REG - Nexteq PLC - Proposed Share Buyback and Notice of GM

NexteqAnnouncement

28/03/2024 07:15

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RNS Number : 5984I  Nexteq PLC  28 March 2024

Nexteq plc

 

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

 

Proposed Share Buyback, Rule 9 Waiver and Notice of General Meeting

Nexteq (AIM: NXQ), a leading technology solutions provider to customers in
selected industrial markets, announces that today it has posted a Circular to
Shareholders giving Notice of a General Meeting, to be held at 11.00 a.m. on
16 April 2024 at the Company's offices at The Galleria, Station Road, Crawley,
RH10 1WW.

Proposed Share Buyback and Rule 9 Waiver

The Company proposes to seek Shareholder approval to have the authority to buy
back up to 10 per cent of the Company's issued share capital, being up to
6,653,906 Ordinary Shares.

Assuming utilisation of the full buyback authority, the Concert Party (being
Nicholas Jarmany, Francesca Marzilli, Alessandro Jarmany, Oliver Jarmany,
Daniel Jarmany, Gary Mullins, Sophie Mullins, Susan Mullins, John Mullins,
Mark Mullins, Jacob Mullins, Joseph Mullins, Louis Mullins and Best Acumen
Limited), may own up to approximately 37.3 per cent of the voting rights in
the Company. Therefore, the Independent Shareholders will be asked to waive an
obligation on the Concert Party to make a general offer for the entire issued,
and to be issued, share capital of the Company which may arise under Rule 9 of
the Takeover Code as a result of the Company purchasing its Ordinary Shares.

The Company has historically sought authority and received approval from its
shareholders to make market purchases of its own shares, with the most recent
authority being granted at the Company's AGM on 27 April 2023, permitting the
Company to repurchase up to 6,647,506 Ordinary Shares, equal to 10 per cent.
of the Company's issued ordinary share capital at the time of the 2023 AGM.
However, despite this authority having already been granted (to expire at the
conclusion of the 2024 AGM), the Company has been restricted from using it
owing to the Concert Party being interested in more than 30 per cent. but
holding less than 50 per cent. of the total voting rights of the Company (and
therefore, any repurchases of shares under such buyback authority being liable
to trigger an obligation for the Concert Party to make an offer, in cash, for
the entire issued and to be issued share capital of the Company, pursuant to
Rule 9 of the City Code, if the repurchase would cause the aggregate number of
shares of which the Concert Party was interested to increase).

With a strong cash balance, that the Board believes will increase, the Board
has concluded that it wishes to have the flexibility to utilise the Proposed
Buy Back Authority in circumstances which it decides are in the best interests
of the Company. Accordingly, this letter sets out the background to, and
reasons why the Board believes it to be in the best interests of Shareholders
as a whole for the Company to reapply for authority, to make market purchases
of its Ordinary Shares under the same parameters as previously approved, being
that any share repurchases are made at a price:

i.      no less than the nominal value of an Ordinary Share, being 0.1
pence;

ii.     no higher than an amount which is not more than 5 per cent. above
the average of the closing middle market quotations for an Ordinary Share, as
derived from the London Stock Exchange Daily Official List for the five
business days immediately preceding the date on which that Ordinary share is
contracted to be purchased; or,

iii.    the higher of the price of the last independent trade of an
ordinary share or the highest current independent bid on the London Stock
Exchange.

Share Buy Backs

Should the Proposed Buy Back Authority be approved, the Board intends to
undertake any share buy backs subject to the parameters described above. The
Company's dividend policy remains unchanged.

The full Circular to Shareholders will be made available on the Company's
website, https://www.nexteqplc.com/. Defined terms used in this announcement
are the same as those defined in the Circular unless the context requires
otherwise.

