses mentioned below.

Copies of the KENV Acquisition Articles of Association are available free of charge at the offices of KENV Acquisition and can be obtained by contacting KENV Acquisition at the address mentioned above.

For further information

Koninklijke Econosto N.V.
Mr. Frank van Os, CEO
www.econosto.com
Phone: +31 (0) 10 284 12 80

Gilde Buy Out Partners
Mr. Boudewijn Molenaar
www.gilde.com
Phone: +31 (0) 30 219 25 25

KENV Acquisition B.V.
Newtonlaan 91
3584 BP Utrecht
Settlement Agent:
Kempen & Co N.V.
Attn: Mr D. Siemensma
Beethovenstraat 300
1077 WZ Amsterdam
Phone: +31 (0) 20 348 95 54
E-mail: kas@kempen.nl

Econosto full-year results 2007

Net sales
Econosto achieved net sales totalling EUR 227.1 million in 2007, excluding the Kirishi project, representing an organic increase of 19% in comparison to 2006, when net sales totalled EUR 191.4 million. Net sales of the Kirishi project totalled EUR 33.4 million, thereby increasing total net sales for 2007 to EUR 260.5 million – 36% higher than in 2006.

All the group companies contributed to the rise in net sales in 2007, with sales from projects showing significant growth as well. The strong growth of the activities in the Middle East made a particularly striking contribution to the increase in sales. The activities in The Netherlands, Belgium and the United Kingdom also showed strong growth.

Net profit
Operating profit (excluding other income) rose from EUR 7.4 million to EUR 19.3 million in 2007. Net profit, including the Kirishi project, increased from EUR 3.9 million to EUR 17.9 million, partly as a result of the inclusion of a deferred tax asset of EUR 2.9 million. Basic earnings per share amounted to EUR 1.19 in 2007, compared to EUR 0.29 in 2006.

The operating profit was positively influenced by the increase in net sales and effective cost control. The profit was negatively influenced by the pressure on the margins that resulted from rising raw material prices and increased international competition in 2007.

Net operating capital
Due to the increased activities in 2007, net operating capital (which comprises total inventories and trade receivables less trade payables) rose to EUR 57.4 million at year-end 2007, representing a 16% increase in comparison to 31 December 2006 (year-end 2006: EUR 49.4 million). Net operating capital as a percentage of net sales on 31 December 2007 fell to 22.0% (2006: 25.8%).

Liquidity
Net interest-bearing debts, i.e. the total amount of current and non-current interest-bearing liabilities, net of cash and short-term deposits, decreased by EUR 20.4 million in 2007: from EUR 34.2 million to EUR 13.8 million.

Dividend
The Management Board will propose to the General Meeting of Shareholders to be held on 15 May 2008 to forego a dividend for 2007, as was the case in 2006.

Outlook
Econosto expects market conditions to remain favourable overall in 2008. It is however not yet clear what the impact will be of the credit crunch in the financial industry, uncertainties regarding the political developments in the Middle East and the global economic growth prospects. Given the current insecurities, Econosto will refrain from making any statements on projected sales and profit in 2008. The fact that Kirishi was a one-off project means that its contribution to net sales and operating profit will be lower in 2008

Econosto's long-term objective is to achieve a return on average capital invested in excess of 20%, operating profit of more than 5% of net sales and net operating capital of less than 25% of net sales.

Key events in 2007
Repayment of convertible bond loan
In June 2007, Econosto repaid the outstanding 6.35% convertible subordinated bond loan prematurely and in full. Of this convertible subordinated bond loan, 50% could be converted into ordinary Econosto shares with a par value of EUR 0.50 at a conversion rate of EUR 4.00. Of the bondholders, 91% opted for conversion, which resulted in the issuance of 2,622,335 ordinary Econosto shares, corresponding to a dilution of 19%. Following conversion, the number of outstanding Econosto shares at year-end 2007 was 16,190,220.

The non-convertible portion of the bond loan was repaid by Econosto in cash. Of the remainder of the IFRS interest accrual on the convertible subordinated bond loan of EUR 3.7 million at 31 December 2006, EUR 2.1 million was processed directly through equity capital, while EUR 1.6 million was deducted from the 2007 profit.

By repaying and converting the bond loan, Econosto significantly improved the financial ratios. Based on the balance sheet ratios at 31 December 2006, Econosto's debt-to-equity ratio increased by 18% to 36% at year-end 2007. In addition, the repayment ensured that interest charges will decrease by approximately EUR 4 million in the next three years.

Financing

New credit facilities were established with ABN AMRO Bank and Fortis Bank in June 2007. The central credit facility was increased from EUR 10.2 million to EUR 66.2 million, which was necessary to finance the successful early repayment of the convertible subordinated bond loan. The new central agreement ensures greater flexibility for Econosto in the allocation of resources to and from the foreign participating interests.

Kirishi project and financial impact on 2007 results
In 2006, Econosto entered into an agreement with main contractor ABB Lummus Global B.V. for the delivery of a comprehensive range of valves for a major new petrochemical industrial complex in Kirishi, which is located approximately 180 kilometres southeast of Saint Petersburg, Russia.

Econosto largely completed and invoiced the deliveries for the Kirishi project in 2007. The project accounted for EUR 33.4 million of Econosto's sales for the full financial year. The remainder of the deliveries for the Kirishi project are expected to be made in 2008.

From a financial perspective, operating profit (EBIT) of the Kirishi project amounted to EUR 5.9 million in 2007, which reflects approximately 30% of the total reported operating profit of Econosto for 2007.

As part of the agreement with ABB Lummus Global B.V., a guarantee has been issued amounting to EUR 6.7 million which expires at 1 April 2009. This guarantee is to cover the risks of the project. The balance sheet as at 31 December 2007 includes a provision of EUR 1.7 million in connection with the Kirishi project, amongst others for claims concerning the supply of products alleged to be defective for which it is likely that the liability will lead to an outflow of funds and where a reliable estimate could be made of the amount of the liability.

Winning the Kirishi contract further strengthened Econosto's good reputation among customers, contractors and banks. The Russian market is currently showing strong growth, and Econosto expects to benefit from this development in the years ahead, anticipating that it will be able to participate in a number of large projects.