REG - Madison Bidco Ltd Velocys PLC - Recommended Cash Acquisition

VelocysAnnouncement

05/12/2023 07:15

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RNS Number : 6494V  Madison Bidco Limited  05 December 2023

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INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

FOR IMMEDIATE RELEASE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
EU REGULATION 596/2014 (WHICH FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN
UNION (WITHDRAWAL) ACT 2018). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN

 

5 December 2023

RECOMMENDED CASH ACQUISITION

of

Velocys plc

by

Madison Bidco Limited

(a newly formed company indirectly owned by (i) a fund advised by Lightrock,
(ii) a fund advised by Carbon Direct Capital, (iii) GenZero and (iv) Kibo
Investments, as members of the Consortium)

to be implemented by means of a scheme of arrangement

under Part 26 of the Companies Act 2006

Summary

·    The boards of directors of Madison Bidco Limited ("Bidco") and
Velocys plc ("Velocys") are pleased to announce that they have reached
agreement on the terms and conditions of a recommended cash acquisition by
Bidco of the entire issued, and to be issued, ordinary share capital of
Velocys. It is intended that the Acquisition will be implemented by way of a
court-sanctioned scheme of arrangement under Part 26 of the 2006 Act.

 

·    Under the terms of the Acquisition, each Velocys Shareholder will be
entitled to receive:

for each Velocys Share: 0.25 pence in cash

·    In addition, conditional on the Acquisition becoming Effective, Bidco
has agreed to provide up to US$40 million (approximately £31.5 million) of
growth capital to Velocys which is expected to ensure that Velocys and its
management have the capital resources needed to deliver against Velocys'
medium-term strategic plans.

 

·    In connection with the Acquisition, the Carbon Direct Fund has agreed
to provide a secured bridging loan of £3.5 million ("Bridge Financing") with
a view to providing sufficient capital for Velocys through to the Acquisition
becoming Effective.

 

·    The Acquisition values Velocys' entire issued, and to be issued,
ordinary share capital at approximately £4.1 million on a fully diluted basis
and provides a post growth capital valuation of Velocys of up to approximately
US$45.2 million (approximately £35.6 million).

 

·    The Velocys Directors unanimously intend to recommend the Scheme.

 

·    Irrevocable undertakings to vote in favour of the Scheme have been
received in respect of an aggregate of 310,227,044 Velocys Shares representing
18.78 per cent. of the existing issued ordinary share capital of Velocys as at
the Latest Practicable Date.

 

·    If, on or after the date of this announcement and prior to the
Acquisition becoming Effective, any dividend and/or other distribution and/or
other return of capital or value is announced, declared, made or paid or
becomes payable in respect of the Velocys Shares, Bidco reserves the right to
reduce the consideration payable under the terms of the Acquisition for the
Velocys Shares by an amount up to the aggregate amount of such dividend and/or
distribution and/or other return of capital or value, in which case any
reference in this announcement to the consideration payable under the terms of
the Acquisition will be deemed to be a reference to the consideration as so
reduced. Any exercise by Bidco of its rights referred to in this paragraph
shall be the subject of an announcement and, for the avoidance of doubt, shall
not be regarded as constituting any revision or variation of the terms of the
Scheme or the Acquisition. In such circumstances, Velocys Shareholders shall
be entitled to retain any such dividend, distribution and/or other return of
capital or value.

 

·    It is expected that the Scheme Document, containing further
information about the Acquisition and notices of the Court Meeting and the
General Meeting, will be published as soon as practicable and, in any event,
within 28 days of this announcement.

Recommendation

·      The Velocys Directors, who have been so advised by Panmure Gordon
as to the financial terms of the Acquisition, consider the terms of the
Acquisition to be fair and reasonable. Panmure Gordon is providing independent
financial advice to the Velocys Directors for the purposes of Rule 3 of the
Takeover Code.

·      In providing its financial advice to the Velocys Directors,
Panmure Gordon has taken into account the commercial assessments of the
Velocys Directors. Panmure Gordon has taken into consideration Velocys'
limited cash resources, the challenging financial position of Velocys and the
absence of alternative funding offers, in circumstances where, should the
Bridge Financing not be made available by the Carbon Direct Fund in connection
with the Acquisition, the insolvency of Velocys would be highly likely.

·      The Velocys Directors believe that the Bridge Financing, which is
vital for Velocys to avoid insolvency, would not be made available in the
absence of the Acquisition and that any insolvency would be highly likely to
result in minimal value being returned to Velocys Shareholders.

·      Accordingly, the Velocys Directors, who have been so advised by
Panmure Gordon, intend to unanimously recommend that Velocys Shareholders vote
in favour of the Scheme at the Court Meeting and the Resolutions at the
General Meeting (or in the event that the Acquisition is implemented by way of
a Takeover Offer, to accept or procure the acceptance of such Takeover Offer).

·      Each Velocys Director who holds Velocys Shares has irrevocably
undertaken to vote in favour of the Scheme at the Court Meeting and in favour
of the Resolutions to be proposed at the General Meeting in respect of their
own beneficial holdings of Velocys Shares, amounting to in aggregate 7,070,412
Velocys Shares representing approximately 0.43 per cent. of the existing
issued ordinary share capital of Velocys as at the Latest Practicable Date.

·      Velocys Shareholders should note that, in the event that the
Acquisition does not become Effective, it is unlikely that Velocys will be
able to repay the Bridge Financing and remain a going concern. In those
circumstances, it is likely that administrators would be appointed promptly
and, whilst the administrator would seek to maximise value from the sale of
available assets, it is considered highly unlikely that this would result in
anything other than minimal returns to Velocys Shareholders, after costs and
preferential (including secured) and unsecured claims that would arise on
insolvency.

Background to and reasons for the Acquisition

·    Bidco believes that the production of sustainable aviation fuel
("SAF") is a compelling market opportunity given the confluence of regulatory
support, demand pull by airlines, and increased technology readiness.
Furthermore, Bidco believes Velocys is well positioned to capitalise on these
sector tailwinds, given its patented integrated Fischer-Tropsch reactor and
catalysis solution and its pipeline of commercial licensing opportunities.

 

·    However, while Bidco believes that these secular tailwinds for SAF
potentially stand to benefit Velocys and its technology in the long term,
without significant additional growth capital Velocys will be unable to
further scale the business and accelerate the delivery of its technology to
clients, including Velocys' reference projects. Reflecting the very
challenging public market environment, the significant deterioration in
Velocys' share price prior to release of the possible offer announcement on 20
November 2023, and the risks and circumstances of the business, Velocys has
been unable to raise sufficient growth capital. Bidco believes that, given
this funding challenge, the viability of the business and its ability to
deliver against its growth strategy will be impacted to the detriment of
Velocys' shareholders, management team and employees.

 

·    It is the view of Bidco that the longer-term interests of Velocys and
its employees therefore are best served away from the public markets. Bidco
believes that Velocys is best positioned to succeed as a private company, with
the current management team, and with an injection of growth capital from a
consortium of long-term investors who have the requisite experience in
supporting industrial companies as they seek to fully realise their potential.

 

·    Velocys noted in its announcement on 20 November 2023 that, unless
Velocys was able to find meaningful sources of funding or strategic options,
it was unlikely that Velocys would be able to continue as a going concern
beyond the end of December 2023. This date has now been extended into
early-January 2024 as a result of cost control and cash management
initiatives. The Acquisition provides Velocys Shareholders with a certain
liquidity opportunity in circumstances where shareholders may otherwise face
the prospect of realising minimal value.

Background to and reasons for the recommendation

·    Velocys operates a business model focussed on providing a unique
technology pathway to enable production of SAF. Velocys is focused on
developing its proprietary technology solutions ahead of commercial adoption
and currently does not have recurring revenues. As a result, it has
historically been reliant on equity raises and grant funding to execute its
business strategy. Velocys has for some time been seeking significant
long-term funding. However, reflecting the challenging equity market
environment and the current risks and circumstances of the business, Velocys
has not been able to secure the funding required to provide long-term security
for the operations of the business. As noted in the announcement made by
Velocys on 20 November 2023, to enable it to continue as a going concern,
Velocys would require funding by the end of December 2023. This date has now
been extended into early-January 2024 as a result of cost control and cash
management initiatives undertaken by Velocys however this does not materially
alter Velocys' precarious financial position.

 

·    As part of the Acquisition, the Carbon Direct Fund has agreed to
provide the Bridge Financing as a short-term funding solution to provide
sufficient capital for Velocys through to the Acquisition becoming Effective
(further details of which are set out in section 11 below). It is the
understanding of the Velocys Directors that, absent the Acquisition, the
Bridge Financing would not be made available.

 

·    Additionally, conditional on the Acquisition becoming Effective,
Bidco has agreed that it will provide up to US$40 million of growth capital to
Velocys (of which a portion will be immediately available from the Effective
Date) which is expected to ensure that Velocys and its management have the
capital resources needed to deliver against Velocys' medium-term strategic
plans.

 

·    In the absence of the Acquisition or any alternative funding or
strategic options, Velocys will need to consider and take immediate steps to
implement alternatives which seek to protect the interests of all creditors,
including financial creditors, commercial counterparties and employees, but
which would highly likely result in minimal value being attributed to the
existing equity. There can be no guarantee that Velocys would be able to
implement alternatives in the available timeframe and it is highly likely that
Velocys would face insolvency.

 

·    In intending to unanimously recommend the Acquisition, the Velocys
Board believes that there is no present viable alternative likely to produce
more value for Velocys Shareholders than would be available through the
Acquisition, and further that the Acquisition (given the associated provision
of funding) represents the only realistic prospect of allowing Velocys to
continue as a going concern.