 

 Nexteq plc                                     Tel: +44 (0)1223 892 696

 Jon Jayal, Chief Executive Officer

 Johan Olivier, Chief Financial Officer

 Nominated Adviser and Broker:                  Tel: +44 (0) 20 7220 0500

 Cavendish Capital Markets Ltd

 Matt Goode / Simon Hicks (Corporate Finance)

 Tim Redfern / Harriet Ward (ECM)

 Joint Broker:                                  Tel: +44 (0) 20 7523 8000

 Canaccord Genuity Limited

 Simon Bridges / Andrew Potts

 Financial PR:                                  Tel: +44 (0)20 3405 0205

 Alma Strategic Communications

 Hilary Buchanan / Kieran Breheny

 

About Nexteq

Nexteq (AIM: NXQ) is a strategic technology solutions provider to customers in
selected industrial markets. Its innovative technology enables the
manufacturers of global electronic equipment to outsource the design,
development and supply of non-core aspects of their product offering. By
outsourcing elements of their technology stack to Nexteq, customers can focus
their product development effort on the most critical drivers of their
business' success.

Our solutions are delivered through a global sales team and leverage the
Group's electronic hardware, software, display and mechanical engineering
expertise. Our Taiwan operation is at the heart of Asian supply networks and
facilitates cost effective manufacturing and strategic supply chain
management.

The Group operates in seven countries and services over 500 customers across
50 countries.

Nexteq operates two distinct brands: Quixant, a specialised computer platforms
provider, and Densitron, leaders in human machine interface technology, each
with dedicated sales, account management and product innovation teams. Founded
in 2005, and later floating on the London Stock Exchange's AIM stock market as
Quixant plc, the Group rebranded to Nexteq in 2023.

Further information on Nexteq and its divisions can be found at
www.nexteqplc.com (http://www.nexteqplc.com/) .

Disclaimer

Cavendish Capital Markets Limited ("Cavendish"), which is authorised and
regulated by the Financial Services Authority (FCA), is acting as Financial
Adviser to the Company in connection with the matters described in this
announcement. Cavendish will not be responsible to anyone other than the
Company for providing the protections afforded to clients of Cavendish or for
advising any other person on the Proposed Buy-Back Authority and the Rule 9
Waiver or any other arrangements described in this announcement. Cavendish has
not authorised the contents of, or any part of, this announcement and no
liability whatsoever is accepted by Cavendish for the accuracy of any
information or opinions contained in this announcement or for the omission of
any information.

The below text has been extracted from the Circular.

1.    Introduction

The Company has historically sought authority and received approval from its
shareholders to make market purchases of its own shares, with the most recent
authority being granted at the Company's AGM on 27 April 2023, permitting the
Company to repurchase up to 6,647,506 Ordinary Shares, equal to 10 per cent.
of the Company's issued ordinary share capital at the time of the 2023 AGM.
However, despite this authority having already been granted (to expire at the
conclusion of the 2024 AGM), the Company has been restricted from using it
owing to the Concert Party being interested in more than 30 per cent. but
holding less than 50 per cent. of the total voting rights of the Company (and
therefore, any repurchases of shares under such buyback authority being liable
to trigger an obligation for the Concert Party to make an offer, in cash, for
the entire issued and to be issued share capital of the Company, pursuant to
Rule 9 of the City Code, if the repurchase would cause the aggregate number of
shares of which the Concert Party was interested to increase).

With a strong cash balance, that the Board believes will increase, the Board
has concluded that it wishes to have the flexibility to utilise the Proposed
Buy Back Authority in circumstances which it decides are in the best interests
of the Company. Accordingly, this letter sets out the background to, and
reasons why the Board believes it to be in the best interests of Shareholders
as a whole for the Company to reapply for authority, to make market purchases
of its Ordinary Shares under the same parameters as previously approved, being
that any share repurchases are made at a price:

i.      no less than the nominal value of an Ordinary Share, being 0.1
pence;

ii.     no higher than an amount which is not more than 5 per cent. above
the average of the closing middle market quotations for an Ordinary Share, as
derived from the London Stock Exchange Daily Official List for the five
business days immediately preceding the date on which that Ordinary Share is
contracted to be purchased; or,

iii.    the higher of the price of the last independent trade of an
Ordinary Share or the highest current independent bid on the London Stock
Exchange.

