Recommended Cash Offer
 by
 Williams de Broe Plc
 on behalf of
 Soundersleep Limited
 to acquire the whole of the issued share capital of
 Silentnight Holdings Plc
 not already owned by Soundersleep Limited
 
 
1. Introduction
 
The Independent Directors announced today that they have reached agreement on
the terms of a recommended cash offer, to be made by Williams de Broe on behalf
of Soundersleep, for the whole of the issued share capital of Silentnight that
Soundersleep does not already own.
 
The Silentnight business was established in 1946 by Tom and Joan Clarke and was
floated on the London Stock Exchange in 1973. Famco was formed in 1982 in order
to hold shares in trading companies on behalf of the Clarke family. Famco is
controlled by 20 Clarke family trusts. These trusts have common trustees, none
of whom has a beneficial interest in any of the trusts. Famco's shares are owned
by the trusts and the 19 beneficiaries of the trusts all of whom are members of
the Clarke family.
 
Soundersleep, a subsidiary of Famco, was established as a private limited
company in May 2002 to bring together the interests of the Clarke family in
Silentnight with those of Antonino Allenza and Michelle Scott with a view to
making an offer for the share capital of Silentnight which they did not then
already own. To date, Soundersleep has been financed by the cash investment of
£250,000 in its share capital by Antonino Allenza and Michelle Scott.
 
The directors of Soundersleep are Antonino Allenza, John Clarke, Peter Clarke
and Michelle Scott.
 
2. The Offer
 
The Offer, which will be made on the terms and conditions summarised below and
in Appendix I to this announcement and on the further terms which will be set
out in the Offer Document and in the Form of Acceptance, will be made on the
following basis:
 
 for each Silentnight Share: 155 pence in cash
 
The Offer values the whole of the issued share capital of Silentnight at £72.2
million and represents a premium of approximately 32 per cent. to the closing
middle market price of 117.5p per Silentnight Share on 15 July 2003, being the
last business day prior to the announcement by Silentnight that it was in
discussions regarding a possible offer and a premium of approximately 12 per
cent. to the closing middle market price of 138.5p per Silentnight Share as
derived from the Daily Official List at the close of business on 11 September
2003 (the latest practicable date prior to the publication of this document).
 
The Silentnight Shares to be acquired pursuant to the Offer will be acquired by
Soundersleep fully paid and free from all liens, equities, charges, encumbrances
and other interests and together with all rights now or hereafter attaching
thereto, including the right to receive and retain all dividends and other
distributions declared, made or which become payable on or after the date of
this document.
 
3. Background and reasons for the Offer
 
As a result of seeing its investment deteriorate in terms of share value and
performance over recent years, in the summer of 2002 Famco made an approach to
the board of Silentnight with a view to acquiring the Silentnight Shares it did
not already own. During the course of discussions, it became clear that Famco
had underestimated the significant operational issues facing the business and
concluded that immediate action was required to protect the value of its and
other shareholders' investments in Silentnight. The board of Famco now believes
that the indicative offer made at the time substantially overvalued the business
and did not reflect the market difficulties and significant risks associated
with the plans to turnaround the loss-making branded furniture businesses and
would not have been fundable once sufficient due diligence had been conducted on
behalf of Famco and the proposed funders. The approach was therefore withdrawn
to enable Famco, outside the constraints of an offer period, to use its
controlling interest to effect a change in the senior management of the Company.
 
The board of Soundersleep believes that the Offer will enable it to address the
issues being faced by the Silentnight businesses. Together with the existing
management team of Silentnight, it is the intention of the directors of
Soundersleep to work towards the turnaround of Silentnight's branded furniture
businesses and to address the margin pressures and long term market trend away
from traditional divan sets being faced by the Bed Division. The directors of
Soundersleep believe that returning Silentnight to private ownership will enable
the necessary measures to be taken and investment required to be made more
efficiently outside the demands of a public market.
 
The new management team are now implementing a major turnaround plan that
involves considerable risk. The board of Soundersleep therefore believes that
this can be done more effectively outside the restrictions of the UK Listing
Authority and the London Stock Exchange. Soundersleep is not willing to dilute
its holding of Silentnight Shares to 50 per cent. or below and, as a result,
Silentnight has not been able to use its share capital to grow the business. For
these reasons, Soundersleep is making the Offer in order to take full ownership
of the business and proposes to apply to de-list Silentnight from the Official
List of the UK Listing Authority and the London Stock Exchange.
 
4. Recommendation
 
The Independent Directors, who have been so advised by Evolution Beeson Gregory,
consider the terms of the Offer to be fair and reasonable. In providing advice
to the Independent Directors, Evolution Beeson Gregory has taken into account
the commercial assessments of the Independent Directors. The Independent
Directors, taking account of all of the circumstances, therefore unanimously
recommend that Silentnight Shareholders accept the Offer.
 
5. Reasons for the recommendation of the Offer by the Independent
Directors
 
In considering the Offer and their recommendation, the Independent Directors
have taken into account a number of factors in relation to Silentnight and its
current status and structure.
 
Over the last year, the new management team together with David Adam, the
Finance Director, has reviewed both the operating divisions of Silentnight,
being the Bed Division and the Furniture Division. Each of these divisions has
encountered trading difficulties over the last year and measures have been
implemented by the Board to address these difficulties.
 
In the Furniture Division there were inefficiencies related to too many product
lines, too many production sites and high manufacturing costs as a result of
being based in the United Kingdom. In addition, the Board was of the opinion
that some of the brand names were perceived to be old fashioned and expensive.
The new management team has tackled these issues with site closures at Andover
and Bridgend, manufacturing run down at Edmonton, redundancies, new management
for some of the brands, new product lines and by starting to source product from
overseas rather than manufacturing in the UK.
 