Irrevocable undertakings

·    As noted above, Bidco has received irrevocable undertakings from the
Velocys Directors who hold Velocys Shares to vote (or, where applicable,
procure voting) in favour of the Scheme at the Court Meeting and the
Resolutions to be proposed at the General Meeting (or in the event that the
Acquisition is implemented by a Takeover Offer, to accept or procure
acceptance of such Takeover Offer), in respect of all their shares,
representing in aggregate 7,070,412 Velocys Shares (representing approximately
0.43 per cent. of the existing issued ordinary share capital of Velocys) as at
the Latest Practicable Date. These undertakings will remain binding in the
event that a higher competing offer for Velocys is made.

 

·    In addition to the irrevocable undertakings referred to above
received from the Velocys Directors, Bidco has also received an irrevocable
commitment from Lansdowne Partners to vote in favour of the Scheme at the
Court Meeting and the Resolutions to be proposed at the General Meeting (or in
the event that the Acquisition is implemented by an Takeover Offer, to accept
or procure acceptance of such Takeover Offer), in respect of 303,156,632
Velocys Shares (representing approximately 18.35 per cent. of the existing
issued ordinary share capital of Velocys) as at the Latest Practicable Date.
This undertaking will remain binding in the event that a higher competing
offer for Velocys is made.

 

·    Accordingly, Bidco has received irrevocable commitments to vote in
favour of the Scheme at the Court Meeting and the Resolutions to be proposed
at the General Meeting (or in the event that the Acquisition is implemented by
a Takeover Offer, to accept or procure acceptance of such Takeover Offer), in
respect of a total of 310,227,044 Velocys Shares (representing in aggregate
approximately 18.78 per cent. of existing issued ordinary share capital of
Velocys) as at the Latest Practicable Date.

 

·    Further details of these irrevocable undertakings (including the
circumstances in which they cease to be binding) are set out in Appendix 3 to
this announcement.

Information relating to Bidco and the Consortium

·    Bidco is a private limited company incorporated in England and Wales
on 28 November 2023. It has its registered office at 1 Eagle Place, London,
Greater London, SW1Y 6AF. Bidco was formed for the purposes of the Acquisition
and has not traded since its date of incorporation, nor has it entered into
any obligations other than in connection with the Acquisition.

 

·    The members of the Consortium are:

 

o  Lightrock: Lightrock is a global private equity firm and 'impact investor'
with a focus on growth capital. Lightrock's investment philosophy targets
companies that pursue scalable and tech-driven business models around the key
impact themes of people, planet, and productivity-tech for good;

o  Carbon Direct Capital: Carbon Direct Capital is a global growth investment
firm that partners with carbon management technology companies. The firm
believes that investing with a science-focused approach maximizes both climate
impact and financial returns;

o  GenZero: GenZero is founded by Temasek, a global investment firm
incorporated and headquartered in Singapore. It is committed to delivering
positive climate impact and long-term sustainable financial returns by
investing in opportunities with the potential to be nurtured into impactful
and scalable solutions ; and

o  Kibo Investments: Kibo Investments is a Singapore-based private investment
office with a focus on climate technology.

Information relating to Velocys

·    Velocys is an international sustainable fuels technology company,
providing clients with one of the most sustainable routes to the economic
production of drop-in SAF from a variety of waste materials. Velocys operates
a capital light and scaleable licencing model offering a technology solution
for the development of synthetic sustainable fuels manufacturing via its
proprietary patented micro-channel Fischer-Tropsch reactors and comprehensive
biorefinery integrated technology package. Velocys has offices in Oxford, UK
and Houston, US, as well as reactor manufacturing facilities in Ohio, US.

 

·    Velocys has a number of third-party clients to whom it supplies its
technology; in addition Velocys is developing two full-scale biorefinery
reference projects: the Bayou Fuels Project in Mississippi, US, which will
utilise woody waste to produce sustainable fuels, and the Altalto Project in
Immingham in the UK, which will process municipal and commercial solid waste
into sustainable fuels. The reference projects are being developed to
accelerate adoption of the Velocys' technology and, following the completion
of third-party development capital project financing and commencement of the
detailed engineering stage of these projects, the reference projects are
expected to generate significant technology licensing revenues.

 

·    Velocys' near-term ambitions are focused on creating sustainable
value by growing the customer pipeline, progressing its biorefinery reference
projects in the UK and US through Front End Engineering Design ("FEED")
delivery and revenue generation. Fees will start being generated as the
reference projects progress through their FEED phase through the execution of
technology licenses and engineering services agreements. Velocys is also
focused on expansion of its commercial and business development functions, and
engineering and reactor manufacturing to support the scale-up of its business.

 

·    Velocys' aim is to become a leading provider of innovative SAF
technology solutions to enable the decarbonisation of the aviation industry.
Velocys is moving towards achieving these ambitions whilst creating sustained
shareholder value through a diverse client pipeline delivering significant
one-off and recurring revenues.

Timetable and conditions

·    It is intended that the Acquisition will be implemented by way of a
court‑sanctioned scheme of arrangement under Part 26 of the 2006 Act
(although Bidco reserves the right to effect the Acquisition by way of a
Takeover Offer, subject to the consent of the Panel and the terms of the
Cooperation Agreement).

 

·    The terms of the Acquisition will be put to Velocys Shareholders at
the Court Meeting and the General Meeting. The Court Meeting and the General
Meeting are required to enable Velocys Shareholders to consider and, if
thought fit, vote in favour of the Scheme and the Resolutions to implement the
Scheme. In order to become Effective, the Scheme must be approved by a
majority in number of Velocys Shareholders, present and voting at the Court
Meeting, whether in person or by proxy, representing 75 per cent. or more in
value of the Scheme Shares voted at the Court Meeting. In addition,
Resolutions to deal with certain matters ancillary to the Scheme must be
passed by Velocys Shareholders representing at least 75 per cent. of votes
cast at the General Meeting.

 

·    The Conditions to the Acquisition are set out in full in Appendix 1
to this announcement along with certain other terms.

 

·    It is expected that the Scheme Document, containing further
information about the Acquisition and the notices of the Court Meeting and
General Meeting, together with the associated Forms of Proxy, will be sent to
Velocys Shareholders as soon as practicable and in any event within 28 days of
this announcement (or such later time as Velocys, Bidco and the Panel agree)
and the Meetings are expected to be held as soon as reasonably practicable
thereafter. Subject to certain restrictions relating to persons resident in
Restricted Jurisdictions, the Scheme Document will also be made available on
Velocys' website at http://offer.velocys.com.

 

·    The Scheme is currently expected to become Effective during January
2024, subject to the satisfaction or (where applicable) waiver of the
Conditions. An expected timetable of key events relating to the Acquisition
will be set out in the Scheme Document.

Commenting on this announcement, Philip Holland, the Chair of Velocys, said:

"During the many discussions that have taken place over the past few months,
the Velocys Board's main objective, together with that of the Velocys
management team has been to secure the best possible outcome for Velocys
Shareholders and other stakeholders. The Velocys Board and management have
spent a great deal of time and effort trying to secure significant long-term
funding to grow the business and accelerate the delivery of its technology to
clients. However, reflecting Velocys' material funding requirements, business
model and limited revenue together with the continued challenging public
market environment, it has not been possible to raise sufficient funds. This
has put the business in an extremely challenging position, with a very real
prospect of not being able to continue as a going concern when we reach the
end of our cash runway in early January.

Bidco is offering the business a secure platform for future growth, alongside
an injection of up to US$40 million of growth capital which is expected to
ensure that Velocys has the capital resources needed to deliver against its
medium-term strategic plans, including to scale up and grow and work towards
its long stated goal of supporting the decarbonisation of the global aviation
sector. Whilst it is very disappointing for the business to need to leave the
public markets, Bidco's offer will enable Velocys to continue operating as a
going concern."

 

This summary should be read in conjunction with the full text of this
announcement and the Appendices. The conditions to, and certain further terms
of, the Acquisition are set out in Appendix 1. The bases and sources for
certain financial information contained in this announcement are set out in
Appendix 2. Details of undertakings received by Bidco are set out in Appendix
3. Certain definitions and terms used in this announcement are set out in
Appendix 4.

Enquiries

 Bidco                                                                      C/O H/Advisors Maitland

 Kevin Bone (non-executive director)

 Josh Dienstag (non-executive director)

 May Liew (non-executive director)
 Cavendish (Financial Adviser to Bidco and the Consortium)                  020 7220 0500

 Marc Milmo

 Henrik Persson

 Seamus Fricker
 H/Advisor Maitland
 Sam Cartwright / David Sturken                                             020 737 95151
 Velocys

 Henrik Wareborn, CEO                                                       +44 1865 800821

 Philip Sanderson, CFO
 Panmure Gordon (UK) Limited (Rule 3 Adviser, Financial Adviser, Nomad and  020 7886 2500
 Joint Broker to Velocys)

 Emma Earl (Corporate Finance)

 John Prior (Corporate Finance)

 Will Goode (Corporate Finance)

 Mark Rogers (Corporate Finance)

 Hugh Rich (Corporate Broking)
 Shore Capital Stockbrokers Limited (Joint Broker)                          020 7408 4090

 Henry Willcocks (Corporate Broking)

 Toby Gibbs (Corporate Advisory)

 James Thomas (Corporate Advisory)

 

Cooley (UK) LLP is acting as legal adviser to Bidco

Mayer Brown International LLP is acting as legal adviser to Velocys.

Further information

Cavendish Capital Markets Limited ("Cavendish"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority, is acting
as financial adviser to the Consortium and Bidco and no one else in connection
with the matters described in this announcement and will not be responsible to
anyone other than the Consortium and Bidco for providing the protections
offered to clients of Cavendish or for providing advice in connection with any
matter referred to in this announcement. 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 this
announcement, any statement contained herein, the Takeover Offer or otherwise.
No representation or warranty, express or implied, is made by Cavendish as to
the contents of this announcement.

