Statement regarding a possible offer for Davenham Group plc

2 November 2007

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION

For immediate release

ACP Capital Limited ("ACP") confirms that it has approached the Board of Davenham Group plc ("Davenham" or the "Company") with a possible offer for the Company. ACP is disappointed that the Board has rejected the approach as it believes it would represent highly attractive terms for Davenham shareholders.

Over the last 12 months, ACP has held a number of meetings with Davenham management, primarily focused on the strategic direction of the Company. ACP is concerned about Davenham's increasing exposure to the UK property sector, its higher risk property finance products and about the availability and terms of any additional funding required to write new business during 2008 and beyond.

  • Davenham has increased its exposure to the UK property sector and ACP considers the risks of such exposure are rising. The property finance segment of Davenham's business represented 52% of portfolio income for the year ended 30 June 2007 up from 44% for the prior year and 61% of Davenham's portfolio size as at 30 June 2007, up from 49% as at 30 June 2006.
  • Davenham's property lending products include 100% loan to value financing in areas such as property development and land planning projects. ACP believes that such products are unacceptably high risk and should not be amongst the core products of a diversified asset-based lender to the UK SME market.
  • ACP expects Davenham's committed funding lines to be fully utilised during 2008. Davenham is hoping to arrange new facilities to finance new business during 2008. ACP is concerned that, in current credit markets conditions, these additional facilities may not be available, or the terms on which they are available may reduce the Company's growth profile and the profitability of new business.

ACP's possible offer for the Company was based on the belief that Davenham would benefit from being part of a larger, more international SME finance group with a wider, more balanced spread of business. ACP has invested in, and continues to focus on investing in, similar businesses to Davenham on the continent in its key markets of France, Germany and Italy.

With ACP's support, ACP believes that Davenham would be better placed to achieve sustainable growth through the development of new product lines, reduce its reliance on property finance and generate new business from new product loans to new and existing clients. In addition, it would enable the Company to gain access to potential funding lines which ACP could offer, such as ACP's sub-investment grade vehicle, ACP Mezzanine Limited, which can fund a broad range of sub-investment grade loan assets.

The making of any formal offer by ACP is subject to a number of key pre-conditions including: performance of satisfactory due diligence; unanimous public recommendation of the offer by Davenham's Board and ACP having sufficient resources available to satisfy full acceptance of the offer, which ACP expects to be available by the end of November 2007. ACP reserves the right to waive any of these pre-conditions. There is no certainty that any further approach to the Davenham Board, or any offer, will be made by ACP even if the pre-conditions are satisfied or waived, or as to the level or form of consideration of any such offer.

At the close of business on 1 November 2007, ACP had an interest in 7,592,774 ordinary shares of Davenham, representing 29.2% per cent of the issued share capital.

A further announcement will be made by ACP if appropriate.

Contact

Robert Bailhache +44 (0)20 7269 7200
Financial Dynamics  


ACP Capital's Nominated Adviser is Collins Stewart (Chris Wells, Piers Coombs, Stewart Wallace) and Rothschild is its financial adviser.

Rothschild is acting exclusively for ACP and no-one else in connection with the subject matter of this announcement and will not be responsible to anyone other than ACP for providing the protections afforded to clients of Rothschild or for providing advice in relation to the subject matter of this announcement.

Dealing Disclosure Requirements

Under the provisions of Rule 8.3 of The Takeover Code (the "Code"), if any person is, or becomes, "interested" (directly or indirectly) in 1% or more of any class of "relevant securities" of ACP or of Davenham, all "dealings" in any "relevant securities" of that company (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by no later than 3.30 pm (London time) on the London business day following the date of the relevant transaction. This requirement will continue until the date on which any offer becomes, or is declared, unconditional as to acceptances, lapses or is otherwise withdrawn or on which the "offer period" otherwise ends. If two or more persons act together pursuant to an agreement or understanding, whether formal or informal, to acquire an "interest" in "relevant securities" of ACP or of Davenham, they will be deemed to be a single person for the purpose of Rule 8.3.

Under the provisions of Rule 8.1 of the Code, all "dealings" in "relevant securities" of ACP or of Davenham by ACP or Davenham, or by any of their respective "associates", must be disclosed by no later than 12.00 noon (London time) on the London business day following the date of the relevant transaction.

A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed, and the number of such securities in issue, can be found on the Takeover Panel's website at www.thetakeoverpanel.org.uk.

"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.

Terms in quotation marks are defined in the Code, which can also be found on the Panel's website. If you are in any doubt as to whether or not you are required to disclose a "dealing" under Rule 8, you should consult the Panel.

Appendix
Bases and Sources
  1. References to the proportion of Davenham's business exposed to the property finance sector is sourced from Davenham's Annual Report and Accounts 2007 (before the acquisition of Manor Credit in June 2007).
  2. Reference to Davenham's 100% loan to value products is sourced from Davenham's Annual Report and Accounts 2007.
  3. Reference to additional funding requirements is sourced from Davenham's Annual Report and Accounts 2007: "we [Davenham] borrow to lend and therefore we are continually managing our funding capacity and are planning additional facilities which could be drawn upon during 2008"…. "There is a risk that there will be a lack of available funding which may result in a restriction of the level of funds offered or a higher cost of funding".