In the UK Bed Division, Silentnight enjoys a majority market share of
approximately 26 per cent. and the division has delivered steady cash returns
for Silentnight over the last few years. However, the UK Bed Division has
suffered from the market shift away from divan sets (some 27 per cent. of the
market) towards bedsteads (some 22 per cent. of the market) which currently
represent only a small part of the Bed Division's sales, increasing margin
pressure from the large retail chains and growing input cost pressures from
suppliers. In response to another change in market demand, Silentnight has been
converting one of its bed businesses to become a pocket spring mattress
manufacturer rather than a manufacturer of open coil mattresses. Whilst this
strategy is being progressively adopted the business is still producing a small
loss.
 
The actions being taken to address the difficulties in each division are still
at a very early stage and whilst the Board believes that these actions will lead
to improved trading and profitability in the future, it is unlikely that such
improvements will be fully reflected for at least 18 to 24 months. There also
remains a degree of uncertainty as to how effective the actions taken will prove
to be and therefore, of the future trading performance. This may, in turn,
result in some volatility in the share price. Consequently, the Independent
Directors believe that it would be more appropriate for the shares to be
privately held.
 
The Offer values Silentnight at £72.2 million whilst the net asset value at 2
August 2003, extracted from the interim accounts, was £84.1 million. In making
their assessment of the Offer, the Independent Directors consider that this
value is potentially diminished by the deficit on the Defined Benefit Pension
Scheme, which was £19 million at 1 February 2003 under FRS 17 (net of deferred
tax), and by further trading losses and exceptional costs to be incurred during
the second half of this financial year.
 
The Independent Directors have also considered the Offer in the context of the
existing capital structure of the Company. The Company has always had a
controlling shareholder, which limits the influence of the minority shareholders
over the strategic direction of the Company. Furthermore, Soundersleep has
confirmed that it does not intend to sell its Silentnight Shares which makes it
unlikely that any other party would make an offer to acquire the Silentnight
Shares not owned by Soundersleep. The Silentnight Shares are therefore
relatively illiquid and the ability of a minority shareholder to sell
Silentnight Shares at the market price, other than in small amounts, is
restricted.
 
6. Undertaking to accept the Offer
 
Soundersleep has received an irrevocable undertaking to accept, or procure the
acceptance of the Offer from David Adam in respect of his and his wife's entire
holding of Silentnight Shares amounting to 6,878 Silentnight Shares,
representing approximately 0.01 per cent. of the entire issued share capital of
Silentnight. Such undertaking will cease to be binding only if the Offer lapses
or is withdrawn.
 
Further irrevocable undertakings have been received from other Silentnight
Shareholders in respect of an aggregate of 1,610,230 Silentnight Shares
representing 3.4 per cent. of the issued share capital of Silentnight. These
undertakings will cease to be binding if, before the Offer becomes or is
declared unconditional in all respects, another person makes an offer to acquire
the entire issued share capital of the Company at a value which exceeds the
value of the Offer.
 
In addition, non-binding letters of intent have been received from other
Silentnight Shareholders to accept the Offer in respect of an aggregate of
9,300,988 Silentnight Shares, representing 20.0 per cent. of the issued share
capital of Silentnight.
 
In total, Soundersleep holds irrevocable undertakings and non-binding letters of
intent to accept the Offer in respect of approximately 23.4 per cent. of the
issued share capital of Silentnight which, together with its holding, and those
of its connected persons, amounting to 23,699,880 Silentnight Shares
representing 50.9 per cent., gives Soundersleep an interest in 74.3 per cent. of
the issued share capital of Silentnight.
 
7. The Acceptance Condition
 
Soundersleep has stated that the Offer will be declared unconditional as to
acceptances if the acceptances, when aggregated with the Silentnight Shares
already held by Soundersleep, are at the level of 75 per cent or more of the
issued share capital of Silentnight. This level will be achieved by acceptances
of 50 per cent. of the Silentnight Shares to which this Offer relates.
 
8. Silentnight directors and employees
 
The board of directors of Soundersleep has given assurances to the Independent
Directors that the existing employment rights, including pensions rights, of all
employees of Silentnight will be fully safeguarded. It is intended that the
executive and non-executive directors of Silentnight will, following the Offer
becoming or being declared unconditional, continue in their existing positions,
save for David Adam who will become a non-executive director of Silentnight on
the appointment of a sufficiently well qualified replacement as finance director
as announced on 9 April 2003.
 
9. Information relating to Famco and Soundersleep
 
The Silentnight business was established in 1946 by Tom and Joan Clarke and was
floated on the London Stock Exchange in 1973. Famco was formed in 1982 in order
to hold shares in trading companies on behalf of the Clarke family. Famco is
controlled by 20 Clarke family trusts. These trusts have common trustees, none
of whom has a beneficial interest in any of the trusts. Famco's shares are owned
by the trusts and the 19 beneficiaries of the trusts all of whom are members of
the Clarke family.
 
Soundersleep, a subsidiary of Famco, was established as a private limited
company in May 2002 to bring together the interests of the Clarke family in
Silentnight with those of Antonino Allenza and Michelle Scott with a view to
making an offer for the share capital of Silentnight which they did not then
already own. To date, Soundersleep has been financed by the cash investment of
£250,000 in its share capital by Antonino Allenza and Michelle Scott.
 