Panmure Gordon (UK) Limited ("Panmure Gordon"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority, is acting
as financial adviser and Rule 3 adviser to Velocys and no one else in
connection with the matters described in this announcement and will not be
responsible to anyone other than Velocys for providing the protections offered
to clients of Panmure Gordon or for providing advice in connection with any
matter referred to in this announcement. Neither Panmure Gordon 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 Panmure Gordon in connection with this
announcement, any statement contained herein, the Takeover Offer or otherwise.
No representation or warranty, express or implied, is made by Panmure Gordon
as to the contents of this announcement.

Shore Capital and Corporate Limited ("Shore Capital"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority, is acting
as adviser to Velocys and no one else in connection with the matters described
in this announcement and will not be responsible to anyone other than Velocys
for providing the protections offered to clients of Shore Capital or for
providing advice in connection with any matter referred to in this
announcement. Neither Shore Capital 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 Shore Capital in connection with this announcement, any statement
contained herein, the Takeover Offer or otherwise. No representation or
warranty, express or implied, is made by Shore Capital as to the contents of
this announcement.

This announcement is for information purposes only and is not intended to, and
does not, constitute, or form part of, an offer, invitation or the
solicitation of an offer to purchase, otherwise acquire, subscribe for, sell
or otherwise dispose of, any securities or the solicitation of any vote or
approval in any jurisdiction pursuant to the Acquisition or otherwise, nor
shall there be any sale, issuance or transfer of securities of Velocys in any
jurisdiction in contravention of applicable law. The Acquisition will be
implemented solely pursuant to the terms of the Scheme Document (or, if the
Acquisition is implemented by way of a Takeover Offer, the offer document),
which will contain the full terms and conditions of the Acquisition, including
details of how to vote in respect of the Acquisition. Any vote in respect of
the Scheme or other response in relation to the Acquisition should be made
only on the basis of the information contained in the Scheme Document (or, if
the Acquisition is implemented by way of a Takeover Offer, the offer
document).

This announcement does not constitute a prospectus, prospectus equivalent
document or exempted document.

This announcement contains inside information in relation to Velocys for the
purposes of Article 7 of the Market Abuse Regulation. The person responsible
for arranging the release of this announcement on behalf of Velocys is David
Bate, General Counsel, Senior Vice President and Head of Compliance for
Velocys. Velocys' Legal Entity Identifier is 549300KGMQV70HA5Y715.

If you are in any doubt about the contents of this announcement or the action
you should take, you are recommended to seek your own independent financial
advice immediately from your stockbroker, bank manager, solicitor, accountant
or independent financial adviser duly authorised under the Financial Services
and Markets Act 2000 (as amended) if you are resident in the United Kingdom
or, if not, from another appropriately authorised independent financial
adviser.

Overseas Shareholders

The release, publication or distribution of this announcement in or into
jurisdictions other than the UK may be restricted by law and therefore any
persons who are subject to the law of any jurisdiction other than the UK
should inform themselves of, and observe, any applicable legal or regulatory
requirements. Any failure to comply with such requirements may constitute a
violation of the securities laws of any such jurisdiction. To the fullest
extent permitted by applicable law, the companies and persons involved in the
Acquisition disclaim any responsibility or liability for the violation of such
restrictions by any person. This announcement has been prepared in accordance
with and for the purpose of complying with English law, the Takeover Code and
the Market Abuse Regulation and information disclosed may not be the same as
that which would have been prepared in accordance with the laws of
jurisdictions outside England.

The availability of the Acquisition to Velocys Shareholders who are not
resident in and citizens of the UK may be affected by the laws of the relevant
jurisdictions in which they are located or of which they are citizens. Persons
who are not resident in the UK should inform themselves of, and observe, any
applicable legal or regulatory requirements of their jurisdictions. In
particular, the ability of persons who are not resident in the United Kingdom
to vote their Velocys Shares with respect to the Scheme at the Court Meeting,
or to appoint another person as proxy to vote at the Court Meeting on their
behalf, may be affected by the laws of the relevant jurisdictions in which
they are located. Any failure to comply with the applicable restrictions may
constitute a violation of the securities laws of any such jurisdiction. To the
fullest extent permitted by applicable law, the companies and persons involved
in the Acquisition disclaim any responsibility or liability for the violation
of such restrictions by any person. Further details in relation to Overseas
Shareholders will be contained in the Scheme Document (or, if the Acquisition
is implemented by way of a Takeover Offer, the offer document).

Unless otherwise determined by Bidco or required by the Takeover Code, and
permitted by applicable law and regulation, the Acquisition will not be made
available, directly or indirectly, in, into or from a Restricted Jurisdiction
where to do so would violate the laws in that jurisdiction and no person may
vote in favour of the Scheme by any such use, means, instrumentality or from
within a Restricted Jurisdiction or any other jurisdiction if to do so would
constitute a violation of the laws of that jurisdiction. Copies of this
announcement and any formal documentation relating to the Acquisition are not
being, and must not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in or into or from any Restricted Jurisdiction and persons
receiving such documents (including agents, custodians, nominees and trustees)
must not mail or otherwise forward, distribute or send it in or into or from
any Restricted Jurisdiction. Doing so may render invalid any related purported
vote in respect of the Acquisition. If the Acquisition is implemented by way
of a Takeover Offer (unless otherwise permitted by applicable law and
regulation), the Takeover Offer may not be made directly or indirectly, in or
into, or by the use of mails or any means or instrumentality (including, but
not limited to, facsimile, e-mail or other electronic transmission, telex or
telephone) of interstate or foreign commerce of, or of any facility of a
national, state or other securities exchange of any Restricted Jurisdiction
and the Takeover Offer may not be capable of acceptance by any such use,
means, instrumentality or facilities.

Further details in relation to Overseas Shareholders will be included in the
Scheme Document (or, if the Acquisition is implemented by way of a Takeover
Offer, the offer document).

Sanctions Disqualified Shareholders

Sanctions Disqualified Shareholders should refer to paragraph 10 of this
announcement, which contains important information in relation to such
holders.

Further details in relation to Sanctions Disqualified Shareholders will be
included in the Scheme Document (or, if the Acquisition is implemented by way
of a Takeover Offer, the offer document).

Notice to US or United States Velocys Shareholders

The Acquisition relates to the shares of an English company and is being made
by means of a scheme of arrangement provided for under the laws of England and
Wales. A transaction effected by means of a scheme of arrangement is not
subject to the tender offer or proxy solicitation rules under the US
Securities Exchange Act of 1934 (the "U.S. Exchange Act"). Accordingly, this
announcement, the Scheme and certain other documents relating to the
Acquisition are subject to the disclosure requirements and practices
applicable in the UK to schemes of arrangement which differ from the
disclosure requirements of the US tender offer and proxy solicitation rules.
The financial information included in this announcement and the Scheme
documentation has been prepared in accordance with generally accepted
accounting principles of the United Kingdom and thus may not be comparable to
financial information of US companies or companies whose financial statements
are prepared in accordance with generally accepted accounting principles in
the United States.

If, in the future, Bidco exercises its right to implement the Acquisition by
way of a Takeover Offer, which is to be made into the United States, such
Takeover Offer will be made in compliance with the applicable U.S. laws and
regulations.

It may be difficult for US holders of Velocys Shares to enforce their rights
and any claim arising out of the US federal laws, since Bidco and Velocys are
located in a non-US jurisdiction, and some or all of their officers and
directors may be residents of a non-US jurisdiction. U.S. holders of Velocys
Shares may not be able to sue a non-US company or its officers or directors in
a non-US court for violations of the US securities laws. Further, it may be
difficult to compel a non-US company and its affiliates to subject themselves
to a US court's judgement.

In accordance with normal UK practice and pursuant to Rule 14e-5(b) of the
U.S. Exchange Act, the Consortium, certain affiliated companies or their
nominees and brokers (acting as agents), may from time to time make certain
purchases of, or arrangements to purchase, Velocys Shares outside of the U.S.,
other than pursuant to the Acquisition, until the date on which the
Acquisition becomes Effective, lapses or is otherwise withdrawn. Also, in
accordance with Rule 14e-5(b) of the U.S. Exchange Act, Cavendish will
continue to act as exempt principal traders in Velocys shares on the London
Stock Exchange. These purchases may occur either in the open market at
prevailing prices or in private transactions at negotiated prices. Any
information about such purchases will be disclosed as required in the United
Kingdom, will be reported to a Regulatory Information Service and will be
available on the London Stock Exchange website, www.londonstockexchange.com
(http://www.londonstockexchange.com) .

US Velocys Shareholders also should be aware that the transaction contemplated
herein may have tax consequences in the U.S. and, that such consequences, if
any, are not described herein. US Velocys Shareholders are urged to consult
with legal, tax and financial advisers in connection with making a decision
regarding this transaction.

Forward Looking Statements

This announcement (including information incorporated by reference in this
announcement), oral statements made regarding the Acquisition, and other
information published by Bidco and Velocys contain statements which are, or
may be deemed to be, "forward-looking statements". Forward-looking statements
are prospective in nature and are not based on historical facts, but rather on
current expectations and projections of the management of Bidco and Velocys
about future events, and are therefore subject to risks and uncertainties
which could cause actual results to differ materially from the future results
expressed or implied by the forward-looking statements.