If the Company buys-back shares under the Proposed Buy-Back Authority and, at
the time, the voting rights attributable to the interests in Ordinary Shares
of the Concert Party exceeds 30 per cent. of such voting rights, an obligation
under Rule 9 of the Takeover Code would arise on one or more of the Concert
Party to make a cash offer for the issued shares of the Company not already
owned by them if the repurchase would cause the aggregate number of shares of
which the Concert Party was interested to increase.

The Panel has agreed, however, to waive the obligation to make a general offer
that would otherwise arise on the Concert Party as a result of the buy-back by
the Company of any Ordinary Shares and under the proposed Buy-Back Authority
subject to approval on a poll by the Independent Shareholders of the Waiver
Resolution as set out in the Notice of GM.

The Circular sets out details of the existing buy back authority and contains
the Notice of GM to be held at 11.00 a.m. on 16 April 2024 to consider and
approve both the new Repurchase Resolution and the Waiver Resolution. The GM
will follow the 2024 AGM of the Company taking place at 10.00 a.m. on 16 April
2024.

2.    Background to and reasons for the recommendation

 

Rationale for using the share buy-back authority

The Board believes it to be in the best interests of Shareholders as a whole
for the Company to have authority to purchase its Ordinary Shares in the
market.

The Directors believe that the Proposed Buy-Back Authority would be a
productive use of the Company's cash reserves, whilst at the same time
enhancing earnings per share. The Directors also believe that the Proposed
Buyback Authority would provide Shareholders with the flexibility, but without
any compulsion, to realise value in respect of all or some of their
shareholdings and is a tax efficient method of returning surplus cash to
certain Shareholders.

The Board is mindful of the financial impact a share buy-back may have on the
Company and has therefore conducted a thorough exercise with regards to the
capital requirements of the Group, its prospects and its funding available,
whilst also taking into account the merits of providing greater short-term
liquidity for Ordinary Shares. The Board will only proceed to make market
purchases at prices which make sense for the Company and its Shareholders as a
whole and intends to only do so when there is a lack of liquidity for the
Ordinary Shares. The Directors have confirmed that none of them (or any
persons connected with them within the meaning of sections 252-255 of the Act)
will, nor do they have any current intention to, sell any of the Ordinary
Shares which they beneficially own to the Company should the Company utilise
the Proposed Buy-Back Authority.

Similarly, all members of the Concert Party have confirmed that none of them
(or any persons connected with them within the meaning of sections 252-255 of
the Act) will, nor do they have any current intention to, sell any of the
Ordinary Shares which they beneficially own to the Company should the Company
utilise the Proposed Buy-Back Authority.

Purchases of Own Shares

The Board is seeking the authority, in accordance with Section 701 of the Act,
for the Company to make market purchases of its own shares (within the meaning
of Section 693(4) of the Act) providing such purchases do not exceed, in
aggregate 10 per cent. of the Company's issued ordinary share capital as at
the latest practicable date before publication of this announcement, being 27
March 2024, being 6,653,906 Ordinary Shares, and subject to such pricing
restrictions as described in Paragraph 1 above.

The Board is seeking the flexibility to buy back shares should they consider
it appropriate to do so. However, the Board will only exercise the authority
after taking account of the overall financial position of the Company and in
circumstances where they believe that to do so would result in either an
increase or protection of value for the remaining Shareholders and be in the
best interests of Shareholders as a whole.

Any Ordinary Shares purchased under the Proposed Buy-Back Authority will
either be cancelled and the number of Ordinary Shares in issue reduced
accordingly, or will be held in treasury. Shares held in treasury may be used,
to the extent necessary to satisfy the exercise of options by existing
Shareholders whilst at the same time minimising dilution to existing
Shareholders.

