Halfords Group PLC: Proposed Fundraise to raise -2-

DJ Halfords Group PLC: Proposed Fundraise to raise up to c.GBP64 million to part fund the Acquisition of National

Halfords Group PLC (HFD) Halfords Group PLC: Proposed Fundraise to raise up to c.GBP64 million to part fund the Acquisition of National 01-Dec-2021 / 16:36 GMT/BST Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. The issuer is solely responsible for the content of this announcement.

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NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA OR JAPAN OR ANY OTHER JURISDICTION WHERE SUCH RELEASE, PUBLICATION 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 for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018

1 December 2021

Halfords Group PLC

("Halfords" or the "Company" and together with its subsidiaries, the "Group")

Proposed Fundraise to raise up to c.GBP64 million to part fund the Acquisition of National

Halfords, the UK's largest provider of Motoring and Cycling products and services, today announces its intention to conduct a placing of new ordinary shares of one penny each in the capital of the Company ("Ordinary Shares") (the "Placing Shares") (the "Placing").

In conjunction with the Placing, certain directors of the Company also intend to subscribe for new Ordinary Shares in the Company (the "Management Subscription Shares") at the Offer Price (as defined below) (the "Management Subscription"). The total contributed by directors of the Company (the "Directors") in the Management Subscription is expected to be GBP125k.

In addition to the Placing and the Management Subscription, there will be an offer made by the Company on the PrimaryBid platform of new Ordinary Shares (the "Retail Shares") at the Offer Price (the "Retail Offer"), to provide retail investors with an opportunity to participate in the equity fundraise. A separate announcement will be made regarding the Retail Offer and its terms.

It is intended that the Placing, Management Subscription and Retail Offer (together, the "Fundraise") will result in the Company raising total gross proceeds of up to c.GBP64 million. The total number of Placing Shares, Management Subscription Shares and Retail Shares are expected to represent up to approximately 9.9 per cent of the Company's existing issued share capital.

The Placing, which is being conducted by way of an accelerated bookbuild (the "Bookbuild"), will be launched immediately following release of this announcement. Investec Bank plc ("Investec") and Peel Hunt LLP ("Peel Hunt" and together with Investec, the "Banks") are acting as Joint Global Co-ordinators and Bookrunners in respect of the Placing. The number of Placing Shares and the price at which the Placing Shares are to be placed (the "Offer Price") will be agreed by the Banks and Halfords following the close of the Bookbuild.

The Placing is subject to the terms and conditions set out in Appendix 1 to this announcement (this announcement together with the Appendices being the "Announcement"). The Management Subscription Shares will be subscribed for on the basis agreed pursuant to subscription letters with the Company, and the Retail Shares will be subscribed for on the basis of the terms and conditions of the Retail Offer, rather than pursuant to the terms and conditions of the Placing contained in Appendix 1 to this Announcement.

Reasons for the Fundraise

The Company has agreed to acquire Axle Group Holdings Ltd ("National"), a well-established business in the tyre and automotive servicing, maintenance and repair ("SMR") market, on a cash free, debt free basis, for total consideration of GBP62 million, subject to adjustment for normalised working capital (the "Acquisition"), as announced separately this afternoon (the "Acquisition Announcement"). The Acquisition consideration will be paid fully in cash on the date of completion, which is expected to be 9 December 2021. In order to deliver the significant synergies associated with the Acquisition, Halfords expects to further invest c.GBP17 million on associated capital expenditure and c.GBP2 million on integration costs.

The Directors believe the Acquisition is both strategically and financially compelling. Further details on the Acquisition can be found in the Acquisition Announcement, including the strategic and financial rationale. This Announcement should be read in conjunction with the Acquisition Announcement.

Following completion of the Fundraise, the Company will use the net proceeds of the Fundraise to part fund the Acquisition. Going forward, the Company believe it is appropriate to operate with lower financial leverage targets than previously communicated, with the Group now targeting a post-IFRS 16 Net Debt / EBITDA ratio of no greater than 1.8x (moving to 2.3x for M&A) (0.0x to 0.8x for M&A on a pre-IFRS 16 basis). Aside from the Acquisition, the Placing allows the Company to maintain balance sheet flexibility for potential future cash outflows, including: an inventory rebuild once supply chain challenges have subsided; ongoing strong-returning capex investment focused on Motoring Services; and further M&A opportunities in Motoring Services.