The directors of Soundersleep are Antonino Allenza, John Clarke, Peter Clarke
and Michelle Scott.
 
 
 
Summary financial information on Famco:
 
 
Three years ended 31 January 2003 2003 2002 2001
 £'000 £'000 £'000
 
Turnover 277,887 300,679 230,730
 
Operating (loss) / profit (11,326) 11,682 11,510
(Loss) / profit on ordinary activities before tax (12,114) 11,503 13,308
(Loss) / profit for the financial year (5,069) 3,541 4,214
 
10. Soundersleep financing arrangements
 
Full acceptance of the Offer by existing Silentnight Shareholders would require
the payment by Soundersleep of £35.5 million in cash. Williams de Broe has
confirmed that the necessary financial resources are available to Soundersleep
to enable it to implement the Offer in full.
 
The cash consideration payable by Soundersleep under the Offer, together with
the expenses of the Offer, will be financed from bank facilities to be provided
to Soundersleep by Yorkshire Bank. Drawdown of the facilities made available to
Soundersleep by Yorkshire Bank will be made as and when required following the
Offer becoming or being declared wholly unconditional.
 
It is the intention of Soundersleep, once it has received acceptances, which
when aggregated with its existing holding of Silentnight Shares, give
Soundersleep a holding of over 75 per cent. of the Silentnight Shares, to
declare the Offer wholly unconditional. It also intends to delist the
Silentnight Shares from the Official List, to cancel trading of Silentnight
Shares on the London Stock Exchange, to re-register the Company as a private
limited company and to implement procedures to enable Silentnight's assets to be
used as security for the bank facilities.
 
11. Information relating to Silentnight
 
Silentnight was established by Tom and Joan Clarke in 1946 and its principal
activity is the manufacture of beds and assembled cabinet furniture for the UK
domestic furniture market. The bed division includes the brand names '
Silentnight Beds', 'Sealy' and 'Rest Assured'. The furniture division includes
the 'Ducal', 'Nathan' and 'Homeworthy' brand names and 'Parker Knoll'
upholstery.
 
In its last financial year ended 1 February 2003, Silentnight reported turnover
of £277.3 million and a loss before taxation of £11.2 million. Turnover had
fallen 8 per cent in an increasingly challenging market and losses in the
furniture division continued to grow. Measures had already been taken to start
to address these issues and the Group's Keighley factory was closed and its
operations in Sunderland were consolidated onto one site. In recognition of the
poor performance, in particular the drop into loss at the post exceptional level
and the serious erosion of net worth, the dividend was also cut from 13.5p in
2002 to 8.5p for the year to 1 February 2003.
 
At its Annual General Meeting on 25 June 2003 Silentnight reported that trading
conditions in its Bed Division continued to be difficult and that in line with a
declining market its first half order book was down year on year, although hope
remained for a slight pick up in the second half of the financial year. In the
first six months of the current financial year order intake has been below the
previous year for five out of the six months. Only June 2003 showed an increase
over the previous year. Overall, order intake in the first six months was 7 per
cent. down on the previous year. An unprecedented level of margin pressure from
key customers was exacerbating an already difficult trading climate and whilst
rationalisation and re-launch plans for the branded furniture businesses were
progressing, some delays were being experienced in the relocation of the Group's
Chipping Norton and Edmonton facilities. Other competitors in the market have
also reported difficult trading conditions.
 
Since Silentnight's last Annual General Meeting, it has closed its manufacturing
facility at Andover.
 
In the Company's interim results statement announced earlier today, the Chairman
reported that trading conditions continued to be challenging. It was also
reported that the Group's turnover from continuing operations fell by £3.1
million to £120.3 million (2002: £123.4 million). Operating profit from
continuing operations had fallen by 29 per cent., compared to the corresponding
period last year, to £3.5 million (2002: £4.9 million). The loss on ordinary
activities before tax for the same period was £6.5 million compared to £7.1
million in 2002, also £1.7 million of trading losses since 4 April 2003 have
been included in the loss from discontinued operation.
 
In the Bed Division the sales and profits for the lower end of the market remain
subject to severe margin pressure and the effects of this are beginning to be
seen in the premium branded business. The attempt to diversify into bedsteads to
mitigate the gradual decline of divan sales is at an early stage but the
Directors remain confident that this change and other operational improvements
will be successful in time. The difficulties faced by the Bed Division are
highlighted by the results for the six months to 2 August 2003 which show a
small decline in turnover of £546,000 but a decline in profitability of 23 per
cent. on the same period in 2002.
 
In the Furniture Division most of the reinvestment and exceptional costs
required to effect the restructuring and closure have now been incurred. The
division remains loss making. In the interim results losses on the discontinued
operation at Ducal were reduced from £2.6 million to £0.7 million as a result of
one-off sales of end of lines from the Ducal manufacturing operation and the
requisite accounting treatment which shows £1.7 million of the loss from the
operation under exceptional closure costs. There are some indications that the
new product lines have gained an audience but it is too soon to forecast a
return to profitability in the near term.
 