City Code on Takeovers and Mergers

The City Code applies to the Company. Under Rule 9 of the Code, any person who
acquires an interest in shares which, taken together with shares in which that
person or any person acting in concert with that person is interested, carry
30 per cent. or more of the voting rights of a company which is subject to the
Code is normally required to make an offer to all the remaining shareholders
to acquire their shares.

Similarly, when any person, together with persons acting in concert with that
person, is interested in shares which in the aggregate carry not less than 30
per cent. of the voting rights of such a company but does not hold shares
carrying more than 50 per cent. of the voting rights of the company, an offer
will normally be required if such person or any person acting in concert with
that person acquires a further interest in shares which increases the
percentage of shares carrying voting rights in which that person, and any
persons acting in concert with that person, are interested.

An offer under Rule 9 must be made in cash at the highest price paid by the
person required to make the offer, or any person acting in concert with such
person, for any interest in shares of the company during the 12 months prior
to the announcement of the offer.

Under Rule 37 of the City Code, when a company purchases its own voting
shares, the resulting increase in the percentage of shares carrying voting
rights in which a person or group of persons acting in concert is interested
will be treated as an acquisition for the purpose of Rule 9 of the City Code
(although a shareholder who is neither a director nor acting in concert with a
director will not normally incur an obligation to make an offer under Rule 9
in these circumstances).

Current and potential shareholdings of the Concert Party

For the purposes of the City Code, Nicholas Jarmany, Francesca Marzilli,
Alessandro Jarmany, Oliver Jarmany, Daniel Jarmany, Gary Mullins, Sophie
Mullins, Susan Mullins, John Mullins, Mark Mullins, Jacob Mullins, Joseph
Mullins, Louis Mullins and Best Acumen Limited are considered to be acting in
concert (the "Concert Party").

The Concert Party currently holds, in aggregate, 22,366,436 Ordinary Shares
representing an aggregate interest of 33.614 per cent. of the Company's issued
share capital of 66,539,060 Ordinary Shares as at 27 March 2024 (being the
latest practicable date prior to the publication of this announcement).

The details of the effect of the Repurchase Resolution on the aggregate
interests of Concert Party are set out in paragraph 3 below and paragraph 5.4
of Part II of the Circular.

3.    The Waiver Resolution

As set out in paragraph 2 above, and given that the Concert Party's current
percentage interest in Ordinary Shares is between 30 and 50 per cent. of the
of the voting rights of the Company, any increase in any member of the Concert
Party's percentage interest in Ordinary Shares (which includes any increase
caused by way of a share buyback) would have the effect of triggering Rule 9
of the City Code and result in the Concert Party being under an obligation to
make a general offer to all Shareholders.

The Independent Directors have consulted with the Panel, which has agreed
that, subject to approval of the Waiver Resolution by the Independent
Shareholders on a poll at the GM, it will grant the Repurchase Waiver. The
effect of the Repurchase Waiver, if approved by the Independent Shareholders,
would be that the Concert Party would not be required to make a general offer
under Rule 9 of the City Code that would otherwise arise due to the increase
in the aggregate holding of the Concert Party resulting from the purchase by
the Company of its own Ordinary Shares pursuant to the Proposed Buy-Back
Authority.

The Waiver Resolution is subject to the approval of Independent Shareholders
on a poll, where each Independent Shareholder will be entitled to one vote for
each Ordinary Share they hold. Members of the Concert Party are not entitled
to vote on this poll as they are not considered to be independent.

Set out below, and also in paragraph 5.4 of Part II of the Circular, are
details of the maximum percentage of the Company's voting rights which could
be held by the Concert Party following the approval of the Repurchase
Resolution and the Waiver Resolution as it assumes the full utilisation of the
Proposed Buy-Back Authority (assuming no member of the Concert Party
participates in the proposed buyback and no further Ordinary Shares are issued
by the Company).

