Melrose Industries PLC — Capital/Financing Update 2012

Nov 23, 2012

SUPPLEMENTARY PROSPECTUS DATED 22 NOVEMBER 2012

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you are recommended to seek your own personal financial advice as soon as possible from your stockbroker, bank, solicitor, accountant, fund manager or other appropriate independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom or, if not, from another appropriately authorised independent financial adviser.

The distribution of this document (the ''Supplementary Prospectus''), the prospectus dated 12 October 2012 (the ''Original Prospectus'') and the accompanying documents and the allotment and issue of New Melrose Ordinary Shares in jurisdictions other than the United Kingdom may be restricted by law. No action has been taken by New Melrose to obtain any approval, authorisation or exemption to permit the allotment or issue of New Melrose Ordinary Shares or the possessing or distribution of this Supplementary Prospectus, the Original Prospectus and the accompanying documents in any jurisdiction, other than the United Kingdom. Persons outside the United Kingdom into whose possession this Supplementary Prospectus or the Original Prospectus comes should inform themselves about, and observe, any applicable restrictions and legal, exchange control or regulatory requirements in relation to the distribution of this Supplementary Prospectus, the Original Prospectus and the Proposals. Any failure to comply with such restrictions or requirements may constitute a violation of the securities laws of any such jurisdiction. In particular, such documents should not be distributed, forwarded to or transmitted in or into any Scheme Restricted Jurisdiction.

No New Melrose Ordinary Shares have been marketed to, or are available for purchase in whole or in part by, the public in the United Kingdom or elsewhere in connection with the Admission. Neither the Supplementary Prospectus nor the Original Prospectus constitutes or forms part of any offer or invitation to purchase, subscribe for, sell or issue, or any solicitation of any offer to purchase, subscribe for, sell or issue, New Melrose Ordinary Shares or any other securities of New Melrose.

A copy of this document, which comprises a supplementary prospectus relating to the New Melrose Ordinary Shares prepared in accordance with the Prospectus Rules made under section 73A of the Financial Services and Markets Act 2000, has been filed with the FSA and has been approved by the FSA in accordance with section 87A of the Financial Services and Markets Act 2000 and made available to the public as required by section 3.2 of the Prospectus Rules.

This Supplementary Prospectus is supplemental to and must be read in conjunction with the Original Prospectus. Shareholders should read the whole of this Supplementary Prospectus, the Original Prospectus and any documents incorporated herein and therein by reference. In particular, your attention is drawn to the factors described in the ''Risk Factors'' section of the Original Prospectus.

NEW MELROSE PLC

(to be renamed as Melrose PLC)

(Incorporated and registered in England and Wales with registered number 8243706)

Introduction to the Official List and admission to trading on the London Stock Exchange of 1,266,627,036 New Melrose Ordinary Shares

Rothschild

Sponsor and Financial Adviser

Investec

Broker

Applications will be made to the UKLA for the New Melrose Ordinary Shares to be admitted to the Official List and to the London Stock Exchange for the New Melrose Ordinary Shares to be admitted to trading on the London Stock Exchange's main market for listed securities. It is expected that Admission will become effective, and that dealings in the New Melrose Ordinary Shares will commence, at 8.00 a.m. on the Effective Date which, subject to the satisfaction of certain conditions, is expected to occur on 27 November 2012. No application has been or is currently intended to be made for any other class of shares issued by New Melrose to be admitted to the Official List or to trading on the London Stock Exchange or to be admitted to listing or dealing on any other exchange.

The New Melrose Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respects with each other and will rank in full for all dividends and other distributions thereafter declared, made or paid in respect of the New Melrose Ordinary Shares.

