(STP.L) Spiritel PLC Buy/Sell

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It is proposed that the Capital Reorganisation will take effect so that every 100 Existing Shares of 1 p each shall be consolidated into one ordinary share of £1 each which shall then be sub-divided into one New Ordinary Share of 1 p each and 99 Deferred Shares of 1 p each.

Therefore, following the completion of the Capital Reorganisation, for every 100 Existing Shares currently held, a Shareholder will receive one New Ordinary Share of 1 p each and 99 Deferred Shares of 1 p each credited as fully paid. The Deferred Shares will have no voting rights or rights to receive a dividend.

(iii) The Company's authorised share capital is increased and the Company is granted additional authority to allot shares. As detailed above, the Company intends to continue with its strategy of acquisitive growth, and currently has limited headroom to raise additional funds without the expense of seeking Shareholder approval. Thus, the Company is also seeking approval at the General Meeting to allot and issue up to £365,000 of equity securities, as defined in section 560 of the 2006 Act to enable it to raise further funds in due course. The Company is currently in discussions in respect of potential acquisitions and will update shareholders if these discussions should proceed.

The Proposals, inter alia, require the amendment of the Company's articles of association and hence need the approval of Shareholders in general meeting. Furthermore, the Proposals require the granting by the Independent Shareholders of a waiver from the application of Rule 9 of the City Code,

The SpiriTel Board believes that the Proposals will have a number of advantages for the Company; leaving the Company with a stronger balance sheet and without the burden of the interest on the Preference Shares and the Loan Facilities, making it more attractive to providers of finance which will enable the Company to further develop.

The Company is, therefore, requesting Shareholders' support for the Resolutions required to implement the Proposals, which will be proposed at a General Meeting to be held at 10.00 a.m. on 30 October 2009.

Also at the General Meeting, the Company is requesting Shareholders ratify the entry into of a lease in respect of the property at Ashland House, Manchester Road, Wigan on arm's length terms between SpiriTel IP Communications Limited and Anthony Vose.

2 City Code

Rule 9 of the City Code ("Rule 9") is designed to prevent the acquisition or control of a company to which the City Code applies without a general cash offer being made to all shareholders of that company.

Under Rule 9, when: (i) a person acquires an "interest" (as defined in the City Code) in shares which (taken together with shares in which he is already interested and in which persons "acting in concert" with him are interested (as defined in the City Code)) carry 30 per cent. or more of the voting rights of a company that is subject to the City Code; or (ii) any person who, together with persons acting in concert with him is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of a company, but does not hold shares carrying more than 50 per cent. of the voting rights of the company subject to the City Code, and such person, or any persons acting in concert with him, acquires an interest in any other shares which increases the percentage of the shares carrying voting rights in which he is interested, then in either case, that person together with the persons acting in concert with him, is normally required to make a general offer in cash, at the highest price paid by him, or any persons acting in concert with him, for any interest in shares in the Company during the preceding 12 months, for all the remaining equity share capital of the Company.

Under the City Code, a concert party arises where persons acting together pursuant to an agreement or understanding (whether formal or informal) co-operate to obtain or consolidate control of that company. Control means an interest or interests in shares carrying an aggregate of 30 per cent. or more of the voting rights of the company, irrespective of whether the holding or holdings give de facto control.

The members of the Concert Party are deemed to be acting in concert for the purposes of the City Code. The Concert Party currently holds 49.99 per cent. of the Ordinary Shares and approximately £7.85 million of the Company's indebtedness. Following the Second Conversion the Concert Party will have 14,556,212 New Ordinary Shares representing approximately 82.3 per cent. of the issued Ordinary Shares of the Company. Following the Second Conversion the Company will have £1 million of outstanding liability in respect of the Loan Facilities and there will be no Preference Shares in issue. The remaining £1 million of Loan Facilities will not be convertible into Ordinary Shares and it is proposed that this balance is repaid when the Company raises funds to pursue its acquisitive growth strategy. The Penta Funds have, irrevocably undertaken, subject to approval of the Whitewash Resolution at the General Meeting and the proposed Capital Reorganisation having been completed, by no later than the successful conclusion of the next fundraising by the Company to raise £3 million or more, to convert the Penta Indebtedness into New Ordinary Shares at the price of 60p per New Ordinary Share. Following the Second Conversion the Concert Party will have 14,556,212 New Ordinary Shares representing approximately 82.3 per cent. of the issued New Ordinary Shares of the Company.