Appendix 1 to this Announcement sets out further information relating to the Bookbuild and the terms and conditions of the Placing.

Structure of Fundraise and shareholder consultation

Halfords acknowledges that it is seeking to issue new Ordinary Shares amounting up to approximately 9.9% of its existing issued ordinary share capital on a non-pre-emptive basis. Members of the Board have consulted with the Company's major institutional shareholders ahead of the release of this Announcement. These shareholders are supportive of the proposed structure, which has been chosen to minimise costs, time to completion and use of management time, and which the Directors believe is the most appropriate structure to deliver financing for the Acquisition.

In addition, the Board has also considered the effect of the Fundraise on its retail shareholders and therefore determined to make available the Retail Offer to provide retail shareholders with the opportunity to take part in the Fundraise. The Board's unanimous view is that the Placing, Management Subscription and Retail Offer are in the best interests of shareholders, as well as wider stakeholders in Halfords.

Details of the Placing, Admission and Lock-up

Investec and Peel Hunt will commence the Bookbuild immediately following the release of this Announcement and it is expected to close as soon as practicable thereafter.

The Placing is subject to the terms and conditions set out in Appendix 1 to this Announcement. Members of the public are not entitled to participate in the Placing.

The Placing Shares, the Management Subscription Shares and the Retail Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing issued Ordinary Shares at that time. This includes the right to receive all dividends and other distributions declared or paid in respect of such Ordinary Shares after the date of issue of the Placing Shares, the Management Subscription Shares and the Retail Shares.

The number of Placing Shares and the Offer Price will be agreed by the Banks and Halfords following the close of the Bookbuild. The timing of the closing of the Bookbuild, pricing and allocations are at the discretion of the Banks and Halfords. Details of the Offer Price and the number of Placing Shares, Management Subscription Shares and Retail Shares will be announced as soon as practicable after the close of the Bookbuild.

Applications have been made for the Placing Shares, Management Subscription Shares and Retail Shares to be admitted to the premium listing segment of the Official List of the Financial Conduct Authority (the "FCA") and to trading on the main market for listed securities of the London Stock Exchange plc (the "London Stock Exchange") (together "Admission"). It is expected that settlement for the Placing Shares, the Retail Offer and the Management Subscription Shares and Admission will take place at or around 8.00 a.m. (London time) on 6 December 2021 (or, in any case, such later date as may be agreed between the Company and the Banks).

The Placing, the Management Subscription and the Retail Offer are conditional upon, inter alia, Admission becoming effective and the placing agreement entered into today between the Company and the Banks (the "Placing Agreement") not being terminated in accordance with its terms. The Placing Agreement contains customary representations, warranties and undertakings from the Company in favour of the Banks relating to the Group and its business. In addition, the Company has agreed to indemnify the Banks and their affiliates in relation to certain liabilities they may incur in respect of the Placing. The Banks can terminate the Placing Agreement at any time prior to Admission in certain customary circumstances, including in the event of a breach of the Company's representations and warranties given in the Placing Agreement, the failure of the Company to comply with its obligations under the Placing Agreement or the occurrence of a material adverse change.

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DJ Halfords Group PLC: Proposed Fundraise to raise -2-

Pursuant to the Placing Agreement, the Company has agreed to a lock-up pursuant to which it has undertaken to the Banks that at any time between the date of the Placing Agreement and 120 days after the date of Admission it will not, and will procure that no Group company will, without the prior written consent of the Banks (i) directly or indirectly, issue, allot, offer, lend, mortgage, assign, charge, pledge, sell, contract to sell or issue, sell any option or contract to purchase, purchase any option or contract to sell or issue, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any Ordinary Shares or interest in Ordinary Shares or any securities convertible into or exercisable or exchangeable for, or substantially similar to, Ordinary Shares or any interest in Ordinary Shares; or (ii) enter into any swap or other transaction or arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Ordinary Shares, whether any such swap or transaction described in (i) or (ii) above is to be settled by delivery of Ordinary Shares or such other securities, in cash or otherwise, subject to certain customary exceptions.

Appendix 1 to this Announcement sets out further information relating to the Bookbuild and the terms and conditions of the Placing.

