Proposed acquisition of Computer Generation, Inc. Placing and open offer by Investec Henderson Crosthwaite

Proposed acquisition of Computer Generation, Inc. Placing and open offer by Investec Henderson Crosthwaite of 30 million new Ordinary shares at 600 pence per share. Preliminary results for the year to 30 September 2000. Turnover increases 140%.

21 November 2000, London: The Board of Intec (LSE:ITL, “Intec” or “the Company” or “the Group”), a leading provider of third party packaged interconnect billing and settlement software, is pleased to announce it has entered a conditional agreement to acquire Computer Generation, Inc. (“CompGen”), a leading global provider of telecommunications mediation software, for total consideration of $245 million (approximately £172.3 million) in cash. CompGen has its corporate headquarters in Atlanta, Georgia, USA.

The Board of Intec also proposes to raise approximately £180 million (before expenses) by means of a Placing and Open Offer of 30 million New Ordinary Shares at 600 pence per share (representing a discount of approximately 17 per cent. to the share price of 722.5p at the time of the suspension of the shares on 3 November 2000). The proceeds of the Placing and Open Offer are intended to be used, in part, to satisfy the cash element of the acquisition of CompGen. The remainder (approximately £7.7 million) will be used to defray costs and fund any suitable future acquisitions and future corporate development. The Placing and Open Offer has been fully underwritten by Investec Bank (UK) Limited.

Intec also announces today its preliminary results for the year to 30 September 2000. Revenues for the year to 30 September 2000 increased by 140% to £20.3 million (year ended 30 September 1999: £8.4 million) and EBITDA increased significantly to £4.5 million (year ended 30 September 1999: loss of £158,000).

Acquisition of CompGen
The Board of Intec believes that the acquisition of CompGen represents an excellent opportunity to advance its stated strategy of both geographical expansion and product diversification into complementary products. The Group’s strategic initiative to offer complementary telecoms products and services has been fuelled by requests from customers and prospective customers for ‘convergent’ mediation solutions (that is, for both traditional switched and now unswitched (IP)) networks as well as 3G mobile technologies such as GPRS. The two companies have been trading successfully as partners since April 2000, and Intec and CompGen have entered into a marketing agreement. Intec has had the opportunity to successfully test the capabilities of CompGen’s products and Intec’s ability to cross sell the products. The Board of Intec is confident that CompGen is an appropriate acquisition. In particular, the Board believes that the acquisition provides Intec with:

• technically strong mediation technology and the capability to address the burgeoning market for next generation mediation solutions
• an additional and impressive list of 80 clients and a strong US presence
• greatly increased financial and corporate stature
• the opportunity to cross-sell complementary telecoms products, both of which are highly regarded as market leaders in their respective fields

Preliminary Audited Results
Intec announces its audited results for the year to 30 September 2000 which are summarised below and set out in full in Part 2 of this announcement.

For the year ended 30 September 2000 Intec recorded revenues increased by 140% to £20.3 million (year ended 30 September 1999: £8.4 milion) and earnings before interest, tax, depreciation, amortisation and exceptional flotation expenses (“EBITDA”) increased significantly to £4.5 million (year ended 30 September 1999: loss of £158,000). Operating Profit increased to £3.3 million compared to a loss of £368,000 for the year ended 30 September 1999. The Company’s customer base increased by 34 contracted installations, with major new sites in Eastern Europe, Latin America, the Far East and the Caribbean. Global expansion continues as planned, with new offices in Eastern Europe, South America, Scandinavia and Asia-Pacific, together with the recent acquisition of i2i in Malaysia. The outlook remains very positive with a strong order book and prospect list for 2001.

Commenting on the acquisition and results, Kevin Adams, Chief Executive of Intec said,

“The acquisition of CompGen is a major step in reaching our objective of being a global provider to the telecommunications industry. In particular, it gives us a technically strong mediation technology, a powerful base in the US market, and a significant increase in our financial and corporate stature. We see considerable opportunities for the combined selling of InterconnecT and mediation software globally, as the telecommunications market undergoes a period of extensive technological change. Our 2000 results demonstrate the growing acceptance in the market for our market leading products and we remain confident that this growth will continue in the year ahead.”

