REG - Nanoco Group PLC - Proposed return of up to £33.0 million

NanocoAnnouncement

11/03/2024 07:00

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RNS Number : 2467G  Nanoco Group PLC  11 March 2024

11 March
2024
                                For immediate
release

THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR
PUBLICATION, RELEASE OR DISTRIBUTION IN WHOLE OR IN PART IN AUSTRALIA, CANADA,
JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE ITS
RELEASE, PUBLICATION OR DISTRIBUTION IS OR MAY BE UNLAWFUL. THIS ANNOUNCEMENT
DOES NOT CONSTITUTE AN INVITATION TO PARTICIPATE IN THE TENDER OFFER (AS
DEFINED HEREIN) IN OR FROM ANY JURISDICTION IN OR FROM WHICH, OR TO OR FROM
ANY PERSON TO OR FROM WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER UNDER APPLICABLE
SECURITIES LAWS OR OTHERWISE.

This release contains inside information within the meaning of Article 7(1) of
the EU Market Abuse Regulation (2014/596/EU), or EU MAR, and of the UK version
of EU MAR as it forms part of UK law by virtue of the European Union
(Withdrawal) Act (as amended).

Nanoco Group PLC

("Nanoco", the "Group", or the "Company")

 

Proposed return of up to £33.0 million to shareholders

 

Retained proceeds to invest in exciting growth prospects

Nanoco Group plc (LSE: NANO), a world leader in the development and
manufacture of cadmium-free quantum dots and other specific nanomaterials
emanating from its technology platform, announces that it will today post a
Circular setting out the details of a proposed return of value to shareholders
of up to £33m of the Samsung litigation proceeds (the "Return of Value").

Following the receipt of the Final Litigation Proceeds, the Board and its
advisers consulted with shareholders representing approximately 37.5 per cent.
of the Company's issued share capital on the different options for a proposed
return of capital.  The Board has determined that, in order to provide
flexibility and choice to shareholders, the most appropriate means of
returning value is to conduct a Tender Offer to return up to £30.0 million to
shareholders (the "Tender Offer"). In addition to the Tender Offer, the Board
also intends to return a further sum of up to £3.0 million by way of an
on-market share buyback of Ordinary Shares (the "Share Buyback Programme") to
provide a continuing value-accretive return of capital to Shareholders.

The Tender Offer is being made at a fixed price of 24 pence per Ordinary Share
(the "Tender Price"), which represents a premium of 25.1 per cent. to the
closing mid-market price per Ordinary Share on 8 March 2024 and a premium of
19.6 per cent. to the 60-day volume weighted average price per Ordinary Share
on 8 March 2024. The Tender Offer is for up to 38.5 per cent. of the Company's
issued share capital (excluding Ordinary Shares held in treasury) with the
Share Buyback Programme, commencing following completion of the Tender Offer,
having the potential to acquire a further 3.9 per cent. of the Company's
issued share capital (if assumed at the Tender Price).

Further details of the Tender Offer are included later in this announcement
and full details are included in the Circular being posted later today.

Shareholders will be able to decide whether to tender none, some or all of
their Ordinary Shares within the overall limits of the Tender Offer.
Shareholders will be entitled to tender 38.5 per cent. of their shares as a
basic entitlement. Further details are set out in the Circular to be published
later today.

Shareholders may decide not to participate fully or partially in the Tender
Offer for a number of reasons, including their view of the potential for the
value of the Company to increase in the future. If a material amount of the
£33.0 million is not returned through the Tender Offer and Share Buyback
Programme, the Board will consider a possible further stage of the Return of
Value comprising a Special Dividend.

The Tender Offer is conditional on Shareholders' approval and a general
meeting of the Company is to be held at the offices of Reed Smith LLP at The
Broadgate Tower, 20 Primrose Street, London EC2A 2RS at 10.00 a.m. on 28 March
2024 to seek the approval of Shareholders to the proposed Return of Value.

Christopher Richards, Non-Executive Chairman of Nanoco, said:

"Over the last five years, Nanoco has been transformed from an R&D first
mover facing going concern challenges to a commercial manufacturer of
nanomaterials, with a growing range of leading nanomaterials and a validated
IP portfolio supported by the strongest commercial and financial position in
its history.