Following the Capital Reorganisation and the Second Conversion the Concert Party's shareholding will be as follows:

Penta Fund 1 Per cent* Penta Fund 1 SP Per cent* Penta Funds Total Per cent*
Limited Limited Partnership

Partnership Current holding of
Existing Shares 311,863,617 49.68 1,956,228 0.31 313,819,845 49.99

Total holding of New Ordinary
Shares immediately following 3,118,636 49.68 19,562 0.31 3,138,198 49.99

the Capital Reorganisation
Value of Loan Facilities £4,887,472 £4,804 £4,892,276

converted including interest and redemption premium
Value of Preference Shares £1,946,270 £12,263 £1,958,533

converted including redemption premium Conversion Shares issued pursuant to the
Second Conversion 11,389,570 - 28,444 - 11,418,014 -

Total holding of New Ordinary Shares immediately following the
Second Conversion 14,508,206 81.99 48,006 0.27 14,556,212 82.26

The Panel has agreed, however, subject to the passing on a poll by the Independent Shareholders of the Company of the Whitewash Resolution, to waive the obligation on the Concert Party (both individually and collectively) to make a general offer to equity shareholders of the Company under Rule 9 which would otherwise arise as a result of the Second Conversion.

Shareholders should note that, if the Whitewash Resolution is passed and the authority becomes unconditional, the Concert Party would be interested in Ordinary Shares carrying more than 50 per cent. of the voting rights of the Company and, for as long as they continue to be treated as acting in concert, would be able to acquire further New Ordinary Shares, without incurring an obligation to make an offer to Shareholders under Rule 9, although individual members of the Concert Party will not be able to increase their percentage interests in shares through a Rule 9 threshold without the consent of the Panel on Takeovers and Mergers.

3. Irrevocable undertakings

The Independent Directors and the Company Secretary have irrevocably undertaken to the Company to vote in favour of Resolution 2 to be proposed at the General Meeting, in respect of their aggregate beneficial holdings totalling 50,641 ,933 Existing Shares, representing approximately 8.1 per cent. of the Existing Shares. Due to the relationship between Steven Scott and the Penta Funds, the Penta Funds have irrevocably undertaken not to vote on Resolution 2 at the General Meeting.

The Directors (including Steven Scott) and the Company Secretary have irrevocably undertaken to the Company to vote in favour of Resolutions 1, 3, 4, 6 and 7 to be proposed at the General Meeting, in respect of their aggregate beneficial holdings totalling 364,461 ,778 Existing Shares, representing approximately 58.1 per cent of the Existing Shares.

The Directors (including Steven Scott but excluding Anthony Vose) and the Company Secretary have irrevocably undertaken to the Company to vote in favour of Resolution 5 to be proposed at the General Meeting, in respect of their aggregate beneficial holdings totalling 318,758,173 Existing Shares, representing approximately 50.7 per cent of the Existing Shares. Due to the lease of Ashland House being entered into with Anthony Vose he has irrevocably undertaken not to vote on Resolution 5 at the General Meeting.

Additionally, the Penta Funds have irrevocably undertaken to the Company to convert the Penta Indebtedness into Ordinary Shares by no later than the successful completion of the next fundraising by the Company to raise a minimum of £3 million.

4. Admission, settlement and dealings

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM upon the approval of the Resolutions proposed at the General Meeting.

It is expected that Admission will become effective and dealings will commence in the New Ordinary Shares on 2 November 2009. It is expected that Admission will become effective and dealings will commence in the Conversion Shares on the Business Day after completion of the Second Conversion. No application has or will be made for the enlarged share capital to be admitted to trading or to be listed on any other stock exchange.

New definitive Share Certificates will be issued to certified Shareholders in respect of the New Ordinary Shares and, pending dispatch of the definitive share certificates, instruments of transfer should be accompanied by the existing Share Certificate.

5. Recommendation

The Directors believe that, if the Concert Party undertakes the Proposed Conversion then SpiriTel will benefit in number of ways. The Company will have a much stronger balance sheet, unencumbered by £6.85 million of Penta Indebtedness and the conversion will significantly increase the market capitalisation of the Company at the Conversion Price. In addition, the Company will not face the annual interest cost of approximately £550,000 under the current Loan Facilities and Preference Shares which is due to accrue from May 2010. With a stronger balance sheet, SpiriTel will be much better able to continue its acquisitive strategy, focusing on earnings enhancing transactions. The Company remains in discussions in respect of potential acquisitions and if these discussions should proceed, the Company is likely to raise additional funds. In addition, SpiriTel will be a more attractive acquisition target following the conversion of Penta Indebtedness and this may allow Shareholders an exit in due course. Without the Second Conversion, the Company will continue to have a significant interest burden and will remain highly geared. SpiriTel is unlikely to be able to repay the amounts due under the Loan Facilities and Preference Shares and thus it would remain highly geared for the foreseeable future.