Summary financial information on Silentnight:
 
 
Four years ended 1 February 2003  2003 2002 2001 2000
 £'000 £'000 £'000 £'000
 
Turnover 277,311 300,293 230,082 219,682
Operating profit before exceptional items 5,570 12,506 13,481 17,702
(Loss) / profit on ordinary activities before tax:
Before surpluses on disposals of business and
properties  (10,934) 11,539 13,949 18,541
 
(Loss)/profit on disposal of business and
properties (313) 571 - 21,472
(Loss) / profit on ordinary activities before tax (11,247) 12,110 13,949 40,013
(Loss) / profit attributable to shareholders (8,477) 8,212 9,305 25,482
(Loss) / earnings per share (18.75)p 18.14)p 20.56)p 56.30)p
 
 
Summary financial information on Silentnight's interim results:
 26 weeks 26 weeks
 ended  ended
 2 August 3 August
 2003 2002
  £'000 £'000
Turnover
Continuing operations 120,260 123,386
Discontinued operation 10,543 14,845
 130,804 138,231
Operating profit / (loss) before exceptional operating costs
Continuing operations  3,480 4,898
 (700) (2,564)
 
Discontinued operation
 2,780 2,334
Exceptional operating costs (2,370) (9,226)
Loss on discontinued operation (6,954) -
Loss on ordinary activities before taxation  (6,497) (7,139)
Loss and diluted loss per share (11.44)p (11.85)p
 
12. Silentnight pension schemes
 
The accounting treatment of the Group's contributions to the defined benefit
pensions scheme currently follows the accounting standard, SSAP24 'Accounting
for pension costs'. A new actuarial valuation of the ongoing Silentnight Group
Defined Benefit Scheme is being undertaken as at 1 December 2002 and this will
determine future SSAP24 accounting. This scheme was formed by merger of the
traditional Silentnight scheme, the Silentnight Staff Retirement Benefits
Scheme, and the former Cornwell Parker scheme. In summary, the provisions of the
Silentnight Group Defined Benefit Scheme for future service accrual require
increased employee contributions, and produce reduced benefits for existing
members. Entry to new members is restricted. The Group has provided alternative
money purchase schemes for most new employees eligible for pension benefits.
 
Employee contributions to the Silentnight Group Defined Benefit Scheme were
maintained up to 30 November 2002. The employer's contribution holiday in the
former Cornwell Parker scheme ceased upon the merger as at 1 December 2002.
Employer contributions to the combined scheme have been maintained in full.
 
The effects of the adoption of FRS17 'Retirement Benefits' as at 1 February
2003, would show a deficit of £27.1 million in the merged scheme on the basis of
the assumptions made. The full adoption of FRS17 would have the effect of
reducing Silentnight Shareholders' funds by £21.6 million.
 
13. De-listing
 
As soon as it is appropriate and possible to do so and subject to the Offer
becoming or being declared unconditional in all respects, Soundersleep intends
to apply for cancellation of the listing of Silentnight Shares on the Official
List and cancellation of trading on the London Stock Exchange's market for
listed securities. It is anticipated that cancellation will, subject to the
Listing Rules, take effect no earlier than 20 business days following the Offer
becoming or being declared unconditional in all respects. It is also the
intention to re-register Silentnight as a private limited company under the
relevant provisions of the Act.
 
In addition, on receipt of acceptances of the Offer in respect of 90 per cent.
or more of the Silentnight Shares to which the Offer relates, Soundersleep
intends to apply the provisions of sections 428 to 430F of the Act to acquire
compulsorily any Silentnight Shares that are outstanding.
 
14. General
 
The Offer will be subject to the applicable requirements of the City Code. The
formal Offer Document, setting out the details of the Offer, together with the
Form of Acceptance, will be despatched to Silentnight Shareholders today. This
announcement does not constitute an offer or an invitation to purchase any
securities.
 
The Offer is not being made, directly or indirectly, in or into the USA, Canada,
South Africa, Australia or Japan and this announcement, the Offer Document and
the Form of Acceptance will not be, and must not be, mailed, forwarded,
transmitted or otherwise distributed or sent in or into the USA, Canada, South
Africa, Australia or Japan and persons receiving this document (including
custodians, nominees and trustees) must not distribute or send them in, into or
from the USA, Canada, South Africa, Australia or Japan.
 
The availability of the Offer to Silentnight Shareholders who are not resident
in the United Kingdom may be affected by the laws of the relevant jurisdictions.
Silentnight Shareholders who are not resident in the United Kingdom should
inform themselves about and observe any applicable requirements. Further details
in relation to overseas shareholders will be contained in the Offer Document.
 
Williams de Broe, a company authorised and regulated by the Financial Services
Authority Limited and a member of the London Stock Exchange plc, is acting
exclusively for Soundersleep and no-one else in connection with the Offer and
the preparation and distribution of this document and will not be responsible to
anyone other than Soundersleep for providing the protections afforded to
customers of Williams de Broe or for giving advice in relation to the Offer, the
contents of this document or any transaction or arrangement referred to in this
announcement or in the Offer Document.
 
Evolution Beeson Gregory, a company authorised and regulated by the Financial
Services Authority Limited and a member of the London Stock Exchange plc, is
acting for Silentnight as financial adviser in relation to the Offer and is not
acting for any other person in relation to the Offer. Evolution Beeson Gregory
will not be responsible to anyone other than Silentnight for providing the
protections afforded to its clients or for providing advice in relation to the
contents of this document or any transaction or arrangement referred to in this
announcement or in the Offer Document.
 
Williams de Broe has approved the contents of this announcement solely for the
purposes of section 21 of the Financial Services and Markets Act 2000.
 
Appendix III to this announcement contains definitions of certain expressions
used in this announcement.
 