"Today Nanoco is announcing an exceptional and significant return of capital
to shareholders, while retaining and investing funds to support delivery of
further value from commercial prospects and enhance our future growth and
margin profile. With growing opportunities and a fully funded commercial
business, we are confident in enhancing shareholder value over the medium and
long term."

Background to the Return of Capital

On 24 January 2024, the Company announced that it had received the second
tranche of litigation proceeds from Samsung after settling last year on a
no-fault basis for the alleged infringement of the Group's IP (the "Final
Litigation Proceeds"). The Group has received a net sum of $71.75 million,
being $75.0 million less the expected Korean withholding tax, which amounted
to $3.25 million. The Korean withholding tax is available to offset Nanoco's
future profits in the UK. The Group previously announced the hedging of this
tranche of proceeds at a rate of $1.22 / £1.00. The funds have been converted
at this rate and generated a sterling receipt of £58.8 million. This
represents a gain of £2.1 million compared to the exchange rate for USD on
the date of receipt.

The Board first signalled its intention to return significant funds to
shareholders on 3 February 2023 when the final settlement agreement was signed
with Samsung. At that time, the Chairman made the following statement:

"In deciding the allocation of the net proceeds, the Board will balance any
investment needs of Nanoco's growing organic business with a firm intention to
deliver a material return of capital to shareholders."

Over the last five years, Nanoco has been transformed from an R&D first
mover facing going concern challenges to a commercial manufacturer of
nanomaterials in the strongest commercial and financial position in its
history.

The Board now believes that Nanoco has entered a new phase of its development
as a Company, and is confident in the Group's future growth prospects,
primarily as a result of the factors below:

1.    The Group has successfully fulfilled its first commercial production
orders for two new materials;

2.   The Group has a diverse portfolio of second and further generation
nanomaterial development projects underway with some of the world's most
respected electronics supply chain companies, presenting a compelling pipeline
of organic growth opportunities;

3.    Key display and sensing Group patents were validated during the
Samsung litigation by the US Patent Trial and Appeal Board and Samsung felt
compelled to take out a licence over the Group's IP, with further licensing
efforts underway to support commercial opportunities; and

4.    The Group is now fully funded and in the strongest financial position
in its history following the receipt of the Final Litigation Proceeds.

The Board believes that the proposal to return up to £33.0 million from the
Final Litigation Proceeds to Shareholders strikes the appropriate balance
between the investment needs of the business and the desire to return a
material amount of capital to Shareholders.

Following the shareholder consultation noted above, the Board concluded that a
Tender Offer is the best way to return a significant amount of capital to
Shareholders in a short space of time, offering freedom of choice to all while
taking account of the relative costs, complexity and timeframes of the various
possible methods, as well as the likely tax treatment for Shareholders.

Allocation of proceeds

It is the Board's view that the receipt of the Final Litigation Proceeds
presents a unique opportunity in Nanoco's history to enhance its financial
resilience and invest in its operational capability, further enhancing the
Group's future growth prospects, margin profile and ability to provide future
potential returns to shareholders. Therefore, following the completion of the
£33.0 million return of capital noted above, and after allowing for the
repayment of the Group's outstanding debt of approximately £5 million and
remaining cash reserves from the first tranche of litigation proceeds, the
Group expects to have approximately £23 million of cash available to support
the commercial business. As outlined in the circular issued on 20 June 2023,
the Board intends to use the retained funds to invest as follows:

·      Investment in the Group's production capability to enable further
production efficiencies and expansion of the Group's gross profit margin as
Nanoco continues to transition from a pure-play R&D first mover towards a
commercial producer of nanomaterials at scale;

·    Investing to accelerate a number of promising R&D projects focused
on developing new second and further generation sensing materials;

·    Expanding the Runcorn facility to create a capability to make wafer
scale sensing devices to enhance business development and analytical services;

·     Funding the Group's commercial business activities until it becomes
self-financing which is expected to be achieved during the calendar year 2025;

·      Self-funding the early stages of its IP portfolio licensing
programme. These efforts are in support of the Group's overall commercial
goals. This approach also mitigates the downside impact on returns that would
arise by using licencing agents or third party funding; and

·     The Board is keen to ensure to the fullest extent possible that
Nanoco does not need to return to the capital markets for funding in the
foreseeable future or before the adoption of the Group's technology in high
volume consumer electronics applications. Our blue-chip global partners and
potential new customers take comfort from a more robust balance sheet. If
adoption of Nanoco's technology in higher mass market volumes accelerates
faster than expected, the Board will have the option to return further funds
to Shareholders.