The forward-looking statements contained in this announcement include
statements relating to the expected effects of the Acquisition on Bidco and
Velocys (including their future prospects, developments and strategies), the
expected timing and scope of the Acquisition and other statements other than
historical facts. Often, but not always, forward-looking statements can be
identified by the use of forward-looking words such as "prepares", "plans",
"expects" or "does not expect", "is expected", "is subject to", "budget",
"projects", "synergy", "strategy", "scheduled", "goal", "estimates",
"forecasts", "cost-saving", "intends", "anticipates" or "does not anticipate",
or "believes", or variations of such words and phrases or statements that
certain actions, events or results "may", "could", "should", "would", "might"
or "will" be taken, occur or be achieved. Forward looking statements may
include statements relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects; (ii)
business and management strategies and the expansion and growth of Bidco's,
Velocys', or any member of the Velocys Group's operations and potential
synergies resulting from the Acquisition; and (iii) the effects of global
economic conditions and governmental regulation on Bidco's, Velocys', or any
member of the Velocys Group's business.

Although Bidco and Velocys believe that the expectations reflected in such
forward-looking statements are reasonable, Bidco and Velocys can give no
assurance that such expectations will prove to be correct. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future. There are a
number of factors that could cause actual results and developments to differ
materially from those expressed or implied by such forward-looking statements.

These factors include, but are not limited to: the ability to complete the
Acquisition; the ability to obtain requisite shareholder approvals and the
satisfaction of other Conditions on the proposed terms and schedule; changes
in the global political, economic, business and competitive environments and
in market and regulatory forces; changes in future exchange and interest
rates; changes in tax rates; future business combinations or disposals;
changes in general economic and business conditions; changes in the behaviour
of other market participants; changes in the anticipated benefits from the
proposed transaction not being realised as a result of changes in general
economic and market conditions in the countries in which Bidco and Velocys
operate, weak, volatile or illiquid capital and/or credit markets, changes in
tax rates, interest rate and currency value fluctuations, the degree of
competition in the geographic and business areas in which Bidco and Velocys
operate and changes in laws or in supervisory expectations or requirements.
Other unknown or unpredictable factors could cause actual results to differ
materially from those expected, estimated or projected in the forward-looking
statements. If any one or more of these risks or uncertainties materialises or
if any one or more of the assumptions proves incorrect, actual results may
differ materially from those expected, estimated or projected. Such
forward-looking statements should therefore be construed in the light of such
factors. Neither Bidco nor Velocys, nor any of their respective associates or
directors, officers or advisers, provides any representation, assurance or
guarantee that the occurrence of the events expressed or implied in any
forward-looking statements in this announcement will actually occur. You are
cautioned not to place any reliance on these forward-looking statements which
speak only as of the date of this announcement.

Specifically, statements of estimated cost savings and synergies related to
future actions and circumstances which, by their nature, involve risks,
uncertainties and contingencies. As a result, the cost savings and synergies
referred to may not be achieved, may be achieved later or sooner than
estimated, or those achieved could be materially different from those
estimated. Due to the scale of the Velocys Group, there may be additional
changes to the Velocys Group's operations. As a result, and given the fact
that the changes relate to the future, the resulting cost synergies may be
materially greater or less than those estimated.

Other than in accordance with their legal or regulatory obligations, neither
Bidco nor Velocys is under any obligation, and Bidco and Velocys expressly
disclaim any intention or obligation, to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.

Dealing and Opening Position Disclosure Requirements

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1% or
more of any class of relevant securities of an offeree company or of any
securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the offer period and, if later, following the announcement in
which any securities exchange offeror is first identified. An Opening Position
Disclosure must contain details of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) of the Takeover Code
applies must be made by no later than 3.30 pm (London time) on the 10(th)
business day following the commencement of the offer period and, if
appropriate, by no later than 3.30 pm (London time) on the 10(th) business day
following the announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of the
offeree company or of a securities exchange offeror prior to the deadline for
making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the offeree
company or of any securities exchange offeror must make a Dealing Disclosure
if the person deals in any relevant securities of the offeree company or of
any securities exchange offeror. A Dealing Disclosure must contain details of
the dealing concerned and of the person's interests and short positions in,
and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s), save to the
extent that these details have previously been disclosed under Rule 8. A
Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no
later than 3.30 pm (London time) on the business day following the date of the
relevant dealing.

If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Takeover Panel's website at
www.thetakeoverpanel.org.uk (http://www.thetakeoverpanel.org.uk) , including
details of the number of relevant securities in issue, when the offer period
commenced and when any offeror was first identified. You should contact the
Panel's Market Surveillance Unit on +44 (0)20 7638 0129 if you are in any
doubt as to whether you are required to make an Opening Position Disclosure or
a Dealing Disclosure.

Publication on a website

In accordance with Rule 26.1 of the Takeover Code, a copy of this announcement
and the documents required to be published under Rule 26 of the Takeover Code
will be made available, subject to certain restrictions relating to persons
resident in Restricted Jurisdictions, on Bidco's website at
www.madisonmomentum.com and Velocys' website at http://offer.velocys.com by no
later than 12 noon (London time) on the Business Day following this
announcement. For the avoidance of doubt, neither the content of this website
nor of any website accessible from hyperlinks is incorporated by reference or
forms part of this announcement.

No profit forecasts, estimates or quantified benefits statements

No statement in this announcement is intended as a profit forecast, profit
estimate or quantified benefits statement for any period and no statement in
this announcement should be interpreted to mean that earnings or earnings per
share for Velocys or Bidco  for the current or future financial years would
necessarily match or exceed the historical published earnings or earnings per
share for Velocys or Bidco.

Right to switch to a Takeover Offer

Bidco reserves the right to elect, with the consent of the Takeover Panel and
subject to the terms of the Cooperation Agreement, to implement the
Acquisition by way of a Takeover Offer for the entire issued and to be issued
share capital of Velocys as an alternative to the Scheme. In such an event,
the Takeover Offer will be implemented on the same terms or, if Bidco so
decides, on such other terms being no less favourable (subject to appropriate
amendments), so far as applicable, as those which would apply to the Scheme
and subject to the amendment referred to in Part B of Appendix 1 to this
announcement.

Requesting hard copy documents

In accordance with Rule 30.3 of the Takeover Code, Velocys Shareholders,
persons with information rights and participants in Velocys Share Plans may
request a hard copy of this announcement by contacting Link Group on 0371 664
0321. Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the applicable
international rate. The helpline is open between 9.00 a.m. - 5.30 p.m., Monday
to Friday excluding public holidays in England and Wales. Please note that
Link Group cannot provide any financial, legal or tax advice and calls may be
recorded and monitored for security and training purposes. For persons who
receive a copy of this announcement in electronic form or via a website
notification, a hard copy of this announcement will not be sent unless so
requested. Such persons may also request that all future documents,
announcements and information to be sent to you in relation to the Acquisition
should be in hard copy form.

Electronic communications

Please be aware that addresses, electronic addresses and certain other
information provided by Velocys Shareholders, persons with information rights
and other relevant persons for the receipt of communications from Velocys may
be provided to Bidco during the offer period as required under Section 4 of
Appendix 4 of the Takeover Code to comply with Rule 2.11 of the Takeover Code.

Rounding

Certain figures included in this announcement have been subjected to rounding
adjustments. Accordingly, figures shown for the same category presented in
different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of figures that precede them.

General

If the Acquisition is effected by way of a Takeover Offer, and such a Takeover
Offer becomes or is declared unconditional in all respects and sufficient
acceptances are received, Bidco intends to exercise its rights to apply the
provisions of Chapter 3 of Part 28 of the 2006 Act so as to acquire
compulsorily the remaining Velocys Shares in respect of which the Takeover
Offer has not been accepted.

Investors should be aware that Bidco may purchase Velocys Shares otherwise
than under any Takeover Offer or the Scheme, including pursuant to privately
negotiated purchases.

Rule 2.9 of the Takeover Code

For the purposes of Rule 2.9 of the Takeover Code, Velocys confirms that, as
at close of business on the Latest Practicable Date, it had 1,651,798,992
ordinary shares of 1 pence each in issue. Velocys holds no shares in treasury.
Accordingly, the total number of voting rights in Velocys is 1,651,798,992.
The International Securities Identification Number ("ISIN") of Velocys' shares
is GB00B11SZ269.

Disclaimer

The Acquisition will be subject to English law, the jurisdiction of the Court,
and the applicable requirements of the Takeover Code, the Panel, the London
Stock Exchange and the Registrar of Companies.

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR
INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE
A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF THAT JURISDICTION

FOR IMMEDIATE RELEASE

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF
EU REGULATION 596/2014 (WHICH FORMS PART OF UK LAW BY VIRTUE OF THE EUROPEAN
UNION (WITHDRAWAL) ACT 2018). UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN

 

5 December 2023

RECOMMENDED CASH ACQUISITION

of

Velocys plc

by

Madison Bidco Limited

(a newly formed company indirectly owned by (i) a fund advised by Lightrock,
(ii) a fund advised by Carbon Direct Capital, (iii) GenZero and (iv) Kibo
Investments, as members of the Consortium)

 

to be implemented by means of a scheme of arrangement

under Part 26 of the Companies Act 2006

1.    Introduction

The boards of directors of Bidco and Velocys are pleased to announce that they
have reached agreement on the terms and conditions of a recommended all cash
acquisition by Bidco of the entire issued, and to be issued, ordinary share
capital of Velocys.

It is intended that the Acquisition will be implemented by way of a
court‑sanctioned scheme of arrangement under Part 26 of the 2006 Act
(although Bidco reserves the right to effect the Acquisition by way of a
Takeover Offer, subject to the consent of the Panel and the terms of the
Cooperation Agreement).

2.    The Acquisition

Under the terms of the Acquisition, which will be subject to the Conditions
and further terms set out in Appendix 1 to this announcement and to be set out
in full the Scheme Document, each Velocys Shareholder will be entitled to
receive:

for each Velocys Share: 0.25 pence in cash

In addition, conditional on the Acquisition becoming Effective, Bidco has
agreed to provide up to US$40 million (approximately £31.5 million) of growth
capital which is expected to ensure that Velocys and its management have the
capital resources needed to deliver against Velocys' medium-term strategic
plans.