Shareholders should only rely on the information contained in this Supplementary Prospectus, the Original Prospectus and any documents incorporated herein or therein by reference. No person has been authorised to give any information or make any representations other than those contained in this Supplementary Prospectus and the Original Prospectus and, if given or made, such information or representation must not be relied upon as having been so authorised. New Melrose will comply with its obligations to publish a further supplementary prospectus pursuant to section 87G FSMA and Rule 3.4 of the Prospectus Rules containing further updated information required by law or by any regulatory authority but, except as required by the Listing Rules, the Prospectus Rules, the Disclosure and Transparency Rules or any other applicable law, assumes no further obligation to publish additional information. Without prejudice to New Melrose's legal or regulatory obligations to publish a further supplementary prospectus, neither the delivery of this Supplementary Prospectus or the Original Prospectus nor Admission shall, under any circumstances, create any implication that there has been no change in the affairs of the Melrose Group since the date of this Supplementary Prospectus or the Original Prospectus or that the information is correct as of any time subsequent to the date of this Supplementary Prospectus or the Original Prospectus.

Rothschild, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for New Melrose in relation to the Admission and for New Melrose and Old Melrose in relation to the Proposals and is not advising any other person and accordingly will not be responsible to any person other than New Melrose for providing the protections afforded to the clients of Rothschild or for providing advice in relation to the matters described in this Supplementary Prospectus and the Original Prospectus.

Investec, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting for New Melrose in relation to Admission and Old Melrose in relation to the Proposals and is not advising any other person and accordingly will not be responsible to any person other than New Melrose for providing the protections afforded to the clients of Investec or for providing advice in relation to the matters described in this Supplementary Prospectus and the Original Prospectus.

Apart from the responsibilities and liabilities, if any, which may be imposed on Rothschild or Investec under FSMA or the regulatory regime established thereunder, neither Rothschild or Investec accepts any responsibility whatsoever and makes no warranty, express or implied, in relation to the contents of this Supplementary Prospectus or the Original Prospectus, including their accuracy, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with the Melrose Group, the New Melrose Ordinary Shares or the Proposals. Each of Rothschild and Investec accordingly disclaims, to the fullest extent permitted by law, all and any liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this Supplementary Prospectus, the Original Prospectus or any such statement.

The contents of this Supplementary Prospectus and the Original Prospectus are not to be construed as legal, financial or tax advice. Each prospective investor should consult his, her or its own solicitor, independent financial adviser or tax adviser for legal, financial or tax advice.

Neither this Supplementary Prospectus nor the Original Prospectus is an offer of securities for sale in the United States or in any other country or jurisdiction. New Melrose Ordinary Shares to be issued to Shareholders in connection with the Scheme have not been, and will not be, registered with the SEC under the US Securities Act, and will be issued in reliance upon the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) of that act. For the purpose of qualifying for the exemption from the registration requirements of the US Securities Act provided by Section 3(a)(10) of that act with respect to the New Melrose Ordinary Shares issued pursuant to the Scheme, Old Melrose will advise the Court that it will rely on the Section 3(a)(10) exemption based on the Court's sanctioning of the Scheme, which will be relied upon by Old Melrose as an approval of the Scheme. The Court will hold a hearing on the Scheme's fairness to Old Melrose Shareholders, at which hearing all such Shareholders will be entitled to attend in person or through counsel to support or oppose the sanctioning of the Scheme.

The New Melrose Ordinary Shares have not been and will not be registered on a United States securities exchange or quoted on any inter-dealer quotation system in the United States. New Melrose does not intend to take any action to facilitate a market in New Melrose Ordinary Shares in the United States. Consequently, New Melrose believes that it is unlikely that an active trading market in the United States will develop for the New Melrose Ordinary Shares.

Neither the SEC nor any other US federal or state securities commission or regulatory authority has approved or disapproved the New Melrose Ordinary Shares or passed an opinion on the adequacy of this Supplementary Prospectus or the Original Prospectus. Any representation to the contrary is a criminal offence in the United States.