 
Enquiries:
 
Soundersleep
 
Nino Allenza Tel: 01282 815888
 
Williams de Broe (Financial Adviser to Soundersleep)
 
Joanne Lake Tel: 0113 243 1619
Ian Stanway Tel: 0121 609 0050
 
Silentnight Holdings
 
Roger Pedder Tel: 01458 842626
 
Evolution Beeson Gregory (Financial Adviser to Silentnight)
 
Tim Worlledge  Tel: 020 7071 3000
 
Luther Pendragon
 
Jon Bennett Tel: 020 7518 9100
Simon Maule Tel: 020 7518 9100
 
 
 
 
APPENDIX I
 
CONDITIONS AND CERTAIN FURTHER TERMS OF THE OFFER
 
PART A. CONDITIONS OF THE OFFER
 
The Offer is conditional upon:
 
(a) valid acceptances being received (and not, where permitted,
withdrawn) by not later than 3.00pm London time on the first closing date of the
Offer (or such later time(s) and/or date(s) as Soundersleep may, subject to the
rules of the City Code, decide) in respect of not less than 50 per cent. (or
such lesser percentage as Soundersleep may decide) in nominal value of the
Silentnight Shares to which the Offer relates. For the purposes of this
condition:
 
(i) the expression 'Silentnight Shares to which the Offer relates'
shall be construed in accordance with sections 428 to 430F (inclusive) of the
Act;
 
(ii) shares that have been unconditionally allotted shall to the
extent (if any) required by the Panel be deemed to carry the voting rights that
they will carry upon issue; and
 
(iii) valid acceptances shall be treated as having been received
in respect of any Silentnight Shares that Soundersleep and its subsidiaries
shall, pursuant to section 429(8) of the Act, be treated as having acquired or
contracted to acquire by virtue of acceptances of the Offer;
 
(b) no relevant authority having intervened in a way that would
or might reasonably be expected to:
 
(i)  make the Offer or its implementation or the acquisition or
proposed acquisition by Soundersleep of any Silentnight Shares, by Soundersleep,
void, unenforceable and/or illegal in any jurisdiction or, to an extent that is
material in the context of the Offer, directly or indirectly restrain, restrict,
prohibit, delay or otherwise interfere with the implementation thereof, or
impose additional conditions or obligations with respect thereto, or otherwise
challenge, impede or require amendment to the Offer or the acquisition or
proposed acquisition of any Silentnight Shares, or the acquisition or proposed
acquisition of control of Silentnight by Soundersleep to an extent which is or
would be material in the context of the Offer;
 
(ii) as a result of the Offer, require, prevent or delay the
divestiture or alter the terms envisaged of any proposed divestiture by
Soundersleep or Silentnight or any member of the wider Soundersleep Group or the
wider Silentnight Group of any of their respective shares or other securities
(or the equivalent) in Silentnight or of all or any material part of their
respective businesses, assets or properties or impose a material limitation on
the ability of any of them to conduct any of their respective businesses or to
own any of their respective assets or properties or any part thereof in any such
case in a manner or to an extent which is material in the context of the wider
Soundersleep Group or the wider Silentnight Group (as the case may be) taken as
a whole;
 
(iii)  impose any material limitation on the ability of any member of
the wider Soundersleep Group or of the wider Silentnight Group to hold or
exercise effectively, directly or indirectly, any rights of ownership in respect
of shares or other securities (or the equivalent) in, or to manage or control,
Silentnight or, to an extent material in the context of the wider Soundersleep
Group or of the wider Silentnight Group (as the case may be) taken as a whole,
any member of the wider Silentnight Group;
 
(iv) as a result of the Offer (and save as pursuant to the Offer or
Part XIIIA of the Act or the City Code), require any member of the wider
Soundersleep Group or of the wider Silentnight Group to offer to acquire any
shares or other securities (or the equivalent) in any member of the wider
Silentnight Group owned by any third party or to sell or offer to sell any
shares or other securities (or the equivalent) or any asset owned by any member
of the wider Soundersleep Group or the wider Silentnight Group, such acquisition
or sale being material in the context of the wider Soundersleep Group or the
wider Silentnight Group taken as a whole;
 
(v) result in a material delay in the ability of Soundersleep, or
render Soundersleep unable, to acquire some or all of the Silentnight Shares or
require or prevent or materially delay divestiture by Soundersleep of any such
shares or other securities of Silentnight;
 
(vi) result in any member of the wider Soundersleep Group or of the
wider Silentnight Group ceasing to be able to carry on its business under any
name which it at present uses where such use is material in the context of the
wider Soundersleep Group or of the wider Silentnight Group (as the case may be)
taken as a whole;
 
(vii) impose any material limitation on, or result in any material delay
in, the ability of any member of the wider Soundersleep Group or of the wider
Silentnight Group to integrate or co-ordinate its business, or any part thereof,
with the business(es) of any part of the wider Soundersleep Group or the wider
Silentnight Group in any such case being material in the context of the wider
group concerned taken as a whole; or
 
(viii) otherwise materially and adversely affect the business(es),
assets, prospects or profits of the wider Soundersleep Group or of the wider
Silentnight Group, taken as a whole, to an extent that is material in the
context of the wider Soundersleep Group or of the wider Silentnight Group (as
the case may be) taken as a whole;
 
and all necessary filings having been made, all regulatory and statutory
obligations having been complied with, in each case in any relevant
jurisdiction, all applicable waiting and other time periods during which any
relevant authority could have intervened, having expired, lapsed or terminated;
 
(c) all authorisations and determinations necessary in any
jurisdiction for or in respect of the Offer or the acquisition or proposed
acquisition of any shares or other securities in Silentnight by Soundersleep
having been obtained in terms and in a form reasonably satisfactory to
Soundersleep from all relevant authorities or (without prejudice to the
generality of the foregoing) from any persons or bodies with whom any member of
the wider Silentnight Group has entered into contractual arrangements and such
authorisations and determinations together with all authorisations and
determinations necessary for any member of the wider Silentnight Group to carry
on its business remaining in full force and effect at the time at which the
Offer becomes or is otherwise declared unconditional in all respects and all
filings necessary for such purpose having been made and there being no notice of
any intention to revoke, suspend, restrict, modify or not renew any of the same
having been received;
 