The Board remains confident that near-term opportunities fully merit the
allocation of funds noted above, namely for growing commercial production of
sensing materials, together with the current interest in the Group's display
materials following the IP litigation and the growing display market for
CFQD® cadmium free quantum dots.

Details of the Tender Offer

The key points to the Tender Offer are as follows:

·    The Tender Offer is for up to 38.5 per cent. of the Company's issued
share capital (excluding Ordinary Shares held in treasury). Under the Tender
Offer, each Shareholder is entitled to have up to 38.5 per cent. of their
shareholding purchased by Cavendish at the Tender Price.

·      The Tender Offer is being made at a fixed price of 24 pence per
Ordinary Share, which represents:

o  a premium of 25.1 per cent. to the closing mid-market price per Ordinary
Share on 8 March 2024;

o  a premium of 18.4 per cent. to the 30-day volume weighted average price
per Ordinary Share on 8 March 2024; and

o  a premium of 19.6 per cent. to the 60-day volume weighted average price
per Ordinary Share on 8 March 2024.

·   Shareholders will be able to decide whether to tender none, some or all
of their Ordinary Shares within the overall limits of the Tender Offer.

·  Tenders in excess of a Shareholder's Basic Entitlement will only be
accepted to the extent that other Shareholders tender less than their Basic
Entitlement or do not tender any Ordinary Shares and, if necessary, excess
demand will be scaled back on a pro rata basis (save that tenders from
Shareholders who hold 2,000 Ordinary Shares or less will be accepted in full
subject to there being capacity to purchase those Ordinary Shares in
accordance with the terms of the Tender Offer).

All Eligible Shareholders on the Register of Members at 6.00 p.m. on 9 April
2024 are entitled, but not required, to tender some or all of their Ordinary
Shares for purchase by Cavendish, acting as principal, at the Tender Price.

Subject to satisfaction of the conditions to the Tender Offer, including
Shareholders voting in favour of the Tender Offer at the General Meeting,
Ordinary Shares which are successfully tendered under the Tender Offer will be
purchased at the Tender Price. Further details can be found in the Circular.

Benefits of the Tender Offer for Shareholders

The benefits of the Tender Offer for Shareholders as a whole are that:

·    it is available to all Eligible Shareholders regardless of the size
of their holdings;

·   it provides Eligible Shareholders who wish to reduce their holdings of
Ordinary Shares with an opportunity to do so at a market driven price at a
premium of 25.1 per cent. to the closing mid-market price per Ordinary Share
on 8 March 2024;

·    it provides Shareholders with an opportunity to sell their shares
without incurring any dealing costs, and therefore avoids Shareholders holding
a small number of Ordinary Shares having their proceeds significantly eroded
by dealing costs; and

·   it permits Shareholders who wish to retain their current investment in
the Company and their Ordinary Shares to do so since no Shareholder is
required to participate in the Tender Offer.

The Company intends to cancel approximately 90 per cent. of the Ordinary
Shares acquired in connection with the Return of Value which will reduce the
number of Ordinary Shares in issue. Assuming the Company's earnings stay the
same, this should have a positive impact on the Group's earnings per share.
The Company intends to transfer the remaining approximately 10 per cent.
balance of the Ordinary Shares which are not cancelled from treasury to the
Nanoco Employee Benefit Trust to meet potential future obligations which may
arise from the Company's share option schemes.

Notice of General Meeting

A General Meeting of the Company will be held at the offices of Reed Smith LLP
at The Broadgate Tower, 20 Primrose Street, London EC2A 2RS at 10.00 a.m. on
28 March 2024 to seek Shareholder approval for two Resolutions in relation to
the Return of Value.

Resolution 1 seeks authority for the Company to make market purchases of
Ordinary Shares in connection with the Tender Offer. The Resolution specifies
the Tender Price and the maximum number of Ordinary Shares which may be
acquired pursuant to this authority. The authority sought will expire on 31
December 2024.