In connection with the Acquisition, the Carbon Direct Fund has agreed to
provide a secured bridging loan of £3.5 million ("Bridge Financing") with a
view to providing sufficient capital for Velocys through to the Acquisition
becoming Effective.

The Acquisition values Velocys' entire issued, and to be issued, ordinary
share capital at approximately £4.1 million on a fully diluted basis and
provides a post growth capital valuation of Velocys of up to approximately
US$45.2 million (approximately £35.6 million).

If, on or after the date of this announcement and prior to the Acquisition
becoming Effective, any dividend and/or other distribution and/or other return
of capital or value is announced, declared, made or paid or becomes payable in
respect of the Velocys Shares, Bidco reserves the right to reduce the
consideration payable under the terms of the Acquisition for the Velocys
Shares by an amount up to the aggregate amount of such dividend and/or
distribution and/or other return of capital or value, in which case any
reference in this announcement to the consideration payable under the terms of
the Acquisition will be deemed to be a reference to the consideration as so
reduced. Any exercise by Bidco of its rights referred to in this paragraph
shall be the subject of an announcement and, for the avoidance of doubt, shall
not be regarded as constituting any revision or variation of the terms of the
Scheme or the Acquisition. In such circumstances, Velocys Shareholders shall
be entitled to retain any such dividend, distribution and/or other return of
capital or value.

3.            Background to and reasons for the Acquisition

Bidco believes that the production of sustainable aviation fuel ("SAF") is a
compelling market opportunity given the confluence of regulatory support,
demand pull by airlines, and increased technology readiness. Furthermore,
Bidco believes Velocys is well positioned to capitalise on these sector
tailwinds given its patented integrated Fischer-Tropsch reactor and catalysis
solution and its pipeline of commercial licensing opportunities.

However, while Bidco believes that these secular tailwinds for SAF potentially
stand to benefit Velocys and its technology in the long term, without
significant additional growth capital Velocys will be unable to further scale
the business and accelerate the delivery of its technology to clients,
including Velocys' reference projects. Reflecting the very challenging public
market environment, the deterioration in Velocys' share price prior to release
of the possible offer announcement, and the risks and circumstances of the
business, Velocys has been unable to raise sufficient growth capital. Bidco
believes that, given this funding challenge, the viability of the business and
its ability to deliver against its growth strategy will be impacted to the
detriment of Velocys' shareholders, management team and employees.

It is the view of Bidco that the longer-term interests of Velocys and its
employees therefore are best served away from the public markets. Bidco
believes that Velocys is best positioned to succeed as a private company, with
the current management team, and with an injection of growth capital from a
consortium of long-term investors who have the requisite experience in
supporting industrial companies as they seek to fully realise their potential.

Velocys noted in its announcement on 20 November 2023 that, unless Velocys was
able to find meaningful sources of funding or strategic options, it was
unlikely that Velocys would be able to continue as a going concern beyond the
end of December. This date has now been extended into early-January 2024 as a
result of cost control and cash management initiatives. The Acquisition
provides Velocys shareholders with a certain liquidity opportunity in
circumstances where shareholders may otherwise face the prospect of realising
minimal value.

4.    Recommendation

The Velocys Directors, who have been so advised by Panmure Gordon as to the
financial terms of the Acquisition, consider the terms of the Acquisition to
be fair and reasonable. Panmure Gordon is providing independent financial
advice to the Velocys Directors for the purposes of Rule 3 of the Takeover
Code.

In providing its financial advice to the Velocys Directors, Panmure Gordon has
taken into account the commercial assessments of the Velocys Directors.
Panmure Gordon has taken into consideration Velocys' limited cash resources,
the challenging financial position of Velocys and the absence of alternative
funding offers, in circumstances where, should the Bridge Financing not be
made available by the Carbon Direct Fund in connection with the Acquisition,
the insolvency of Velocys would be a significant possibility. The Velocys
Directors believe that the Bridge Financing, which is vital for Velocys to
avoid insolvency, would not be made available in the absence of the
Acquisition and that any insolvency would highly likely result in minimal
value being returned to Velocys Shareholders.

Accordingly, the Velocys Directors, who have been so advised by Panmure
Gordon, intend to unanimously recommend that Velocys Shareholders vote in
favour of the Scheme at the Court Meeting and the Resolutions at the General
Meeting (or in the event that the Acquisition is implemented by way of a
Takeover Offer, to accept or procure the acceptance of such Takeover Offer).

Each Velocys Director who holds Velocys Shares has irrevocably undertaken to
vote in favour of the Scheme at the Court Meeting and in favour of the
Resolutions to be proposed at the General Meeting in respect of their own
beneficial holdings of Velocys Shares, amounting to, in aggregate 7,070,412
Velocys Shares representing approximately 0.43 per cent. of the existing
issued ordinary share capital of Velocys as at the Latest Practicable Date.

Velocys Shareholders should note that, in the event that the Acquisition does
not become Effective, it is unlikely that Velocys will be able to repay the
Bridge Financing and remain a going concern. In those circumstances, it is
likely that administrators would be appointed promptly and, whilst the
administrator would seek to maximise value from the sale of available assets,
it is considered highly unlikely that this would result in anything other than
mininmal returns to Velocys Shareholders, after costs and preferential
(including secured) and unsecured claims that would arise on insolvency.

5.    Background to and reasons for the recommendation

Velocys operates a business model focused on providing a unique technology
pathway to enable production of SAF. Velocys has developed industry leading
proprietary patented micro-channel Fischer-Tropsch reactors and a
comprehensive biorefinery integrated technology package for use by SAF
producers with the focus of the business model being to provide Velocys'
Fischer-Tropsch solution under site license agreements and subsequently
providing engineering services, reactors and catalysts to generate revenue
through fees. Velocys has an extensive intellectual property portfolio
consisting of over 200 granted patents, 90 pending patents and various
trademarks.

Significant funding requirement to execute Velocys' strategy

The provision of Velocys' integrated technology and service model requires
significant engineering and project resources, alongside a robust balance
sheet to support the business whilst its revenue pipeline develops (including
the two reference projects in development) and to provide performance
guarantees to future clients. In addition, Velocys requires funding for its
recently commissioned manufacturing facility, including for production
start-up and the strengthening of catalysis service delivery to clients. The
commercial progress of Velocys, and in turn the timing of significant revenue
and income for Velocys, is dependent on external factors such as favourable
government policies relating to SAF and the construction funding of
biorefineries by third parties. The potential for delays to Velocys' revenue
potential means that significant working capital continues to be required to
support the business during its growth phase.

Notwithstanding the commercial progress made to date by Velocys, it currently
generates minimal revenue and has significant losses. Accordingly, Velocys
has, for some time, been seeking significant long-term funding to further
scale its business and to allow for the acceleration of the delivery of its
technology to clients, including Velocys' reference projects and an identified
pipeline of opportunities. To achieve this, on 18 May 2023, Velocys announced
a fundraise of a minimum of US$40 million (up to a maximum of £50 million).
However, reflecting a challenging public market environment and the risks and
circumstances of the business, only a total of £6.3 million (before expenses)
has been raised since this date.

Significant market head winds

Velocys' revenue is heavily influenced by the progress of its customers,
including its two reference projects and large but slow-moving business
development pipeline, as well as the ability for SAF biorefinery projects to
attract significant third-party financing to enable Velocys to invoice the
projects. The SAF industry is relatively nascent and evolving. The industry
has been impacted by slower than expected government policies (particularly in
the UK) and technical issues with third party SAF technologies which the
Velocys Board believes, in addition to its funding issues, have impacted the
timeliness of completion of the development capital raises for the Altalto
Project and Bayou Fuels Project. Accordingly, Velocys had minimal revenues in
2023 and had to continue to meet the costs of both the Altalto Project (in
addition to grant funding) and the Bayou Fuels Project.

Alternative options explored by Velocys

As a result of Velocys' material funding requirements, during 2023, the
Velocys Board has had discussions with a broad range of institutional and
specialist financial investors, as well as strategic investors and venture
entities, none of which (save for in relation to discussions with members of
the Consortium) have to date resulted in offers of material funding for
Velocys.

Equity financing: The equity fundraise in May 2023 raised less than targeted,
and the financial markets and risk profile of the business have not materially
improved since this date. Even if new or existing shareholders were prepared
to put further equity funding into Velocys, there would be no guarantee that
such funding could be made available on a timely basis and such funding would
likely be highly dilutive to existing shareholders. Further, any such funding
would be unlikely to significantly extend Velocys' cash runway, given Velocys'
relatively high working capital needs and ongoing funding requirements.

Debt financing: As noted above, Velocys has very limited revenues and
significant losses and, accordingly, other than the Bridge Financing (which is
being provided in connection with the Acquisition), Velocys has not identified
a viable debt solution to provide near-term or long-term financing.

Other strategic alternatives: In recent weeks and months, Velocys has explored
a number of strategic alternatives, including discussions with a number of
companies operating in relevant industries. To date, none of these have
resulted in a viable funding alternative. Whilst Velocys continues to pursue
commercial, collaboration and licence opportunities, given Velocys' very
limited cash runway, it is highly unlikely that these opportunities could
materially extend the cash runway in the timeframe available. The Velocys
Board believes that Velocys' value primarily lies in its integrated technology
solution and, accordingly, that it is highly unlikely that Velocys
Shareholders would receive additional value over and above the Acquisition
Price in the event that Velocys sold its assets on a piecemeal basis or
entered an insolvency process, such as administration. Velocys has taken
specialist restructuring advice in relation to its very limited cash runway.

