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Melbourne IT Ltd, 22/05/2006 by Melbourne IT Ltd

• Announcement of proposed Scheme of Arrangement
• Creation of a market leader in web services
• WebCentral Group directors recommend in favour

Melbourne IT and WebCentral Group today announced that they have entered into a conditional agreement for Melbourne IT to acquire WebCentral Group via a Scheme of Arrangement to be voted on by WebCentral Group Shareholders at a Scheme Meeting, likely to be held in late August 2006.

"The proposed acquisition will bring together two of Australia's leading web-services businesses, generating significant benefits for customers, shareholders and staff of both companies," said Theo Hnarakis, CEO and Managing Director of Melbourne IT.

Mr Hnarakis said the proposed consideration values each WebCentral Group share at $1.53, which represents:

A premium of approximately 43% over the 5-day volume weighted average price (VWAP) for WebCentral Group shares to Friday 19 May 2006. A premium of approximately 44% over VWAP for the period since 28 April 2006, the date of WebCentral Group's last Trading Announcement.

"The post merger group will bring together Melbourne IT's domain name and brand protection experience with WebCentral Group's hosting and business solution expertise to provide our channel partners and customers with a range of services to optimise their online success," said Mr Hnarakis. "All WebCentral customers can be assured that they will continue to receive the high levels of service to which they are accustomed."

He also said "with combined annual sales of over $130 million (as at 2005) and approximately 400 staff worldwide, the increased scale of the business will help facilitate an acceleration of innovation and investment in future growth."

"Furthermore, we will be able to deliver efficiencies in service delivery to enhance the success of our customer base," said Mr Hnarakis. "Shareholders will benefit from the synergies in bringing two industry leaders together, while staff will have opportunities for career advancement with a recognised Employer of Choice

"In regard to the ForTheRecord (FTR) division, Melbourne IT's substantial experience in managing international businesses will complement FTR as it pursues continued growth." Mr Hnarakis said.

Lucy Turnbull, WebCentral Group's Chair, said that Melbourne IT's proposal represents a very attractive offer.

"The Board of WebCentral Group is excited about the prospects for the new merged business. This transaction will create a much larger company with greater scale and breadth of operations which will benefit both shareholders and customers. There are expected to be significant merger synergies."

"The new enterprise will be a leading publicly listed and substantially Australian owned online technology services company with a strong presence both nationally and internationally,” she said.

"This transaction offers a great opportunity for WebCentral shareholders to participate in the value which is expected to arise from increased scale and profitability. WebCentral shareholders will also have the flexibility to choose the consideration alternative that best suits their investment preferences - either 63 or 93 cents cash per share, with the balance in Melbourne IT shares."

After the transaction, WebCentral Group's shareholders will own shares in a company with a much wider shareholder base and greater market liquidity

WebCentral Group's Directors unanimously support the Melbourne IT proposal as being in the best interests of WebCentral Group shareholders.

WebCentral Group's Directors also unanimously recommend that other WebCentral shareholders also vote in favour of Melbourne IT's proposal, in the absence of a superior proposal and provided that the independent expert concludes the transaction is in the best interests of WebCentral Group shareholders.

Collectively, WebCentral's directors hold approximately 47% of WebCentral Group's shares and will vote those shares in favour of the proposal in the absence of a superior proposal.

Transaction Details

Under the Scheme, WebCentral Group shareholders will be able to choose between two alternative consideration mixes, namely, for each share of WebCentral Group held:

Option A (default, if no election made): One half (1/2) of a new share in Melbourne IT plus 63 cents in cash; or

Option B: One third (1/3) of a new share in Melbourne IT plus 93 cents in cash.

Based on the 5 day VWAP of Melbourne IT shares prior to announcement, the implied consideration for both Option A and Option B is $1.53 per WebCentral Group share.

WebCentral Group Chair, Lucy Turnbull, and WebCentral Director, Sean Howard, have both undertaken to elect to receive the consideration under Option A above, if the Scheme is approved.

The Scheme will be put to WebCentral Group shareholders for their approval at a Scheme meeting, which is expected to be held in late August. Full particulars of the Scheme will be provided to shareholders towards the end of July in an Explanatory Memorandum, which will include an Independent Expert's Report.

Appropriate arrangements for WebCentral Group option holders will be communicated in due course.

Board and Management

It is proposed that Lucy Turnbull and Sean Howard will join the Melbourne IT Board if the Scheme is approved.

"Both new directors will bring valuable experience and business acumen, and we look forward to the contribution they can make to the combined business," said Melbourne IT Chairman Rob Stewart.

Mr Hnarakis will continue in his role as Chief Executive Officer and Managing Director of the Group.

Looking Ahead

Both companies expect that the combination of Melbourne IT and WebCentral Group will deliver substantial operating synergies, new and improved services and enhanced customer experience. The acquisition is expected to be significantly EPS accretive for Melbourne IT shareholders in the first full year of combined operations (after allowing for the costs of financing the acquisition and the maximum number of Melbourne IT shares being issued in consideration).

Please Note
Melbourne IT's Annual general meeting will be held tomorrow, 23 May 2006 at 11.00am, at The Melbourne School of Business, 200 Leicester Street, Carlton, Melbourne, Victoria.

Advisors

Melbourne IT is being advised on the transaction by Investec Bank. WebCentral Group is being advised by Deutsche Bank.

About Melbourne IT

Melbourne IT (ASX:MLB) is a world leader in the supply of domain name registration and other online solutions with a strong commitment to the delivery of high value internet services and web-based solutions to organisations of all sizes across the globe. Melbourne IT was listed on the Australian Stock Exchange in 1999 and has a network of offices in locations across the world.

About WebCentral Group

WebCentral Group (ASX:WCG) is a successful Australian technology company with two principal operating divisions. WebCentral Pty Ltd is Australia's largest web and application hosting company and a leading supplier of Internet solutions for business, including software as a service (SaaS) solutions such as premium email, electronic commerce, database and email marketing solutions.

FTR Pty Ltd is the leading global supplier of rich media asset management systems for courts, hearing rooms, public meetings and law enforcement venues.

Following:

SUMMARY OF CERTAIN KEY TERMS OF THE MERGER IMPLEMENTATION DEED