Scenario

In the event that:

·    the Independent Shareholders approve the Waiver Resolution;

·    the maximum number of Ordinary Shares are repurchased by the Company
under the Proposed Buy-Back Authority and no further Ordinary Shares are
issued by the Company; and

·    there are no sales of Ordinary Shares by any member of the Concert
Party pursuant to the proposed share buyback or otherwise.

the combined shareholding of the Concert Party of 22,366,436 Ordinary Shares
would increase from 33.614 per cent. to a maximum of 37.349 per cent. of the
issued ordinary share capital of the Company (excluding any shares held in
treasury) as further detailed in paragraph 5.4 of Part II of the Circular.

                                                        Current interests of the Concert Party                        Interests of the Concert Party assuming full utilisation of the Proposed
                                                                                                                      Buy-Back Authority, the Concert Party does not participate in the share
                                                                                                                      buyback nor sell any Ordinary Shares and no further Ordinary Shares are issued
                                                                                                                      by the Company
 Concert Party Member                                   Number of Ordinary Shares  % of current issued share capital  Number of Ordinary Shares                 % of current issued share capital
 Nick Jarmany                                           5,769,980                  8.67                               5,769,980                                 9.64
 Francesca Marzilli                                     5,356,683                  8.05                               5,356,683                                 8.94
 Alessandro Jarmany                                     2,250                      0.003                              2,250                                     0.004
 Oliver Jarmany                                         2,250                      0.003                              2,250                                     0.004
 Daniel Jarmany                                         602,481                    0.91                               602,481                                   1.01
 Gary Mullins                                           1,913,071                  2.88                               1,913,071                                 3.19
 Sophie Mullins                                         302,582                    0.45                               302,582                                   0.51
 Susan Mullins                                          2,232,707                  3.36                               2,232,707                                 3.73
 John Mullins                                           1,626,213                  2.44                               1,626,213                                 2.72
 Mark Mullins                                           1,105,000                  1.66                               1,105,000                                 1.85
 Jacob Mullins                                          2,220                      0.003                              2,220                                     0.004
 Joseph Mullins                                         2,220                      0.003                              2,220                                     0.004
 Louis Mullins                                          2,220                      0.003                              2,220                                     0.004
 Best Acumen Limited (Chen-Tai Lin and Shu-Hsiang Wu)*  3,446,559                  5.18                               3,446,559                                 5.76
 Total                                                  22,366,436                 33.614                             22,366,436                                37.349

 

* Shares held by Best Acumen Limited, an entity owned and controlled by
Chen-Tai Lin and Shu-Hsiang Wu.

Shareholders should note that any further increase in the interests of the
Concert Party in the Ordinary Shares of the Company, which increases the
percentage of the voting rights in which they are interested, whether
collectively or individually, other than as a result of the purchase of
Ordinary Shares pursuant to the Proposed Buy-Back Authority will be subject to
the provisions of Rule 9. Whether or not the Waiver Resolution is passed by
the Independent Shareholders, members of the Concert Party will not be
restricted from making an offer for the Company.

In the event that the Concert Party's interest in the voting rights of the
Company increases as a result of the exercise of the Proposed Buy-Back
Authority, they could not acquire any further interest in the shares of the
Company without triggering an obligation under Rule 9.

The Waiver described in the Waiver Resolution, applies only in respect of
increases in the percentage interest of the Concert Party resulting from
purchases by the Company of its own shares under the Proposed Buy-Back
Authority and not in respect of any other increases in the Concert Party's
interests in Ordinary Shares by any other means.

4.    The intentions of the Concert Party

The members of the Concert Party have each confirmed to the Company that they
are not proposing, following any increase in their percentage interests in
Ordinary Shares or voting rights as a result of any buy-back of its Ordinary
Shares by the Company to seek any change in the composition of the Board or
the general nature of the Company's business.