Old Melrose and New Melrose are public limited companies incorporated under the laws of England and Wales. All of the Directors of Old Melrose and New Melrose are citizens or residents of countries other than the United States. Substantially all of the assets of such persons and a significant proportion of the assets of Old Melrose and New Melrose are located outside the United States. As a result, it may not be possible to effect service of process within the United States upon such persons, Old Melrose or New Melrose, or to enforce against them judgments of US courts, including judgments predicated upon civil liabilities under the securities laws of the United States or any state or territory within the United States. The United States and the United Kingdom do not have a treaty providing for the reciprocal recognition of judgements (other than arbitral awards) in civil and commercial matters. Consequently, a final and conclusive judgement by any federal or state court of the United States based on civil liability, whether or not predicated solely upon US federal securities laws, would not automatically be enforceable in England and Wales. In addition, it is doubtful whether the courts of England and Wales would accept jurisdiction and impose civil liability if proceedings were commenced in England or Wales in an original action predicated solely upon US federal securities laws.

Some financial and other numerical information in this Supplementary Prospectus and the Original Prospectus has been rounded and, as a result, the numerical figures shown as totals in this Supplementary Prospectus and the Original Prospectus may vary slightly from the exact arithmetic aggregation of the figures that precede them.

The New Melrose Ordinary Shares have not been, and will not be, registered under the securities laws of any state or jurisdiction of the United States and, accordingly, will only be issued to the extent that exemptions from the registration or qualification requirements of state ''blue sky'' securities laws are available or such registration or qualification requirements have been complied with.

NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER RSA 421-B WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

CONTENTS

	Page
AMENDMENTS TO SUMMARY CONTAINED IN THE ORIGINAL PROSPECTUS	1
CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS	4
PART I SUPPLEMENTARY INFORMATION	5
PART II ADDITIONAL INFORMATION	6
DOCUMENTS INCORPORATED BY REFERENCE	7

AMENDMENTS TO SUMMARY CONTAINED IN THE ORIGINAL PROSPECTUS

The text below replaces Element B.4a of the Summary of the Original Prospectus.

Section B—ISSUER
Element	Disclosure Requirement	Disclosure
B.4a	Significant recent trends affecting the Melrose Group and the industries in which it operates	On 16 November 2012, Old Melrose issued the following Interim Management Statement for the period from 1 July 2012 to 15 November 2012:
		''Overview
		Trading for the Group is in line with expectations for 2012. However, especially in the last few weeks, slower trends for certain businesses are noticeable compared to those seen in the first half of the year. The acquisition of the Elster Group was completed successfully in the period and the process of improving its performance is well underway. The Melrose Board remains confident about the prospects for delivering significant shareholder value over the medium term from this acquisition.
		Given that the acquisition of the Elster Group happened part way through the period on 23 August this year, comparisons of trading results within the period and to last year are not consistent. The most meaningful comparisons can be made for Melrose companies excluding Elster.
		For these Melrose companies, revenue, at constant currency has continued to grow in the period compared to the same time last year, by 6% compared to 10% in the first half, giving a year to date revenue growth of 8%.
		The overall weekly rate of order intake in the period is 8% lower than the first half of the year but it is too early to tell how this will affect 2013, and it will vary by business.
		We have already made significant changes to Elster, and identified larger than expected cost savings. It is early days to draw meaningful conclusions about the current trends in trading, but initial indications point to current revenue trends having slowed and the boost from European Electricity Smart Meters being delayed.
		Energy
		Revenue in Turbogenerators in the period is up 17% on last year and 13% year to date. The book to bill ratio was 82% which points to OEM sales in 2013 being below this year in value but not in volume terms. This is caused in part by a move in mix toward smaller units but there is also evidence of slower demand for turbines with the consequent effect on turbogenerators. Despite this, the Board has confidence that any reduction in OEM sales will be largely, if not entirely, mitigated by a number of other positive opportunities.

The new rotor machine, a significant investment in Brush approved last year, is undergoing final testing before being commissioned at the Loughborough, UK factory. This will improve manufacturing efficiencies, as will the completed restructuring of the Dutch Brush operation and Hawker Siddeley Switchgear. Indeed substantial capital expenditure has been made in Brush this year, equivalent to twice the level of depreciation and this, along with further identified investment, will be beneficial to margins. The continuing growth of the aftermarket business will also position Brush well for next year.

Marelli is experiencing strong momentum going into next year with revenue up 6% in the period on last year and order intake up 18%. This growth is being driven by demand for generators and motors toward the top end of their range.