Proposed acquisition of Computer Generation, Inc. Placing and Open Offer by Investec Henderson Crosthwaite of 30 million new Ordinary shares at 600 pence per share, incorporating an open offer of 14,850,000 New Ordinary Shares

Introduction

The Board of Intec announces today that the Company proposes to raise approximately £180 million (approximately £174 million net of expenses) by means of a Placing and Open Offer, further details of which are set out below. The Board also announces that the Company has conditionally agreed to acquire CompGen and its non-trading parent company, CGI Holding, for a total consideration of $245 million (approximately £172.3 million) in cash (“the Acquisition”).

The proceeds of the Placing and Open Offer are, principally, intended to be used to satisfy the cash element of the Consideration and to meet the expenses of the Proposals. The remainder (being approximately £1.7 million) will be put on deposit by the Company and will be used to fund (in whole or in part) any suitable future acquisitions by the Company and for general corporate development. The Placing and Open Offer are fully underwritten by Investec Bank (UK) Limited. The Placing Shares will represent approximately 16.63 per cent. of the enlarged issued ordinary share capital of the Company on Admission to listing, and will rank pari passu in all respects with the Existing Ordinary Shares.

In view of the size of CompGen in relation to the Group, the Acquisition is conditional, inter alia, upon the approval of Shareholders which is to be sought at the extraordinary general meeting to be held in December. The Acquisition is also conditional upon the expiration of the applicable waiting period pursuant to the Hart-Scott-Rodino Antitrust Improvements Act 1976.

On 3 November 2000, the Existing Ordinary Shares were suspended from trading following the release of a positive trading update which included reference to the fact that the Company was in advanced negotiations relating to the Acquisition. Re-admission is expected to take place at the opening of business on Friday 24 November 2000. If the requisite special resolution is passed by shareholders, it is expected that Admission will take place and that trading in the New Ordinary Shares will commence on 20 December 2000, subject to the Acquisition Agreement having become unconditional.

Information on CompGen
CompGen is one of the leading global providers of telecommunications mediation software as measured by number of customer installations. CompGen has been developing mediation software for the telecommunications industry since 1981 and has its corporate headquarters in Atlanta, Georgia. CompGen also maintains sales and technical support offices in Maidenhead, UK and Melbourne, Australia.

CompGen provides scalable and convergent mediation system solutions to the telecommunications industry. The majority of CompGen’s revenue (approximately 85 per cent. in the year ended 31 December 1999) comes from this source.

According to Chorleywood Consulting Limited, CompGen has more than 80 customers world-wide, compared to the next largest competitor which has a customer base of 50. Additionally, CompGen has some of the world’s largest and most profitable telecom companies as customers, one of which is processing in excess of 750 million CDRs per day.

In the year ended 31 December 1999, CompGen recorded operating profit before tax of $12.9 million on turnover of $34.3 million.

Background to and reasons for the Acquisition
In the Global Offer Prospectus issued by the Company dated 9 June 2000, the Directors stated that their strategy for the Group included:

• increasing geographic coverage
• enhancing the functionality and technology of its products
• identifying potential strategic acquisition opportunities aimed at enhancing the Group's product and services portfolio
• offering complementary telecoms products and services

Additionally, the Directors believe that recent trends in the telecoms industry have given rise to significant opportunities for companies such as Intec. The Directors perceive that the telecoms market has begun, and will continue, to consolidate into a number of larger integrated telecoms service companies offering a wider range of operational support systems, such as interconnect billing, retail billing, customer care, network planning, carrier access billing and fraud systems. Servicing each of these operational support systems are mediation devices, which collect and aggregate network usage and traffic data from network elements such as routers, switches, firewalls, servers and gateways. The Directors further believe that the operational support systems market is continuing to grow (the Insight Research Corporation estimates that the market for operational support systems will grow from $33.9 billion in 2000 to $59.9 billion annually by 2005).

The Directors recognise that the trend towards real time or near real time network analysis and billing could lead to a blurring of the current division of responsibilities between mediation software and operational support systems such as billing and network planning. The Directors believe, therefore, that this creates a need for billing systems and other operational systems to be as close as possible to the actual network. To mitigate the threat of mediation companies responding to these trends by adding rating capabilities to their products, the Directors have determined that the Group should seek to expand the scope of its relationship with CompGen to improve the Group's control over the billing value chain.