In summary, the Velocys Board believes that none of the alternatives set out
above are capable of delivering a solution to the urgent financial constraints
faced by Velocys. The Velocys Board now finds itself in a challenging position
where, given the immediate need for near-term funding and Velocys' significant
long-term funding requirements, other than the Acquisition and associated
provision of funding to Velocys, it currently has no viable options available
to it that would secure sufficient near-term funding and otherwise that would
be expected to secure the future of the business. The announcement made by
Velocys on 20 November 2023 noted that Velocys would require funding by the
end of December 2023 to enable it to continue as a going concern. This date
has now been extended into early-January 2024 as a result of cost control and
cash management initiatives undertaken by Velocys however, this slight
extension has no material impact on Velocys' precarious financial position. In
the event that funding is not obtained, Velocys would need to consider and
take steps to implement alternatives which continue to seek to protect the
interests of financial creditors, commercial counterparties and employees
potentially resulting in minimal value being attributed to the existing
equity.

Bridge Financing and growth capital

The proposals for the Acquisition include: (i) the provision of near-term
funding in the form of the Bridge Financing by the Carbon Direct Fund; and
(ii) an intention from Bidco to provide up to US$40 million of growth capital
funding to Velocys following the Acquisition becoming Effective. It is
Velocys' understanding that, absent the Acquisition, the Bridge Financing
would not be available to Velocys. Further details on the Bridge Financing are
set out below.

Bridge Financing

On 5 December 2023, in connection with the Acquisition, the Carbon Direct Fund
entered into the Facility Letter with Velocys and certain of Velocys'
subsidiaries (as guarantors). Pursuant to the terms of the Facility Letter,
the Carbon Direct Fund has agreed to make available to Velocys a term secured
loan facility of £3.5 million.

The Bridge Financing will be available to be used for general corporate and
working capital purposes. The Bridge Financing will (subject to customary
conditions at the time of each utilisation) be available to Velocys to draw
down in tranches no more frequently than once in every two week period and in
amounts based on the anticipated cash flow requirements of Velocys for that
period), until the final draw down date of 31 January 2024. No further
utilisation requests may be made after 31 January 2024 without the consent of
the Carbon Direct Fund. On the current anticipated timetable, the Acquisition
is expected to become Effective prior to 31 January 2024. Any drawn down
amounts under the Bridge Financing shall be repayable 364 days from the date
of the Facility Letter unless any of the following occurs before that time, in
which case the Bridge Financing will be required to be repaid in full upon
such occurrence:

(1)  the Acquisition becomes Effective:

(2)  a Change of Control occurs (being any person or group of persons acting
in concert (other than the Consortium) acquiring 50.1 per cent. of the shares
in Velocys or otherwise gaining direct or indirect control of Velocys);

(3)  the sale of all, or substantially all, of the assets of Velocys occurs
whether in a single transaction or a series of related transactions; or

(4)  it becomes illegal for the Carbon Direct Fund to fund or maintain its
participation in the financing.

 

Interest will accrue at a rate of 30 per cent. per annum on the principal
drawn down pursuant to the Facility Letter.

The Bridge Financing is secured by English and New York law security interests
granted by Velocys and certain of Velocys' subsidiaries. Further details of
the security are set out in paragraph 11 below.

                Long term financing

Subject to the Acquisition becoming Effective, Bidco has agreed (from the
Effective Date) to provide up to US$40 million (approximately £31.5 million)
of growth capital which is expected to ensure that Velocys has the capital
resources it needs to deliver against its medium-term strategic plans.
Existing shareholders will not benefit from the injection of growth capital
into Velocys. The Acquisition and Bidco's commitment to provide growth capital
of up to US$40 million provides a post growth capital valuation of Velocys of
up to approximately US$45.2 million (approximately £35.9 million). Even if
Velocys were able to raise a similar amount in the near-term as a public
company through the issue of new shares, this would result in significant
dilution of existing Velocys Shareholders.

Conclusion

In conclusion absent the Acquisition Velocys would need to consider and take
immediate steps to implement alternatives which continue to seek to protect
the interests of financial creditors, commercial counterparties and employees,
but which would highly likely result in minimal value being attributed to the
existing equity. There can be no guarantee that Velocys would be able to
implement alternatives in the available timeframe and it is highly likely
Velocys would face insolvency if such alternatives are not implemented in the
available timeframe.

The Velocys Directors believe that the financial terms of the Acquisition,
when considered together with the financial support to be provided under the
Bridge Financing and intended to be provided under the US$40 million growth
capital funding, represent the most realistic prospect of returning any value
to Velocys Shareholders and the best prospect of enabling Velocys to meet its
obligations to employees, pension scheme members and other creditors and to
continue to trade as a going concern.

Taking into account the above, the Velocys Board, together with its financial
advisers Panmure Gordon, have carefully considered and evaluated the financial
terms of the Acquisition. Panmure Gordon is providing financial advice to
Velocys under Rule 3 of the Code. In making its assessment, the Velocys Board
has also carefully evaluated Bidco's intentions regarding the conduct of the
Velocys business under Bidco's ownership. Accordingly, the Velocys Directors
intend to unanimously recommend that Velocys Shareholders vote in favour of
the Scheme at the Court Meeting and the Resolutions at the General Meeting (or
in the event that the Acquisition is implemented by way of a Takeover Offer,
to accept or procure the acceptance of such Takeover Offer).

In intending to unanimously recommend the Acquisition, the Velocys Board
believes that there is no present viable alternative likely to produce more
value for Velocys Shareholders than would be available through the
Acquisition, and further that the Acquisition (given the associated provision
of funding) represents the only realistic prospect of allowing Velocys to
continue as a going concern.

6.    Information relating to Bidco AND the consortium

Bidco

Bidco is a private limited company incorporated in England and Wales on 28
November 2023. It has its registered office at 1 Eagle Place, London, Greater
London, SW1Y 6AF. The current directors of Bidco are Kevin Bone, Josh Dienstag
and May Liew. Bidco was formed for the purposes of the Acquisition and has not
traded since its date of incorporation, nor has it entered into any
obligations other than in connection with the Acquisition.

All members of the Consortium are shareholders in Bidco. The members of the
Consortium are:

o  Lightrock: Lightrock is a global private equity firm and 'impact investor'
with a focus on growth capital. Lightrock's investment philosophy targets
companies that pursue scalable and tech-driven business models around the key
impact themes of people, planet, and productivity-tech for good;

o  Carbon Direct Capital: Carbon Direct Capital is a global growth investment
firm that partners with carbon management technology companies. The firm
believes that investing with a science-focused approach maximizes both climate
impact and financial returns;

o  GenZero: GenZero is founded by Temasek, a global investment firm
incorporated and headquartered in Singapore. It is committed to delivering
positive climate impact and long-term sustainable financial returns by
investing in opportunities with the potential to be nurtured into impactful
and scalable solutions; and

o  Kibo Investments: Kibo Investments is a Singapore-based private investment
office with a focus on climate technology

7.            Information relating to Velocys

Velocys is an international sustainable fuels technology company, providing
clients with one of the most sustainable routes to the economic production of
drop-in SAF from a variety of waste materials. Velocys operates a licencing
model offering a technology solution for the development of synthetic
sustainable fuels manufacturing via its proprietary patented micro-channel
Fischer-Tropsch reactors and comprehensive biorefinery integrated technology
package. Velocys has offices in Oxford, UK as well as Houston, US and reactor
manufacturing facilities in Ohio, US.

Velocys has a number of third-party clients to whom it supplies its services
and technology; in addition Velocys is developing two full-scale biorefinery
reference projects: the Bayou Fuels Project in Mississippi, US, which will
utilise woody waste to produce sustainable fuels, and the Altalto Project in
Immingham in the UK, which will process municipal and commercial solid waste
into sustainable fuels. The reference projects are being developed to
accelerate adoption of Velocys' technology and, following the completion of
third-party development capital project financing and commencement of the
detailed engineering stage of these projects, the reference projects are
expected to generate significant technology licensing revenue for Velocys.

Velocys' near-term ambitions are focused on creating sustainable value by
growing the customer pipeline, progressing its biorefinery reference projects
in the UK and US into FEED (Front End Engineering Design) delivery and revenue
generation. Fees will start being generated as the reference projects progress
through their FEED phase which will generate revenues through the execution of
technology licenses and engineering services agreements. Velocys is also
focused on expansion of its commercial and business development functions, and
engineering and reactor manufacturing to support the scale-up of its business.

Velocys' aim is to become a leading provider of innovative SAF solutions to
enable the decarbonisation of the aviation industry.

8.            Irrevocable undertakings

As described above, Bidco has received irrevocable undertakings to vote (or,
where applicable, procure voting) in favour of the Scheme at the Court Meeting
and the Resolutions to be proposed at the General Meeting (or in the event
that the Acquisition is implemented by a Takeover Offer, to accept or procure
acceptance of such Takeover Offer) from all of the Velocys Directors who own
Velocys Shares, in respect of their own beneficial holdings totalling
7,070,412 Velocys Shares (representing approximately 0.43 per cent. of the
existing issued ordinary share capital of Velocys) as at the Latest
Practicable Date. The undertakings will remain binding in the event that a
higher competing offer for Velocys is made.

In addition to the irrevocable undertakings referred to above received from
the Velocys Directors, Bidco has received an irrevocable commitment from
Lansdowne Partners to vote in favour of the Scheme at the Court Meeting and
the Resolutions to be proposed at the General Meeting (or in the event that
the Acquisition is implemented by a Takeover Offer, to accept or procure
acceptance of such Takeover Offer), in respect of 303,156,632 Velocys Shares
(representing approximately 18.35 per cent. of the existing issued ordinary
share capital of Velocys) as at the Latest Practicable Date. The undertakings
will remain binding in the event that a higher competing offer for Velocys is
made.

