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Danka Announces Agreement to Sell Danka Services International Division

9 Apr, 2001

Danka Announces Agreement to Sell Danka Services International Division

Danka Business Systems PLC (Nasdaq:DANKY - news) today announced a definitive agreement to sell its outsourcing division, Danka Services International (DSI), to Pitney Bowes Inc. (NYSE:PBI - news), a global provider of integrated mail and document management solutions, for $290 million in cash. ``I am delighted that we've been able to reach an agreement that benefits all parties,'' said P. Lang Lowrey, Danka's Chief Executive Officer. ``Pitney Bowes will provide a strong platform for the development of DSI's business. In addition, we've achieved our financial goal for the sale, which will enable us to move forward in completing our restructuring plan. We are optimistic that our shareholders and senior lenders will view this agreement as positively as we do.'' Danka announced an integrated three-part plan to reduce and refinance its debt on February 20, 2001. First is the sale of DSI, with proceeds to be used primarily to repay a substantial portion of Danka's existing bank debt. Second is an exchange offer for all $200 million of Danka's outstanding 6.75% convertible subordinated notes due April 1, 2002. The Company recently extended the exchange offer until April 30, 2001, and as of March 20, 2001 had received tenders from holders of $89,333,000 in aggregate principal amount, representing approximately 44.7% of the outstanding notes. Third is the refinancing of Danka's existing senior credit facility, and the Company expects the DSI sale agreement to accelerate the progress of these negotiations. ``Pitney Bowes will make a great partner for DSI's customers and employees,'' noted Randy Miller, president of Danka's DSI division. ``Their services, relationships, and worldwide presence make Pitney Bowes a strategic fit for our business. With their support, we are looking forward to improving and expanding our business operations.'' ``Pitney Bowes Management Services is one of the fastest growing components of our business and comprehensive document management is one of the most valuable services we offer our customers. With this acquisition Pitney Bowes becomes one of the most important global providers in this market,'' commented Pitney Bowes Chairman and CEO, Michael J. Critelli. Completion of the proposed sale is contingent upon the approval of Danka shareholders, and a circular containing the notice convening the necessary extraordinary general meeting will be sent to shareholders soon. The terms of the transaction are subject to the approval of Danka's senior lenders, consent for the assignment of contracts being obtained from certain DSI customers, and certain regulatory clearances being obtained in the United States and in certain European countries. The sales price is subject to adjustment depending on DSI's net assets at closing. Danka expects to close the sale of DSI on or before June 30, 2001. DSI is a leading provider of document management services with more than 300 customers worldwide. In the nine months ended December 31, 2000, DSI generated earnings from operations of $17.3 million on revenues of $218.5 million. DSI's net assets were $92.6 million as of December 31, 2000. Danka also announced that it recently paid approximately $40.7 million of quarterly principal and interest due on its senior revolving and term credit facilities. The principal portion of the payment, approximately $30 million, fully repays the existing term loan facility. A balance of approximately $520 million remains on the senior revolving credit facility. In addition, the Company recently paid its semi-annual interest payment of $6.75 million due under its $200 million 6.75% convertible subordinated notes due April 1, 2002.

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