The members of the Concert Party have also each confirmed that they have no
intention to make any changes regarding the future of the Company's business,
the locations of the Company's places of business and the continued employment
of its employees and management (and those of its subsidiaries) as a result of
any increase in their percentage interests in Ordinary Shares or voting rights
as a result of a buy-back of its Ordinary Shares by the Company nor will there
be any redeployment of the fixed assets of the Company as a result of such an
increase.

The Company intends for its Ordinary Shares to remain admitted to AIM in the
event the Proposed Buy-Back Authority is exercised in whole or in part at any
point within the authority being requested.

There have been no changes to the relationship agreement entered into between
the Company and each of Nick Jarmany, Gary Mullins and Chen-Tai Lin on 14 May
2013.

5.    Current Trading and Prospects

In the audited final results for the year ended 31 December 2023 released on
13 March 2024, Nexteq provided the following trading update on current
trading:

·    "The Group entered 2024 with confirmed order book covering five
months revenue.

·    Strong balance sheet with net cash position and good operational
liquidity; supported by good cash generation, positioning the Group for future
organic and strategic acquisitive growth.

·    The Board is confident in meeting market expectations for 2024 with
the typical second half weighting."

 

6.    General Meeting

A notice convening the General Meeting to be held at 11.00 a.m. on 16 April
2024 is set out at the end of the Circular.

Owing to their interests in it, the Concert Party members will not be voting
on the Waiver Resolution in respect of their combined interests of 22,366,436
Ordinary Shares representing 33.614 per cent. of the Company's issued ordinary
share capital (excluding treasury shares) as at 27 March 2024, being the last
practicable date prior to the publication of this announcement.

7.    Action to be Taken

Please note that a hard copy form of proxy has been included with the
Circular. If you would like to vote on the Resolutions to be proposed at the
GM, you are requested to vote in accordance with the instructions printed
below as soon as possible.

In the case of CREST members, Shareholders should record their proxy
appointment by utilising the CREST electronic proxy appointment service in
accordance with the procedures set out in the Notes on page 22 of the
Circular.

The instrument appointing a proxy must reach the Company's registrars, Neville
Registrars Limited, Neville House, Steelpark Road, Halesowen B62 8HD by no
later than 11.00 a.m. on 12 April 2024.

8.    Recommendation

Repurchase Resolution

The Directors recommend all Shareholders to vote in favour of the Repurchase
Resolution to be proposed at the GM, as they intend to do in respect of their
own beneficial holdings of Ordinary Shares which, as at 27 March 2024, being
the last practicable date prior to the publication of this announcement in
aggregate, amount to 13,815,536 Ordinary Shares representing approximately
20.76 per cent. of the existing issued ordinary share capital of the Company.
The Directors consider the proposals to be in the best interests of the
Company and its members as a whole and are most likely to promote the success
of the Company for the benefit of its members as a whole.

Waiver Resolution

The Independent Directors who have been so advised by Cavendish, believe that
the Proposed Buy Back Authority and the Waiver Resolution are fair and
reasonable and in the best interests of the Independent Shareholders and the
Company as a whole. In providing advice to the Independent Directors,
Cavendish has taken into account the Independent Directors' commercial
assessments.

Accordingly, the Independent Directors recommend all Independent Shareholders
vote in favour of the Waiver Resolution as they intend to do in respect of
their own beneficial holdings of Ordinary Shares which, as at 27 March 2024,
being the last practicable date prior to the publication of this announcement,
in aggregate amount to 468,720 Ordinary Shares, representing approximately 0.7
per cent. of the existing issued ordinary share capital of the Company
(exclusive of treasury shares).

As detailed above, the Concert Party is considered to be interested in the
outcome of the Waiver Resolution. Accordingly, no Director who is also a
member of the Concert Party (being Nick Jarmany and Gary Mullins) has
participated in the Independent Directors' recommendation and no member of the
Concert Party will vote on the Waiver Resolution.

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