The Waiver

In light of his relationship with the Penta Funds Steven Scott has not been deemed independent for the purposes of recommending Shareholders to vote on Resolution 2, and he has accordingly, not taken part in the Board's decision to recommend this resolution.

The Independent Directors, who have been so advised by FinnCap, consider that the terms of the Second Conversion are fair and reasonable and are in the best interests of the Company and the Independent Shareholders as a whole and accordingly unanimously recommend Independent Shareholders to vote in favour of the Whitewash Resolution to be proposed at the General Meeting as they intend to do in respect of their beneficial holdings amounting, in aggregate, to 50,141,933 Existing Shares, representing approximately 8.0 per cent. of the existing issued ordinary share capital of the Company. In providing advice to the Directors, FinnCap has taken into account the Directors' commercial assessments.

The other Proposals

The Directors, who have been so advised by FinnCap, consider the remaining Proposals to be fair and reasonable and in the best interests of the Company and its Shareholders as a whole, and unanimously recommend Shareholders to vote in favour of Resolutions 1, 3, 4, 6 and 7, as they intend to do in respect of their shares totalling 363,961 ,778 Existing Shares, being 58.0 per cent. of the Existing Share capital of the Company. In providing advice to the Directors, FinnCap has taken into account the Directors' commercial assessments.

Ratification of lease

Anthony Vose is deemed not to be independent in relation to Resolution 5 and thus has irrevocably undertaken not to vote on this resolution. The Directors (excluding Anthony Vose), who have been so advised by FinnCap, consider the terms of the lease of Ashland House to be fair and reasonable and, in the best interests of the Company, its Shareholders as a whole, and unanimously recommend Shareholders to vote in favour of Resolution 5, as they intend to do in respect of their shares totalling 318,258,178 Existing Shares, being 50.7 per cent. of the Existing Share capital of the Company. In providing advice to the Directors, FinnCap has taken into account the Directors' commercial assessments.

For further information please visit www.spiritelplc.com or contact:

SpiriTel Plc FinnCap
Alastair Mills Geoff Nash/Mark Young

Chief Executive
Tel: 020 7160 0100 Tel. 020 7600 1658

SHARE CAPITAL STATISTICS

Number of Ordinary Shares in issue 627,639,692
Number of Ordinary Shares currently held by the Concert 313,819,845

Party Percentage of issued Ordinary Shares currently held by the
Concert Party 49.99 per cent.

Number of New Ordinary Shares of 1 p each in issue following
the Capital Reorganisation 6,276,396

Number of New Ordinary Shares of 1 p each to be held by the
Concert Party following the Capital Reorganisation 3,138,198

Percentage of issued New Ordinary Shares of 1 p each to be
held by the Concert Party following the Capital 49.99 per cent

Reorganisation Number of Conversion Shares to be issued pursuant to the
Second Conversion 11,418,014

Number of New Ordinary Shares to be held by the Concert
Party following the Second Conversion 14,556,212

Number of New Ordinary Shares in issue following the Second
Conversion 17,694,410

Percentage of issued Ordinary Shares to be held by the
Concert Party following the Second Conversion 82.3 per cent.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Despatch and date of this document 7 October 2009

Latest time and date for receipt of the completed
Forms of Proxy to be valid at the 10.00 a.m. on 28 October 2009

General Meeting
Capital Reorganisation Record Time Close of business on 30 October 2009
General Meeting 10.00 a.m. on 30 October 2009

Admission and commencement of dealings on AIM of
New Ordinary Shares 2 November 2009
CREST accounts credited 2 November 2009
Despatch of definitive Share by 13 November 2009

Certificates
Conversion of Penta Indebtedness and 1

allotment of Conversion Shares to the Concert Party

Note 1

To be no later than the successful conclusion of the Company's next fundraising to raise £3 million or more and the passing of the Whitewash Resolution at the General Meeting.