(d) save as disclosed in writing to Soundersleep or its advisers
in connection with the Offer prior to 12 September 2003 there being no
provision of any agreement, arrangement, licence or other instrument which is
material to the Silentnight Group taken as a whole to which any member of the
wider Silentnight Group is a party or by or to which any member of the wider
Silentnight Group or any part of its assets may be bound, entitled or subject or
any circumstance that, as a result of the Offer or the acquisition or the
proposed acquisition by Soundersleep of the Silentnight Shares or any of them,
or change in the control or management of any member of the wider Silentnight
Group or otherwise, would or might reasonably be expected to result in (to an
extent that is material in the context of the wider Silentnight Group taken as a
whole):
 
(i) any moneys borrowed by, or any other indebtedness, actual or
contingent of, or grant available to, any such member being or becoming
repayable or capable of being declared repayable immediately or earlier than the
repayment date provided for in such agreement, arrangement, licence or other
instrument, or the ability of any such member to borrow moneys or incur any
indebtedness being withdrawn or inhibited;
 
(ii) any such agreement, arrangement, licence or other
instrument being terminated or adversely modified or any onerous obligation or
liability arising or any material and adverse action being taken or arising
thereunder;
 
(iii) the assets, rights, liabilities, obligations, interests or
business of any member of the wider Silentnight Group under any such agreement,
arrangement, licence or instrument or the interests or business of any such
member in or with any other person, firm, company or body (or any arrangements
relating to any such interests or business) being terminated or adversely
modified or affected;
 
(iv) any such member ceasing to be able to carry on its business under
any name which it at present uses;
 
(v) any assets or interests of or the use of which is enjoyed by any
such member being or failing to be disposed of or charged or any right arising
under which any such asset or interest could be required to be disposed of or
charged or could cease to be available to any member of the wider Soundersleep
Group or of the wider Silentnight Group, in each case otherwise than in the
ordinary course of business;
 
 (vi) any change in or effect on the ownership or use of any
intellectual property rights owned or used by any member of the wider
Silentnight Group;
 
 (vii) the creation or enforcement of any mortgage, charge or other
security interest over the whole or any material part of the business, property
or assets of any such member or any such security interest (whenever and
wherever arising or having arisen) becoming enforceable;
 
 (viii) the value of any such member or their respective financial or
trading position or profits or prospects being prejudiced or adversely affected
or materially and adversely modified; or
 
(ix) the creation of any liability (actual or contingent) of any
member of the wider Silentnight Group;
 
(e) no member of the wider Silentnight Group having, save as announced
on or before 12 September by Silentnight on the London Stock Exchange (such
information being 'publicly announced'):
 
(i) (save as between Silentnight and, on a pre-emptive basis, any
member of the wider Silentnight Group which is a wholly owned subsidiary of
Silentnight) issued or agreed to issue or authorised or proposed the issue of
additional shares of any class, or of securities convertible into or
exchangeable for, or rights, warrants or options to subscribe for or acquire,
any such shares or convertible securities or redeemed, purchased or reduced any
part of its share capital;
 
(ii) recommended, declared, paid or made or proposed to recommend,
declare, pay or make any bonus, dividend or other distribution, whether payable
in cash or otherwise, other than to Silentnight or to a member of the wider
Silentnight Group which is a wholly-owned subsidiary of Silentnight;
 
(iii) acquired or disposed of or transferred, mortgaged or charged or
created any security interest over any assets or any rights, title or interest
in any asset (including shares and trade investments) which in any such case is
material in the context of the wider Silentnight Group taken as a whole or
merged with any body corporate (in each case other than in the ordinary course
of business);
 
(iv) made or authorised or proposed or announced an intention to
authorise or propose any change in its share or loan capital;
 
(v) issued, authorised or proposed the issue of any debentures or
incurred or increased any indebtedness or contingent liability which is material
in the context of the wider Silentnight Group taken as a whole;
 
(vi) purchased, redeemed or repaid or proposed the purchase, redemption
or repayment of any of its own shares or other securities or reduced or made any
other change to any part of its share capital to an extent which (other than in
the case of Silentnight) is material in the context of the Silentnight Group
taken as a whole;
 
(vii) entered into any contract, reconstruction, amalgamation, commitment or
other transaction or arrangement otherwise than in the ordinary course of
business which is material in the context of the wider Silentnight Group taken
as a whole;
 
(viii) entered into, varied or terminated any contract, transaction or
commitment (whether in respect of capital expenditure, trading obligations or
otherwise) which is of a loss making, long-term, onerous or unusual nature or
magnitude or which involves or could involve an obligation of a nature or
magnitude which is material in the context of the wider Silentnight Group taken
as a whole;
 
(ix) entered into any contract, transaction or arrangement which would
be or would be likely to be materially restrictive on the business of any member
of the wider Silentnight Group;
 
(x) waived or compromised any claim otherwise than in the ordinary
course of business which is material in the context of the wider Silentnight
Group taken as a whole;
 
(xi) entered into or varied the terms of or terminated any service
agreement with any of the directors or senior executives of Silentnight in any
material respect;
 