Additionally, mediation software is often acquired earlier in the life cycle of telecom companies than inter-carrier solutions. Having access to mediation software allows Intec to establish relationships earlier with telecom operators which could enhance the Group's prospects of making InterconnecT sales to such mediation customers.

The Group's strategic initiative to offer complementary telecoms products and services has been fuelled by requests from the Group's customer base and prospective customers for mediation solutions. Marketing relationships with vendors of mediation products are in place but the Directors believe that these arrangements do not provide either the flexibility in pricing required by the Group or the scope of solutions required by the market.

As a consequence, the Directors looked for alternative mediation offerings to provide solutions to the Group's target market. Following a comprehensive evaluation of a number of the major companies involved in the sector, the Directors selected CompGen's mediation product to offer to their existing and prospective customer base. The Directors were attracted to the scalability, technical capabilities and flexibility of CompGen's products. In addition, the Directors were attracted by the ability of CompGen's mediation product to provide a single convergent solution for both switched and non-switched (IP) networks.

Following a working relationship lasting several months, a marketing agreement was signed in August 2000 between the Group and CompGen. This agreement has allowed the Group to market CompGen's products in the Group's stronger markets of Europe and Asia where CompGen has little penetration and sales capabilities but where the Group has a strong presence.

By virtue of the marketing agreement, the Group had already sold several of CompGen's mediation solutions and has a significant number of well qualified prospects. Through working closely with CompGen, the Group had been able to evaluate the technical capabilities of CompGen's products and the strength of the support capabilities of the business. Additionally, the Directors have established strong relationships with CompGen's management team.

Having had an opportunity to successfully test the capabilities of CompGen's products and the Group's ability to cross sell CompGen's products, the Directors believe that CompGen is an appropriate acquisition to make.

Benefits of the Acquisition
The Directors believe that the Acquisition represents an excellent opportunity to advance their stated strategy of both geographical expansion and product diversification in related areas. In addition, CompGen is highly complementary to the Group's existing activities. In particular, the Directors believe that the benefits for the Enlarged Group will be:

• Increased geographical coverage
• CompGen will provide the Enlarged Group with a physical presence in North America, a substantial market in which the Group is not currently represented
• approximately 49 per cent. of CompGen's revenue is generated outside the USA ($8.38 million of total revenues of $17.18 million in the six months ended 30 June 2000) predominantly in South America, Australia and Canada
• a broader product suite offering
• a functionality rich, scalable and flexible mediation product (including IP mediation) and toll collection
• telecoms business decision support software that offers network management decisions support architecture
• the opportunity to cross-sell complementary telecoms products, both of which are widely regarded as market leaders in their respective fields. CompGen’s mediation product is suitable for use in the global telecoms market and is not restricted to use in the US. However, due to the different nature of the US market, the Group's InterconnectT product is not suitable for the US market. Analysis of CompGen’s customer base by the Directors has led them to believe that there is very little overlap between that of the Group and CompGen. The Group has already had significant success in establishing sales leads for CompGen’s range of products
• the opportunity for the Enlarged Group to leverage its experience and ability in sales and marketing in relation to the potential of CompGen’s business and product offering, particularly in the software element of CompGen’s business which the Directors believe will continue to grow
• access to CompGen’s customer base, which includes major PTT customers and, in particular, a global relationship with Cable and Wireless plc, and an established relationship with Daleen
• the quality of CompGen’s research and development capability
• a US ASP capability, which, combined with the Group's existing ASP capability, could form the basis of broader product offerings
• the input of CompGen's experienced management team
• exposure to the mediation market. Chorleywood expects the market for mediation software to grow by an average in excess of 30 per cent. in each of the next 5 years. Indeed, revenue growth in excess of 50 per cent. per annum has been achieved by a major European provider. Additionally, the Directors believe that mediation will become increasingly important as IP telecommunications networks grow and there is a need for mediation systems able to handle both switched and non-switched networks. The Directors believe that CompGen’s mediation product is well placed to take advantage of such an opportunity.