Resolution 2 seeks authority to approve an amendment to the rules of the
Nanoco 2015 Long Term Incentive Plan (the "LTIP") and the Nanoco 2015 Deferred
Bonus Plan (the "DBP"), which were originally approved by shareholders at the
2015 Annual General Meeting, and subsequently amended at the 2021 Annual
General meeting. Awards under the LTIP and the DBP are subject to a combined
limit of exercised and outstanding options at any point in time being less
than 10 per cent. of the issued share capital at that point in time. The
cancellation of approximately 90 per cent. of the Ordinary Shares acquired as
part of the Return of Value will have a disproportionate impact on this limit.
The Board does not consider that employees should be penalised as a result of
the Return of Value which is beneficial to Shareholders. Therefore, in order
to be able to continue to issue options under the LTIP and the DBP,
Shareholders are being asked to approve an amendment to the rules of the LTIP
and DBP to allow shares held in the Nanoco Employee Benefit Trust to be
excluded in assessing the 10 per cent. limit.

The full Notice of General Meeting will be set out in the Circular.

Timetable

 Tender Offer opens                                                               11 March 2024

 Latest time and date for receipt of Form of Proxy or CREST Proxy Instruction     10.00 a.m. on 26 March 2024
 in respect of General Meeting
 General Meeting                                                                  10.00 a.m. on 28 March 2024

 Announcement of the results of the General Meeting                               28 March 2024
 Latest time and date for receipt of Tender Forms and share certificates or       1.00 p.m. on 9 April 2024
 other documents of title for tendered certificated Ordinary Shares (i.e. close
 of the Tender Offer)

 Latest time and date for settlement of TTE Instructions for tendered             1.00 p.m. on 9 April 2024
 uncertificated Ordinary Shares (i.e. close of the Tender Offer)

 Record Date for the Tender Offer                                                 6.00 p.m. on 9 April 2024
 Announcement of the results of the Tender Offer                                  11 April 2024
 Unconditional Date for the Tender Offer and purchase of Ordinary Shares under    12 April 2024
 the Tender Offer
 CREST accounts credited with unsuccessfully tendered uncertificated Ordinary     by 25 April 2024
 Shares
 CREST accounts credited in respect of Tender Offer proceeds for uncertificated   by 25 April 2024
 Ordinary Shares
 Cheques despatched in respect of Tender Offer proceeds for certificated          by 25 April 2024
 Ordinary Shares
 Return of share certificates in respect of unsuccessful tenders of               by 25 April 2024
 certificated Ordinary Shares
 Despatch of balance share certificates in respect of unsold Ordinary Shares in   by 25 April 2024
 certificated form

The dates set out in the expected timetable may be adjusted by the Company, in
consultation with Cavendish, in which event details of the new dates will be
notified to Shareholders via an announcement through a regulatory information
service in the United Kingdom. All references are to London time.

Circular

Capitalised terms shall have the meaning attributed to them in the Circular
unless otherwise defined in this announcement.

Once it has been published, following regulatory approval by the FCA, the
Circular can be viewed on the Company's website at
https://www.nanocotechnologies.com/investors/documents/ and will be submitted
to the National Storage Mechanism and available for inspection at
https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism
shortly. In addition, those Shareholders (other than Restricted Shareholders)
who have elected to receive hard copies of documents will receive a copy of
the Circular by post.

 

 

For further information, please contact:

 

 Nanoco Group plc:                                                                                                                                                                                     +44 (0)1928 761 404

 Brian Tenner, CEO

 Liam Gray, CFO & Company Secretary

 Cavendish Capital Markets Limited (Sponsor, Financial Adviser & Joint                                                                                                                                 +44 (0) 20 7220 0500
 Corporate Broker):

 Ed Frisby / George Lawson (Corporate Finance)

 Tim Redfern / Charlie Combe (Corporate Broking)

 Jasper Berry (Sales)

 Turner Pope Investments (Joint Corporate                                                                                                                                                              +44 (0) 20 3657 0050
 Broker):

 Andrew Thacker

 James Pope

 Powerscourt (Public                                                                                                                                                                                   +44 (0)7970 246 725
 Relations):

 Elly Williamson

 Ollie Simmonds

 Nanoco@powerscourt-group.com

 

The person responsible for arranging for the release of this announcement on
behalf of Nanoco is Liam Gray, Chief Financial Officer.

About Nanoco Group plc

 

Nanoco (LSE: NANO) is a nano-material production and licensing company,
specialising in the production of its patented cadmium free quantum dots
(CFQD®) and other patented nanomaterials for use in the electronics
industries.

Founded in 2001 and headquartered in Runcorn, UK, Nanoco continues to build
out a world-class, patent-protected IP portfolio alongside the scaling of the
production for commercial orders.