(xii) taken any corporate action or had any legal proceedings started
or threatened against it for its winding-up, dissolution or reorganisation or
for the appointment of a receiver, administrator, administrative receiver,
trustee or similar officer of all or any of its assets or revenues or any
analogous proceedings in any jurisdiction or for the appointment of any
analogous person in any jurisdiction;
 
(xiii) other than in the ordinary course of business, taken any action
to commence or institute any legal proceedings or to settle, compromise or
discontinue any legal proceedings which have already been commenced or suffered
any claims or had any legal proceedings instituted against it or admitted any
liability in any such claim or proceedings, failed to take action to refute or
defend any such claim or proceedings or taken any action to settle or compromise
any such claim or proceedings;
 
(xiv) made any amendment to its memorandum or articles of
association;
 
(xv) been unable or admitted that it is unable to pay its debts or
having stopped or suspended (or threatened to stop or suspend) payment of its
debts generally or ceased or threatened to cease carrying on all or a
substantial part of its business;
 
(xvi) made or agreed or consented to any significant change to the
terms of the trust deeds constituting the pension schemes established for its
directors and/or employees and/or their dependants or to the benefits which
accrue, or to the pensions which are payable thereunder, or to the basis on
which qualification for or accrual or entitlement to such benefits are
calculated or determined, or to the basis upon which the liabilities (including
pensions) of such pension schemes are funded or made, or agreed or consented to
any change to the trustees involving the appointment of a trust corporation
which would be material in the context of the wider Silentnight Group taken as a
whole; or
 
(xvii)  entered into any contract, commitment, agreement or arrangement
or passed any resolution with respect to, or to effect, any of the transactions,
matters or events referred to in this condition, or announced or proposed an
intention to do so;
 
(f)  save as publicly announced or as fairly disclosed in writing to
Soundersleep or its advisers in connection with the Offer prior to 12 September
2003 ;
 
(i) no adverse change or deterioration having occurred in the
business, assets (including cash balances), financial or trading position,
profits or prospects of Silentnight or any other member of the wider Silentnight
Group that is material in the context of the wider Silentnight Group taken as a
whole;
 
(ii) no litigation or arbitration proceedings, prosecution or other
legal proceedings having been announced, instituted or threatened by or against
or remaining outstanding against any member of the wider Silentnight Group or to
which any member of the wider Silentnight Group is or is likely to become a
party (whether as plaintiff, defendant or otherwise) and no enquiry or
investigation by or complaint or reference to any relevant authority against or
in respect of any member of the wider Silentnight Group having been threatened,
announced or instituted or remaining outstanding by, against or in respect of
any member of the wider Silentnight Group and which in any such case might be
likely to adversely affect any member of the wider Silentnight Group to an
extent that is material in the context of the wider Silentnight Group taken as a
whole; and
 
(iii) no contingent or other liability of any member of the wider
Silentnight Group having arisen or become apparent that might be likely
adversely to affect any member of the wider Silentnight Group that is material
in the context of the wider Silentnight Group taken as a whole;
 
(g) save as fairly disclosed in writing to Soundersleep or its
advisers in connection with the Offer prior to 12 September 2003, Soundersleep
not having discovered that:
 
(i) any financial, business or other information concerning
Silentnight or the wider Silentnight Group that has been publicly disclosed at
any time by or on behalf of any member of the wider Silentnight Group is
misleading, contains a misrepresentation of fact or omits to state a fact
necessary to make the information contained therein not misleading and which was
not corrected by subsequent public announcement made on the London Stock
Exchange on or before 4.30 pm on 11 September 2003 and which in any such case is
material in the context of the wider Silentnight Group taken as a whole;
 
(ii) any information which affects the import of any such information
to an extent that is material in the context of the wider Silentnight Group
taken as a whole; or
 
(iii) any member of the wider Silentnight Group or any entity in which
any such member has a significant economic interest is subject to any liability
(actual or contingent) that has not been publicly announced, such liability
being material in the context of the wider Silentnight Group taken as a whole;
and
 
(h) in relation to any release, emission, discharge, disposal or other
fact or circumstance which has caused or might impair the environment or harm
human health, no past or present member of the wider Silentnight Group having in
a manner or extent which is material in the context of the Offer:
 
(i) committed any violation of any laws, statutes, regulations,
notices or other requirements of any third party; and/or
 
 (ii) incurred any liability (whether actual or
contingent) to any third party.
 
Definitions
 
For the purposes of these conditions:
 
(a)  'relevant authority' means any government, government department
or governmental, quasi-governmental, supranational, statutory, regulatory or
investigatory body, court, trade agency, professional association or institution
or environmental body or any other body or person in any jurisdiction;
 
(b) a relevant authority shall be regarded as having 'intervened' if
it has instituted, implemented, or threatened or communicated its intention to
take or make any action, proceedings, suit, investigation or inquiry or
reference, or made, enacted or proposed any statute, regulation, decision or
order, or taken any measures or other steps and 'intervene' shall be construed
accordingly;
 
(c) 'authorisations' means authorisations, orders, grants,
recognitions, confirmations, consents, licences, clearances, permissions,
exemptions and approvals; and
 
(d) 'the wider Silentnight Group' means Silentnight and its subsidiary
undertakings, associated undertakings and any other undertakings in which
Silentnight and such undertakings (aggregating their interests) have a
substantial interest and 'the wider Soundersleep Group' means Soundersleep and
its subsidiary undertakings, associated undertakings and any other undertaking
in which Soundersleep and such undertakings (aggregating their interests) have a
substantial interest and, for these purposes, 'subsidiary undertaking', '
associated undertaking' and 'undertaking' have the meanings given by the Act
(but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A to the Act) and
'substantial interest' means a direct or indirect interest in 20 per cent. or
more of the equity capital of an undertaking.
 