Lifting

Crosby revenue is up 14% year to date with order intake up 8%. The pace of revenue growth has slowed in the period but it is still healthy at 6%, although order intake in October and November was trending lower.

Crosby has the ability to benefit from both the demand for oil and the demand for gas, and has the advantage of growing with whichever demand curve is strongest at each point in the cycle. Crosby has outperformed recent cycles due to its gain in market share, and it has an excellent presence in its market where it is a clear market leader.

Bridon revenue is flat in the period as weaker construction and industrial markets have balanced the continued sales growth in Oil & Gas and Mining.

Bridon has seen significant investment in 2012, which is helping this previously under invested business to be revitalised. The brand new, leading edge factory supplying the offshore Oil & Gas industry opened on time, and on budget, in Newcastle, UK on 15 November and initial demand indications are encouraging. The new technology centre in Doncaster opens early next year. All these actions will help improve the performance of Bridon.

Other Industrial

The two businesses within the Other Industrial division operate in very specific markets, which are experiencing opposing market conditions.

Truth operates in the US housing market, both new build and renovation, and continues to experience mid singledigit revenue growth and improving margins. Truth will gain from any further recovery in the US housing market into 2013.

Harris is exposed to the US scrap steel cycle which is experiencing difficult market conditions. Revenue and orders are significantly down on last year, however the company retains good operating margins.

Elster

Twelve weeks into the Elster acquisition our confidence in being able to improve the performance of the businesses is high.

As with previous acquisitions, restructuring the Group to create shareholder value is well underway. The operational restructuring announced by Elster at the start of 2012 is on track and is being extended along with the commencement of many other projects to improve performance.

Elster has been streamlined from five divisions into three – Gas, Electricity and Water and management teams are now in place for each division. This means a clear management structure is in place to create accountability and better focus.

Current revenue trends have slowed with deferral of orders into 2013 and the long-awaited growth in European Electricity Smart Meters still seems some way off. However, the medium term dynamics are still positive and the opportunities for cost reduction via extensive restructuring are larger than previously indicated.

Exchange Rates

Historically the Group's exchange risk has been mainly weighted to the US Dollar. However, since the acquisition of Elster the exchange exposure is equally weighted between the Dollar and the Euro. Each ten cent movement in the Dollar or Euro moves profit by 2%. The weakening of the Euro during 2012 will have some negative impact.

Debt

Group net debt at 30 June 2012 was £306.5 million. Post the Elster acquisition the leverage increased from 1.5x at June to just over 2.5x in the enlarged Group. The outlook for the year end is consistent with this. Significant capital expenditure at approximately twice the level of depreciation continues to be made.

Outlook

The Melrose businesses are not immune to any worsening of macro-economic conditions internationally, but they are positioned in the strong end markets of Energy and Oil & Gas which should fare better than most over the medium term. In addition, the Group's five month order book gives protection to the short term outlook.

Trading is in line with expectations for 2012, although revenue trends have slowed, and recently the sales outlook for 2013 has become more uncertain. Opportunities to improve the Group exist including those arising from the acquisition of Elster and this gives the Board confidence that Melrose will continue to prosper.''