Accordingly, Bidco has received irrevocable commitments to vote in favour of
the resolutions relating to the Scheme and the Acquisition at the Meetings (or
in the event that the Acquisition is implemented by a Takeover Offer, to
accept or procure acceptance of such Takeover Offer), in respect of a total of
310,227,044 Velocys Shares (representing in aggregate approximately 18.78 per
cent. of the existing issued ordinary share capital of Velocys) as at the
Latest Practicable Date.

Further details of these irrevocable undertakings, including the circumstances
in which they cease to be binding, are set out in Appendix 3 to this
announcement.

9.            Financing of the Acquisition

The cash consideration payable to Velocys Shareholders under the terms of the
Acquisition will be financed using cash resources made available to Bidco from
members of the Consortium.

In accordance with Rule 2.7(d) of the Code, Cavendish, in its capacity as
financial adviser to Bidco, is satisfied that sufficient resources are
available to Bidco to satisfy in full the cash consideration payable to
Velocys Shareholders under the terms of the Acquisition.

Further information on the financing of the Acquisition will be set out in the
Scheme Document.

10.          SANCTIONS DISQUALIFIED SHAREHOLDERS

In connection with the Russia-Ukraine conflict, the United Kingdom, the
European Union, the United States, Canada, Japan, Australia and other
countries have imposed broad-ranging economic sanctions against officials,
individuals, regions, companies and industries in Russia. The sanctions
consist of (amongst other things) asset freezes and other restrictions on
certain individuals and entities, and restrictions on certain trade and
financial transactions involving Russia.

To the extent that any Velocys Shareholder is a Sanctions Disqualified
Shareholder, the transfer of such Velocys Shareholder's Scheme Shares and
their entitlement to the cash consideration payable by Bidco for such Velocys
Shares will arise (on the basis set out in the Scheme) only upon the later of:
(i) the Effective Date; and (ii) the earlier of the Licence Grant Date or the
date on which the relevant asset freeze or other Sanctions are removed. In
addition, no Sanctions Disqualified Shareholder will be entitled to vote at
the Court Meeting or appoint a proxy to exercise all or any such Velocys
Shareholder's right to vote on their behalf at the meeting.

11.          Offer‑related arrangements

Confidentiality agreement with Carbon Direct Capital

On 30 August 2022, Carbon Direct Capital and Velocys entered into a
confidentiality agreement, pursuant to which, amongst other things, Carbon
Direct Capital has undertaken, subject to certain exceptions, to keep
information relating to Velocys confidential and not to disclose it to third
parties. The term of the confidentiality agreement was extended on 29 November
2023. These confidentiality obligations will remain in force until the earlier
of: (i) 29 August 2024; and (iii) 30 days after either Carbon Direct Capital
or Velocys gives notice of termination to the other.

Confidentiality agreement with Lightrock

On 27 November 2023, Lightrock and Velocys entered into a confidentiality
agreement in relation to the Acquisition covering information shared between
the parties since 1 October 2023, pursuant to which, amongst other things,
Lightrock has undertaken, subject to certain exceptions, to keep information
relating to Velocys confidential and not to disclose it to third parties.
These confidentiality obligations will remain in force until the earlier of:
(i) the date on which the parties enter into definitive documentation; (ii) 1
October 2026; and (iii) 30 days after either Lightrock or Velocys gives notice
of termination to the other.

Confidentiality agreement with GenZero

On 16 October 2023, GenZero, through Carbon Solutions Platform Pte. Ltd and
Velocys entered into a confidentiality agreement in relation to the
Acquisition, pursuant to which, amongst other things, GenZero has undertaken,
subject to certain exceptions, to keep information relating to Velocys
confidential and not to disclose it to third parties. These confidentiality
obligations will remain in force until the earlier of: (i) 16 October 2025;
and (ii) 30 days after either GenZero or Velocys gives notice of termination
to the other.

Confidentiality agreement with Kibo Investments

On 24 August 2023, Kibo Invest Pte. Ltd., on behalf of Kibo Investments, and
Velocys entered into a confidentiality agreement in relation to the
Acquisition, pursuant to which, amongst other things, Kibo Investments has
undertaken, subject to certain exceptions, to keep information relating to
Velocys confidential and not to disclose it to third parties. These
confidentiality obligations will remain in force until the earlier of: (i) 24
August 2026 and (ii) 30 days after either Kibo Investments or Velocys gives
notice of termination to the other.

Cooperation Agreement

Pursuant to the Cooperation Agreement, Bidco and Velocys have, amongst other
things, each agreed to cooperate in respect of the obtaining of a licence from
the Office of Financial Sanctions Implementation in connection with the
transfer of any Velocys Shares held by Sanctions Disqualified Shareholders.
This is because these Velocys Shareholders are prohibited from participating
in the Acquisition in the absence of such a licence or the Sanctions
applicable to them being removed, as described in paragraph 10 above. Pursuant
to the Cooperation Agreement, Bidco has also agreed to put arrangements in
place for the continued availability of directors' and officers' insurance for
the Velocys Directors following the Acquisition becoming Effective. In
addition, Bidco has agreed to certain provisions if the Scheme should switch
to a Takeover Offer. The Cooperation Agreement will terminate in certain
circumstances, including if the Acquisition is withdrawn, terminated or
lapses, or if prior to the Long Stop Date any Condition has been invoked by
Bidco (with the consent of the Panel), if the Velocys Directors withdraw their
recommendation of the Acquisition or if the Acquisition does not become
Effective in accordance with its terms by the Long Stop Date or otherwise as
agreed between Bidco and Velocys. Pursuant to the terms of the Cooperation
Agreement and the requirements of Paragraph 3(g)(i) of Appendix 7 to the
Takeover Code, Bidco undertakes that it will deliver a notice in writing to
Velocys and the Panel on the Business Day prior to the Sanction Hearing
confirming either: (i) the satisfaction or waiver of the Conditions (other
than the Conditions relating to the implementation of the Scheme); or (ii) to
the extent permitted by the Panel, that it intends to invoke or treat as
unsatisfied or incapable of satisfaction one or more Conditions.

Facility Letter and security

Pursuant to the terms of the Facility Letter, the Carbon Direct Fund has
agreed to provide a term loan facility to Velocys of £3.5 million, Velocys
may utilise the facility for general corporate and working capital purposes of
the Velocys Group. Details of the Facility Letter are set out in paragraph 5
above.

The Bridge Financing is secured by English and New York law security interests
granted by granted by Velocys and certain of Velocys' subsidiaries.
Accordingly, on 5 December 2023, in connection with the Bridge Financing,
Velocys and certain of Velocys' subsidiaries (as guarantors) entered into (i)
an English law governed debenture, pursuant to which Velocys and certain of
Velocys' subsidiaries granted security interests over substantially all of
their assets including intellectual property, land, investments, bank accounts
and insurances; (ii) a New York law governed share pledge agreement, pursuant
to which Velocys and one of its subsidiaries granted pledges over the shares
and associated rights in certain of Velocys' subsidiaries; a New York law
governed patent security agreement, pursuant to which certain of Velocys'
subsidiaries pledged certain patent collateral and associated rights and the
authorisation to supplement that pledge of patent collateral; and (iv) a New
York law governed secured guaranty, pursuant to which certain of Velocys'
subsidiaries pledged and granted security interests in substantially all of
their assets, in each case, in favour of the Carbon Direct Fund.

12.          Disclosure of interests in Velocys securities

Except for the irrevocable undertakings referred to in paragraph 8 above, as
at 4 December 2023 (being the Latest Practicable Date) neither Bidco, nor any
of its directors, nor, so far as Bidco is aware, any person treated as acting
in concert (within the meaning of the Takeover Code) with it for the purposes
of the Acquisition: (i) had any interest in or right to subscribe for any
relevant securities of Velocys; or (ii) had any short positions in respect of
relevant securities of Velocys (whether conditional or absolute and whether in
the money or otherwise), including any short position under a derivative, any
agreement to sell or any delivery obligation or right to require another
person to purchase or take delivery; or (iii) has borrowed or lent any
relevant securities of Velocys (including, for these purposes, any financial
collateral arrangements of the kind referred to in Note 3 on Rule 4.6 of the
Takeover Code) save for any borrowed shares which have been either on-lent or
resold; or (iv) is a party to any dealing arrangement of the kind referred to
in Note 11 on the definition of acting in concert in the Takeover Code.

13.      Directors, management, employees, pensions, research and
development and locations

Bidco's strategic plans for Velocys

Bidco recognises the strength of Velocys' market proposition, technology,
licences, partners, people, facilities and reference projects and believes
that under the ownership of Bidco, and with an adequate injection of growth
capital, Velocys' prospects can materially improve. Bidco acknowledges and
places great value on the identified commercial pipeline of licensing
opportunities Velocys has fostered and believes that successful execution of
this pipeline and the conversion of leads into binding agreements can generate
significant returns on any investment. Notwithstanding this, Bidco is also
highly cognisant of Velocys' current inability to deliver on its strategy and
therefore, conditional on the Acquisition becoming Effective, Bidco has agreed
to provide up to US$40 million of growth capital which is expected to enable
Velocys to meet its medium-term strategic plans.

Following the Acquisition becoming Effective, Bidco intends to work closely
with Velocys' management, and where appropriate, other stakeholders, to
undertake a review of Velocys' business in order to determine the short and
long-term objectives for the business and how they can best be delivered
having regard to the additional growth capital being provided by Bidco. This
review will include an assessment as to how best to support Velocys' existing
growth strategies in pursuit of the commercial opportunities before it. The
detailed scope of this review and the appropriate timetable for its completion
has not yet been finalised, but Bidco anticipates this review will be
completed within approximately three months from the Acquisition becoming
Effective.