Nanomaterials are materials with dimensions typically in the range 1 - 100 nm.
Nanomaterials have a range of useful properties, including optical and
electronic. Quantum dots are a subclass of nano-material that have
size-dependent optical and electronic properties. Within the sphere of quantum
dots, the Group exploits different characteristics of the quantum dots to
target different performance criteria that are attractive to specific markets
or end-user applications such as the Sensor, Electronics and Display markets.
Nanoco's CFQD® quantum dots are free of cadmium and other toxic heavy metals,
and can be tuned to emit light at different wavelengths across the visible and
infrared spectrum, rendering them useful for a wide range of display
applications. Nanoco's HEATWAVE™ quantum dots can be tuned to absorb light
at different wavelengths across the near-infrared spectrum, rendering them
useful for applications including cameras and image sensors.

Nanoco is listed on the Main Market of the London Stock Exchange, holds the
LSE's Green Economy Mark, and trades under the ticker symbol NANO. For further
information please visit: www.nanocotechnologies.com
(http://www.nanocotechnologies.com/)

IMPORTANT INFORMATION

This announcement (including information incorporated by reference in this
announcement) and other information published by Nanoco may contain statements
about Nanoco that are or may be deemed to be forward looking statements.
Such statements are prospective in nature.  All statements other than
historical statements of facts may be forward looking statements.  Without
limitation, statements containing the words "targets", "plans", "believes",
"expects", "aims", "intends", "will", "may", "anticipates", "estimates",
"projects" or "considers" or other similar words may be forward looking
statements.

Forward looking statements inherently contain risks and uncertainties as they
relate to events or circumstances in the future.  Important factors such as
business or economic cycles, the terms and conditions of Nanoco's financing
arrangements, tax rates, or increased competition may cause Nanoco's actual
financial results, performance or achievements to differ materially from any
forward looking statements.  Due to such uncertainties and risks, readers are
cautioned not to place undue reliance on such forward looking statements,
which speak only as of the date hereof.  Nanoco disclaims any obligation to
update any forward looking or other statements contained herein, except as
required by applicable law.

The Tender Offer is not being made to Shareholders resident in Australia,
Canada, Japan, and the Republic of South Africa and any country, region or
territory which is the subject of any comprehensive Sanctions (including, in
each case and without limitation, Cuba, Iran, North Korea, Syria, Russia, the
Crimea Region of Ukraine, the so-called Donetsk People's Republic and the
so-called Luhansk People's Republic). The distribution of this announcement in
certain jurisdictions may be restricted by law. It is the responsibility of
all Overseas Shareholders to satisfy themselves as to the observance of any
legal requirements in their jurisdiction, including, without limitation, any
relevant requirements in relation to the ability of such holders to
participate in the Tender Offer.

Cavendish Capital Markets Limited ("Cavendish"), which is authorised and
regulated by the FCA in the United Kingdom, is acting as sponsor, financial
adviser and corporate broker to the Company and no one else in connection with
the Tender Offer and the Return of Value or any other matter set out in this
Announcement and will not regard any other person as its client in relation to
the Tender Offer and the Return of Value and will not be responsible to anyone
other than the Company for providing the protections afforded to clients of
Cavendish or its affiliates nor for providing advice in relation to the Tender
Offer or the Return of Value, nor for providing advice in relation to the
contents of this document or the Tender Offer or the Return of Value or any
transaction, arrangement or matter referred to in this document. Neither
Cavendish nor any of its affiliates (nor their respective directors, officers,
employees or agents) owes or accepts any duty, liability or responsibility
whatsoever (whether direct or indirect, whether in contract, in tort, under
statute or otherwise) to any person who is not a client of Cavendish in
connection with the Tender Offer or the Return of Value, this Announcement,
any statement contained herein or otherwise. No representation or warranty,
express or implied, is made by Cavendish as to the contents of this
Announcement.

A copy of this announcement will be available on the Company's website at
www.nanocotechnologies.com (http://www.nanocotechnologies.com/) . Neither the
content of the Company's website, nor the content on any website accessible
from hyperlinks on its website for any other website, is incorporated into, or
forms part of, this announcement nor, unless previously published by means of
a recognised information service, should any such content be relied upon in
reaching a decision as to whether or not to acquire, continue to hold, or
dispose of, securities in the Company.

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