Capitalised words and expression in this Announcement shall the meanings given in Appendix 2.

Enquiries

Halfords 
 
Loraine Woodhouse, Chief Financial Officer 
                                [phone] 
Neil Ferris, Corporate Finance Director 
Andy Lynch, Head of Investor Relations 
 
Investec (Joint Global Co-ordinator, Bookrunner and Broker) 
 
                                [phone] 
David Flin / Chris Baird / Alex Penney 
 
Peel Hunt (Joint Global Co-ordinator, Bookrunner and Broker) 
 
George Sellar / Tom Ballard / Andrew Clark (Investment Banking) [phone] 
Jock Maxwell MacDonald / Sohail Akbar (ECM Syndicate) 
 
Powerscourt (Financial PR) 
                                [phone] 
 
                                [e-mail] 
Rob Greening / Nick Hayns 
 
 

The person responsible for releasing this Announcement is Loraine Woodhouse, Chief Financial Officer.

IMPORTANT NOTICES

THIS ANNOUNCEMENT, INCLUDING THE APPENDICES AND THE INFORMATION CONTAINED HEREIN, IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE, TRANSMISSION, FORWARDING OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES OF AMERICA, ITS TERRITORIES AND POSSESSIONS, ANY STATE OF THE UNITED STATES OR THE DISTRICT OF COLUMBIA (COLLECTIVELY, THE "UNITED STATES"), AUSTRALIA, CANADA, SOUTH AFRICA 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 INTENDED THAT IT WILL BE SO APPROVED.

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, Canada, Australia, South Africa, 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.

No action has been taken by the Company , Investec, Peel Hunt or any of their respective affiliates, or any person acting on its or their behalf 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. Persons into whose possession this Announcement comes are required by the Company and the Banks to inform themselves about, and to observe, such restrictions.

No prospectus, offering memorandum, offering document or admission document has been or will be made available in connection with the matters contained in this Announcement and no such prospectus is required (in accordance with Regulation (EU) No 2017/1129 (as amended) (the "EU Prospectus Regulation") or Regulation (EU) No 2017/1129 (as amended) as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 (the "UK Prospectus Regulation")) to be published.

The Placing Shares have not been and will not be registered under the US Securities Act of 1933, as amended (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, pledged, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, in or into the United States absent registration under the Securities Act, 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 any other jurisdiction of the United States. Accordingly, the Placing Shares will be offered and sold only (i) outside of the United States in "offshore transactions" (as such term is defined in Regulation S under the Securities Act ("Regulation S")) pursuant to Regulation S and otherwise in accordance with applicable laws; and (ii) in the United States to persons who are "qualified institutional buyers" (as defined in Rule 144A under the Securities Act) ("QIBs") and who have delivered to the Company and the Banks a US Investor Letter substantially in the form provided to it, in each case, pursuant to an exemption from, or in a transaction not subject to, registration under the Securities Act. No public offering of the Securities will be made in the United States or elsewhere.

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

This Announcement has not been approved by the FCA or the London Stock Exchange.

In Canada, the Placing is directed only to purchasers in the provinces of Canada purchasing, or deemed to be purchasing, as principal that are "accredited investors", as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are "permitted clients", as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this offering memorandum (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal adviser.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts ("NI 33-105"), the agents for the Placing are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

In member states of the European Economic Area (the "EEA"), this Announcement is directed at and is only being distributed to "qualified investors" within the meaning of Article 2(e) of the EU Prospectus Regulation ("Qualified Investors"). In the United Kingdom, this Announcement is directed at and is only being distributed to "qualified investors" within the meaning of Article 2(e) of the UK Prospectus Regulation who are also (i) persons having professional experience in matters relating to investments who fall within the definition of "investment professional" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO"); or (ii) high net worth companies, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2)(a) to (d) of the FPO; or (iii) other persons to whom it may otherwise lawfully be communicated (all such persons together being "Relevant Persons"). Any investment or investment activity to which this Announcement relates is available only to (i) in any member state of the EEA, Qualified Investors; and (ii) in the United Kingdom, Relevant Persons, and will be engaged in only with such persons. This Announcement must not be acted on or relied on (i) in any member state of the EEA, by persons who are not Qualified Investors; and (ii) in the United Kingdom, by persons who are not Relevant Persons.

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