Waiver and Invocation of Conditions
 
Soundersleep reserves the right to waive all or any of the above conditions, in
whole or in part except condition (a). The Offer will lapse unless all the above
conditions have been fulfilled or (if capable of waiver) waived, or, where
appropriate, have been determined by Soundersleep in its reasonable opinion to
be or remain satisfied, by midnight on the day which is 21 days after the later
of the first closing date of the Offer and the date on which the Offer becomes
or is declared unconditional as to acceptances, or such later date as
Soundersleep may, with the consent of the Panel, decide, provided that
Soundersleep shall be under no obligation to waive or treat as fulfilled any of
conditions (d) to (h) inclusive by a date earlier than the latest date specified
or referred to above for the fulfilment thereof notwithstanding that the other
conditions of the Offer may at such earlier date have been waived or fulfilled
and that there are at such earlier date no circumstances indicating that any of
such conditions may not be capable of fulfilment;
 
General
 
If the Offer lapses it shall thereupon cease to be capable of further acceptance
and Silentnight Shareholders and Soundersleep shall cease to be bound by
acceptances delivered on or before the date on which the Offer so lapses.
 
If Soundersleep is required by the Panel to make an offer for Silentnight Shares
under the provision of Rule 9 of the City Code, Soundersleep may make such
alterations to the conditions of the Offer (including condition (a) above) as
are necessary to comply with the provisions of that Rule and any other
requirements of the City Code.
 
The Offer is governed by English law and is subject to the exclusive
jurisdiction of the English courts.
 
The Offer is not being made, directly or indirectly, in or into, the United
States, Canada, South Africa, Australia or Japan.
 
 
 
APPENDIX II
 
BASES OF CALCULATION
 
The value of the entire issued share capital of Silentnight is based on
46,578,831 Silentnight Shares in issue at 11 September 2003 (being the latest
practicable date prior to this announcement).
 
APPENDIX III
 
DEFINITIONS
 
The following definitions apply throughout this document, unless the context
otherwise requires:
 
 
'Act' the Companies Act 1985 (as amended)
'the Board' the board of directors of Silentnight
'City Code' the City Code on Takeovers and Mergers
'Daily Official List'  the Daily Official List of the London Stock Exchange
'Evolution Beeson Gregory' Evolution Beeson Gregory, a division of Evolution Group Plc
'Independent Directors' Roger Pedder and David Adam, being the directors of
  Silentnight who are not connected with Soundersleep
'Famco' Famco Holdings Limited and any predecessor entities
'Famco Directors' Joan Burns, Joan Clarke, John Clarke, Peter Clarke, Robert
 Alan Elliott, John Christopher Hadfield and John Charles
 Griffith Hulbert
'Form of Acceptance' the form of acceptance relating to the Offer which accompanies
 the Offer Document
'Listing Rules' the Listing Rules of the UK Listing Authority
'London Stock Exchange' the London Stock Exchange plc
'Offer' the recommended offer to be made by Williams de Broe on
 behalf of Soundersleep to acquire all the Silentnight Shares not
 already owned by Soundersleep including, where the context so
 requires, any subsequent revision, variation, extension or
 renewal of such offer
'Offer Document' the document to be dated 12 September 2003 containing the
 Offer
'Offer Period' the period commencing on and including 12 September 2003
 and expiring on whichever of the following dates shall be the
  latest:
 (i) 3.00 pm on 3 October 2003;
 (ii) the time and date on which the Offer becomes or is declared
 unconditional as to acceptances; or
 (iii) the date on which the Offer lapses
'Official List' the Official List of the UK Listing Authority
'Panel' the Panel on Takeovers and Mergers
'Silentnight' or 'the Company' Silentnight Holdings Plc
'Silentnight Directors' Roger Anthony Pedder, Antonino Allenza, David William
 Adam, Michelle Scott, John Clarke and Peter Clarke
'Silentnight Group' or 'Group' Silentnight and its subsidiary undertakings
'Silentnight Shareholders' holders of Silentnight Shares
'Silentnight Employee Benefit the Silentnight Holdings Plc Employee Benefit Trust
Trust'
'Silentnight Shares'  the existing unconditionally allotted or issued and fully paid to
 ordinary shares of 10p each in the capital of Silentnight and any
 further such shares which may be issued or unconditionally
 allotted while the Offer remains open for acceptance or, subject
 the rules of the City Code, prior to such earlier date (not being
  earlier than the date on which the Offer becomes or is declared
 unconditional as to acceptances, or, if later, the first closing
 date of the Offer) as Soundersleep may decide as a result of the
 exercise of options under the Silentnight Employee Benefit
 Trust
'Soundersleep' Soundersleep Limited
'Soundersleep Directors' Antonino Allenza, John Clarke, Peter Clarke and Michelle
 Scott
'Soundersleep Group' Soundersleep and each of its subsidiary undertakings
  trustee of which is a wholly owned subsidiary of Silentnight
 Holdings plc
'UK' or 'United Kingdom' the United Kingdom of Great Britain and Northern Ireland
'UK Listing Authority'  the Financial Services Authority Limited acting in its capacity
 as the competent authority for listing in the UK for the purposes
 of Part VI of the Financial Services and Markets Act 2000
'USA' or 'US' or 'United States of the United States of America, its territories and possessions,
America' or 'United States' any state of the United States and the District of Columbia
'Williams de Broe' Williams de Broe Plc
'Yorkshire Bank' Yorkshire Bank PLC