CAUTIONARY NOTE ON FORWARD LOOKING STATEMENTS

Certain statements contained in this document, including those in the parts headed ''Amendments to Summary Contained in the Original Prospectus'' and ''Supplementary Information'', constitute ''forwardlooking statements''. In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms ''believes'', ''continues'', ''estimates'', ''plans'', ''prepares'', ''anticipates'', ''expects'', ''intends'', ''aims'', ''may'', ''will'' or ''should'' or, in each case, their negative or other variations or comparable terminology. Shareholders should specifically consider the factors identified in this Supplementary Prospectus and the Original Prospectus which could cause actual results to differ before making an investment decision. Undue reliance should not be placed on any forward-looking statements as such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Old Melrose, New Melrose and/or the Melrose Group, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Undue reliance should not be placed on any forward-looking statements as such forward-looking statements are based on numerous assumptions regarding Old Melrose's, New Melrose's and/or the Melrose Group's present and future business strategies and the environment in which Old Melrose, New Melrose and/or the Melrose Group will operate in the future. Among the factors that could cause actual results to differ materially from those described in the forward-looking statements are changes in the global political, economic and/or business sphere, competitive, market and regulatory forces, future exchange and interest rates, changes in tax rates and future business combinations or dispositions. Such risks, uncertainties and other factors are set out more fully in the section of the Original Prospectus headed ''Risk Factors'' and include, among others: risks relating to commodity prices, risks relating to the economic conditions of the markets in which New Melrose and the Melrose Group operates and risks relating to the possible volatility of the price of New Melrose Ordinary Shares. These forward-looking statements speak only as at the date of the Original Prospectus. Except as required by the FSA, the London Stock Exchange or applicable law (including as may be required by the Prospectus Rules, Listing Rules and the Disclosure and Transparency Rules), New Melrose expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this Supplementary Prospectus or the Original Prospectus to reflect any change in its expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Forward-looking statements contained in this Supplementary Prospectus and the Original Prospectus do not in any way seek to qualify the working capital statement contained in paragraph 8 of Part IX (Additional Information) of the Original Prospectus.

PART I

SUPPLEMENTARY INFORMATION

INTERIM MANAGEMENT STATEMENT

• 1. On 16 November 2012, Old Melrose published its interim management statement for the period from 1 July 2012 to 15 November 2012 (the ''Interim Management Statement''). The entire contents of the Interim Management Statement are incorporated by reference into this Supplementary Prospectus in compliance with Prospectus Rule 2.4.1.
• 1. Copies of the Interim Management Statement, which is incorporated by reference into this Supplementary Prospectus, are available as provided in paragraph 3 (Documents for Inspection) of Part II (Additional Information) of this Supplementary Prospectus.

PART II

ADDITIONAL INFORMATION

1. RESPONSIBILITY

The Company and the Directors, whose names appear at paragraph 1 of Part VIII (Directors, Corporate Governance and Employees) of the Original Prospectus, accept responsibility for the information contained in this Supplementary Prospectus. To the best of the knowledge of the Company and the Directors (having taken all reasonable care to ensure that such is the case), the information contained in this Supplementary Prospectus is in accordance with the facts and contains no omission that is likely to affect its import.

2. CONSENTS

• 2.1 Investec has given and has not withdrawn its written consent to the inclusion in this Supplementary Prospectus of its name and the references thereto in the form and context in which it appears.
• 2.2 Rothschild has given and has not withdrawn its written consent to the inclusion in this Supplementary Prospectus of its name and the references thereto in the form and context in which it appears.

3. DOCUMENTS FOR INSPECTION

In addition to the documents set out in paragraph 17 of Part IX (Additional Information) of the Original Prospectus, copies of the following documents will be available for inspection during normal business hours on any weekday (Saturday, Sundays and public holidays excepted) at (i) the registered office of Old Melrose and New Melrose (being Precision House, Arden Road, Alcester, Warwickshire B49 6HN) and (ii) the offices of Simpson Thacher & Bartlett LLP (being CityPoint, One Ropemaker Street, London EC2Y 9HU) up to and including the date of Admission:

• (a) the Interim Management Statement;
• (b) this Supplementary Prospectus; and
• (c) the consent letters referred to at paragraph 2 above.

The Old Melrose Circular, this Supplementary Prospectus and the Original Prospectus and the information incorporated by reference into this Supplementary Prospectus and the Original Prospectus (as set out on page 125 of the Original Prospectus under the heading ''Documents Incorporated by Reference'' and on page 3 of this Supplementary Prospectus under the heading ''Documents Incorporated by Reference'') may also be viewed via the National Storage Mechanism.

4. DEFINITIONS

Unless otherwise defined herein, words or expressions defined in the Original Prospectus have the same meaning when used in this Supplementary Prospectus.

Dated: 22 November 2012

DOCUMENTS INCORPORATED BY REFERENCE

The Interim Management Statement, which is available for inspection in accordance with paragraph 3 of Part II (Additional Information) of this Supplementary Prospectus, contains information which is relevant to the Proposals.