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Acquisition of Retail Software Company

K3 Business Technology Group plc, the IT solutions provider to the supply chain sector, is pleased to announce the acquisition of the entire issued share capital of Landsteinar Nederland BV (“Landsteinar”), the Holland-based retail software solutions business, for an initial consideration of £9.87m (€14.5 million) to be satisfied by a mix of cash and shares, and a further consideration of up to £3.74m (€5.5 million) to be paid through an earn out arrangement linked to Landsteinar’s performance to 31 August 2009.

Landsteinar, which has offices in The Hague, was established in 2001 and is a leading distributor of Microsoft-based retail software solutions. It also holds the worldwide rights to software modules specifically designed for Inter IKEA System B.V. (“IKEA”), the global home furnishings business. Landsteinar has a strong domestic and overseas customer base, with over half its customers based outside Holland. In total, the business has some 40 customers, supporting 300 stores across 12 countries. The Directors of K3 expect the acquisition to be immediately earnings enhancing.

In 2004, K3 acquired retail software provider, Alpha Landsteinar Limited, which now comprises the Group’s Retail Software Division and the acquisition of Landsteinar Nederland is considered by the Company’s Board to be entirely complementary since both companies market and support the same Microsoft Dynamics based retail software solution. Landsteinar’s key management will be retained following the completion of the acquisition to help exploit existing opportunities and to assist with the development of other areas of K3’s retail solutions.

The initial consideration is satisfied by £7.40m of cash and the issue of 1.6 million ordinary shares of 25 pence each in the capital of K3 (“Ordinary Shares”) at 153 pence per share. Admission of the Ordinary Shares to trading on AIM is expected to take place on 6 September 2007. K3’s banker, Barclays Bank plc, is providing debt funding to support the acquisition of Landsteinar. Under the terms of an earn out agreement with the seller, depending on the growth in Landsteinar’s EBITA over each of the two 12-month periods between completion and 31 August 2009, further consideration of up to £3.74m (€5.5 million) will be paid.

The Directors intend to issue K3’s interim results for the six months ending 30 June 2007 on Friday, 7 September, in advance of which an announcement will be made of the impact of the adoption of International Financial Reporting Standards on historical results.

Andy Makeham, Chief Executive of K3, said

“The acquisition of Landsteinar is a compelling one for us since it is highly complementary to our existing Retail Software business. The Retail Software Division already supports retail customers in over 18 countries, and the acquisition of Landsteinar will extend this footprint to over 30. The acquisition provides very attractive synergies as we sell the same software products. Additionally, the markets in which both companies operate fit together well. Landsteinar has a strong presence in the Fashion and Home Retail sectors, which are key growth markets for us.

We believe the exchange of experience and resource across both businesses will be of enormous value to the continuing growth and development of each company. We expect to achieve significant growth in the Landsteinar business over the coming years and to benefit immediately and in the longer term from the profitability of this unit.”

K3 is part of the K3 Business Technology Group Plc


Ruth Raistrick
K3 Business Technology Group PLC
Linden House
Linden Road

01282 864111

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