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Freightways Acquires DataBank

7th July 2006

Freightways Limited (Freightways) announces that it has purchased the Australian information management company, Databank Technologies Pty Ltd (DataBank), effective 1 July 2006.

Payment of the purchase price is staged over two years. Initial payments totalling approximately A$18 million will be made during the first few weeks of ownership. Two subsequent payments of up to a maximum of approximately A$6 million each are expected to become payable after finalisation of the results for the years ended 30 June 2007 and 2008, respectively, but only if agreed annual earnings performance has been achieved in those years.

EBITDA in the first year of FRE ownership is anticipated to be A$2.7 million. The expected total purchase consideration represents an effective multipleof 7 times EBITDA, calculated over the two-year period of the earn-out and based upon maximum earn-out achievement.

The structure and timing of the purchase price payments are expected to result in this acquisition being immediately EPS (earnings per share) positive for Freightways.

Key features of this acquisition are:

DataBank is the number two operator by market share in the offsite data storage niche of the Information Management Industry in Australia;
Offsite storage of data remains an underdeveloped and growing niche of the broader Information Management Industry;
DataBank is a successful business with an operating culture similar to that of Freightways’ existing New Zealand information management businesses;
The founders of DataBank have been retained to assist DataBank senior management for a two-year period as part of the earn-out structure of this acquisition;
The founders’ interests are aligned with FRE shareholders’ interests by virtue of the earn-out structure;
DataBank has an experienced and very capable management team who are expected to complement and add value to Freightways’ existing management team;
Although a small acquisition relative to the size of Freightways, it is expected that DataBank will be a catalyst for further offshore growth in niches where Freightways has proven capability; and
This acquisition is a natural extension for Freightways as a leading supplier of offsite data storage services in New Zealand through its ‘Data Security Services’ business. Data Security Services is one of three Freightways brands operating within the Information Management Industry in New Zealand. Information Management services currently provided by Freightways also includes document storage through its ‘Archive Security’ business and the destruction and recycling of documents through ‘Document Destruction Services.’

This acquisition in Australia is a well-considered and important step in the development and growth of Freightways. It diversifies Freightways’ interests both geographically and also deeper into the Information Management market where it has proven experience. Freightways’ existing Information Management businesses and the newly acquired DataBank are experiencing strong organic growth. In addition, it is expected that the acquisition of DataBank will in time create the opportunity to develop further growth initiatives within Australasia.

Freightways operates in three distinct markets-the express package, information management and business mail markets. The acquisition of DataBank is consistent with Freightways’ strategy to develop incremental growth opportunities that complement its existing operations.