DEFINITIONS

The following words and expressions shall have the following meanings in this announcement as in the circular to shareholders posted today unless the context otherwise requires:

"Admission" admission of the New Ordinary Shares and the Conversion Shares
respectively to trading on AIM and such admission becoming
effective in accordance with Rule 6 of the AIM Rules
"AIM" AIM, a market operated by the London Stock Exchange
"AIM Rules" the current rules published by the London Stock Exchange governing
the operation of AIM
"Board" or "Directors" the Directors of the Company
"Capital Reorganisation" the proposed consolidation of the Existing Shares into ordinary
shares of £1 each in the capital of the Company and the
sub-division of such £1 ordinary shares into New Ordinary Shares
and Deferred Shares

"Capital Reorganisation Record Close of business on 30 October 2009 Time"
"Circular" the circular posted to Shareholders on 7 October 2009
"City Code" the Panel on Takeovers and Mergers (as amended from time to time)
"Company" or "SpiriTel" SpiriTel plc
"Companies Act 2006" the Companies Act 2006, as amended and for the time being in force
"Concert Party" together the Penta Funds, Penta Capital, Steven Scott, David
Calder, Torquil Macnaughton, Mark Phillips, Paul Cassidy and
Charles Schrager being members of Penta Capital and, with the
exception of Charles Schrager, directors of Penta Capital Partners
(Holdings) Limited the corporate member of Penta Capital and all
other funds managed or controlled by Penta Capital
"Concert Party Director" Steven Scott
"Conversion Price" the price of 60 pence per New Ordinary Share at which the Second
Conversion will be actioned
"Conversion Shares" the Company to be issued to the Penta Funds as a consequence of the
Second Conversion
"Deferred Shares" the Deferred Shares of 1 p each in the capital of the Company
arising from the Capital Reorganisation
"Directors" or "Board" the Directors of the Company
"Existing Shares" the 627,639,692 Ordinary Shares of 1 p each in the capital of the
Company in issue
"General Meeting" the general meeting of the Company to be held at the offices of
Hammonds LLP, 7 Devonshire Square, London, EC2M 4YH at 10.00 a.m.
on 30 October 2009 or any adjournment thereof
"Group" SpiriTel and its subsidiary undertakings
"Independent Directors" the Directors apart from Steven Scott

"Independent Shareholders" the Shareholders apart from the Concert Party
"Initial Conversion" the conversion, pursuant to resolutions of the Company passed on 22
May 2008, of £2,611,467 of the Preference Shares into Ordinary
Shares at the price of 1 .1 p per Ordinary Share so that, following
the said conversion, the Concert Party's aggregate per cent.
interests in shares carrying voting rights was 49.99 per cent.
"Loan Facilities" the outstanding loan facilities between Penta Capital and SpiriTel
"London Stock Exchange" London Stock Exchange plc
"New Ordinary Shares" the new ordinary shares of 1 p each in the capital of the Company
arising from the Capital Reorganisation
"Ordinary Shares" Existing Shares, New Ordinary Shares or Conversion Shares as the
context may require
"Penta Capital" manager of the Penta Funds, Penta Capital LLP
"Penta Funds" together Penta Fund 1 Limited Partnership and Penta Fund 1 SP
Limited Partnership
"Penta Indebtedness" £6,850,809 of the Company's indebtedness due to the Penta Funds by
way of £4,892,276 due under the terms of the Loan Facilities and £1
,958,533 held by way of all outstanding Preference Shares including
associated redemption premium
"Preference Shares" the 933,533 preference shares of £1 each in the Company issued to
and held by the Penta Funds
"Proposals" the Capital Reorganisation, the Second Conversion, the amendment of
the terms of the Preference Share conversion rights, the allotment
authorities and the amendment of the articles of association
"Resolutions" the resolutions to be proposed at the General Meeting as set out in
the notice of General Meeting at the end of this Circular
"Second Conversion" the proposed conversion, subject to the Resolutions, of the Penta
Indebtedness at the price of 60p per New Ordinary Share so that,
following the said conversion, the Concert Party's aggregate per
cent. interests in shares carrying voting rights will be 82.3 per
cent.
"Shareholders" holders of Existing Shares
"SpiriTel" or "Company" SpiriTel plc
"SpiriTel Group" SpiriTel, its subsidiaries and subsidiary undertakings

"Whitewash Resolution" or "the the resolution set out in the notice of General Meeting as
Waiver" Resolution 2 (to be approved by Independent Shareholders voting on
a poll) to approve the waiver of the obligations on the Concert
Party that would otherwise arise to make a mandatory cash offer for
the Ordinary Shares not owned by the Concert Party.

End

This information is provided by RNS The company news service from the London Stock Exchange

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