Employees and management

Bidco attaches great importance to the skills and experience of the employees
and management team of Velocys and its subsidiaries and consequently, Bidco
does not intend to cause Velocys or its subsidiaries to effect any material
change with regard to: (i) the continued employment of its employees and
managers and (ii) the conditions of employment or balance of skills and
functions of the management of Velocys or its subsidiaries. However, given
Bidco's intention for Velocys to operate as a private company going forward,
certain functions necessary for Velocys to operate as a public company will no
longer be needed, which may result in marginal reductions in headcount. In
addition, it is intended that, with effect from the Effective Date, each of
Velocys' non-executive directors will resign from their office as directors of
Velocys.

Existing employment rights and pensions

Bidco intends for the existing contractual and statutory employment rights of
Velocys' management and employees will be safeguarded in accordance with
applicable law.

Velocys does not operate or contribute to any defined benefit pension schemes
in respect of its management and employees. It does, however, contribute to a
defined contribution pension plan. Bidco does not intend to make any material
changes to the terms and conditions of Velocys' pension schemes, including the
employer contributions, accrual of benefits for existing members or the rights
of admission of new members.

Incentive arrangements

The Acquisition will affect participants in the Velocys Share Plans, who will
be contacted separately as set out in paragraph 14 below.

Bidco has not entered into and has not had discussions on proposals to enter
into, any form of incentivisation arrangements with members of Velocys'
management. However, Bidco believes that providing equity incentivisation of
key employees is important to align the team with the firm's mission and
strategic objectives and therefore following the Acquisition becoming
Effective, Bidco intends to review the management, governance and incentive
structure of Velocys. Bidco confirms no discussions regarding incentive
arrangements will take place before the Effective Date.

Headquarters, locations, fixed assets and research and development

Bidco does not intend to make any changes to Velocys' business (including its
research and development function) or broader strategic plans, or locations
and places of business (including its headquarters and headquarters functions)
and does not intend to redeploy any of Velocys' fixed assets.

Trading facilities

Velocys Shares are currently admitted to trading on the AIM. As set out in
paragraph 16, applications will be made for the cancellation of the admission
to trading of Velocys Shares on AIM and steps will be taken by Bidco following
the Acquisition becoming Effective to re-register Velocys as a private
company.

None of the statements in this paragraph 13 are "post-offer undertakings" for
the purposes of Rule 19.5 of the Takeover Code.

14.          Velocys Share Plans

Participants in the Velocys Share Plans will be contacted regarding the effect
of the Acquisition on their options and awards under the Velocys Share Plans.
Details of the impact of the Scheme on each of the Velocys Share Plans and the
proposals will be set out in the Scheme Document. Options under the Velocys
Share Plans have a higher exercise price than the Acquisition Price and
therefore no proposals are required to be made for any options under the
Velocys Share Plans pursuant to Rule 15 of the Takeover Code. Accordingly, no
such Rule 15 proposals will be made to option holders in connection with the
Acquisition.

15.          Scheme process

The Acquisition is subject to the Conditions and certain further terms
referred to in Appendix 1 to this announcement and to be set out in full in
the Scheme Document, and will only become Effective if, among other things,
the following events occur on or before the Long Stop Date (or such later date
as Bidco and Velocys may, with the consent of the Panel, agree and, if
required, the Court may approve):

·    a resolution to approve the Scheme is passed by a majority in number
of Velocys Shareholders present and voting (and entitled to vote) at the Court
Meeting, either in person or by proxy, representing 75 per cent. or more in
value of each class of the Scheme Shares held by those Velocys Shareholders;

 

·    the Resolutions necessary to implement the Scheme and the Acquisition
is passed by the requisite majority of Velocys Shareholders at the General
Meeting;

 

·    following the Court Meeting and General Meeting and satisfaction
and/or waiver (where applicable) of the other Conditions, the Scheme is
sanctioned by the Court (without modification, or with modification on terms
agreed by Bidco and Velocys); and

 

·    following such sanction, a copy of the Court Order is delivered to
the Registrar of Companies.

The Conditions in paragraphs 1 and 2 of Appendix I to this announcement
provide that the Scheme will lapse (under the authority of Rule 13.5(b) of the
Takeover Code) if:

·    the Court Meeting and the General Meeting are not held by the 22(nd)
day after the expected date of the Court Meeting and the General Meeting to be
set out in the Scheme Document in due course (or such later date as may be
agreed between Bidco and Velocys with the consent of the Panel (and that the
Court may approve if required));

 

·    the Sanction Hearing to approve the Scheme is not held by the 22(nd)
day after the expected date of the Sanction Hearing to be set out in the
Scheme Document in due course (or such later date as may be agreed between
Bidco and Velocys with the consent of the Panel (and that the Court may
approve if required)); or

 

·    the Scheme does not become Effective by 11.59 p.m. on the Long Stop
Date (or such later date as Bidco and Velocys may, with the consent of the
Panel, agree and (if required) the Court may allow).

If any Condition in paragraph 2 of Appendix I to this announcement is not
capable of being satisfied by the date specified therein, Bidco shall make an
announcement through a Regulatory Information Service as soon as practicable
and, in any event, by not later than 8.00 a.m. on the Business Day following
the date so specified, stating whether Bidco has invoked that Condition,
(where applicable) waived that Condition or, with the agreement of Velocys,
specified a new date by which that Condition must be satisfied.

Once the necessary approvals from Velocys Shareholders have been obtained and
the other Conditions have been satisfied or (where applicable) waived and the
Scheme has been sanctioned by the Court, the Scheme will become Effective upon
delivery of a copy of the Court Order to the Registrar of Companies. Subject
to the satisfaction of the Conditions, the Scheme is expected to become
Effective during January 2024.

As noted in paragraph 10, Velocys and Bidco have agreed to cooperate in
respect of the obtaining of a licence from the Office of Financial Sanctions
Implementation in connection with the Acquisition. The obtaining of such
licence is not a Condition, but rather, to the extent that any Velocys
Shareholder is a Sanctions Disqualified Shareholder, any Velocys Shares held
by any such Velocys Shareholder and such Velocys Shareholder's entitlement to
the cash consideration payable by Bidco for such Velocys Shares will arise (on
the basis set out in the Scheme) upon the later of: (i) the Effective Date;
and (ii) the earlier of the Licence Grant Date or the date on which the
relevant asset freeze or other Sanctions are removed.

Upon the Scheme becoming Effective: (i) it will be binding on all Velocys
Shareholders, irrespective of whether or not they attended or voted at the
Court Meeting or the General Meeting (and if they attended and voted, whether
or not they voted in favour); and (ii) share certificates in respect of Scheme
Shares (other than Scheme Restricted Shares unless the Licence Grant Date
takes place prior to or on the Effective Date) will cease to be valid and
entitlements to Scheme Shares held within the CREST system will be cancelled.
In accordance with the applicable provisions of the Takeover Code, the
consideration for the transfer of the Scheme Shares to Bidco will be
despatched no later than 14 days after the Effective Date. The consideration
for the transfer of the Scheme Restricted Shares to Bidco will be despatched
on the later of: (i) 14 days from the Effective Date; and (ii) the earlier of
the Licence Grant Date or the date on which the relevant asset freeze or other
Sanctions are removed. In the event asset freeze or other Sanctions remain in
place upon the transfer of the Scheme Restricted Shares to Bidco, the
consideration will be held in a segregated account in accordance with
applicable sanctions legislation.

Any Velocys Shares issued before the Scheme Record Time will be subject to the
terms of the Scheme.

Further details of the Scheme, including expected times and dates for each of
the Court Meeting, the General Meeting and the Sanction Hearing, together with
the notices of the Court Meeting and the General Meeting, will be set out in
the Scheme Document.

It is expected that the Scheme Document and the Forms of Proxy accompanying
the Scheme Document will be sent to Velocys Shareholders (other than Sanctions
Disqualified Shareholders) as soon as practicable and in any event within 28
days of this announcement (or such later date as Bidco and Velocys may, with
the consent of the Panel, agree and, if required, the Court may approve).

16.          Delisting, and cancellation of trading and
re‑registration

Prior to the Acquisition becoming Effective, Velocys will make an application
to the London Stock Exchange for the cancellation of the admission to trading
of Velocys Shares on AIM, to take effect from or shortly after the Effective
Date.

The last day of dealings in the Velocys Shares on AIM is expected to be the
Business Day immediately prior to the Effective Date and no transfers will be
registered after 6.00 p.m. (London time) on that date.

On the Effective Date, all of the Velocys Shares, other than the Scheme
Restricted Shares unless the Licence Grant Date takes place prior to or on the
Effective Date, will become owned by Bidco and the share certificates in
respect of those Velocys Shares will cease to be valid and of value and should
be destroyed. In addition, entitlements to Velocys Shares held within the
CREST system will be cancelled.

It is intended that, as soon as practicable after the Acquisition is
Effective, Velocys will be re-registered as a private limited company.

17.          Documents

Copies of the following documents will be available on Bidco's website at
www.madisonmomentum.com and Velocys' website at http://offer.velocys.com
(http://offer.velocys.com) , subject to certain restrictions relating to
persons resident in Restricted Jurisdictions, promptly and in any event by no
later than noon on the Business Day following this announcement:

·    this announcement;

 

·    the irrevocable undertakings referred to in paragraph 8 above and
summarised in Appendix 3 to this announcement;

 

·    the documents entered into for the financing of the Acquisition
referred to in paragraph 5 above;

 

·    the Confidentiality Agreements;

 

·    the Cooperation Agreement; and

 

·    the consents from financial advisers to being named in this
announcement.

Neither the content of the websites referred to in this announcement, nor any
website accessible from hyperlinks, is incorporated into or forms part of this
announcement.

18.          General

Bidco reserves the right to elect (with the consent of the Panel and subject
to the terms of the Cooperation Agreement) to implement the acquisition of the
Velocys Shares by way of a Takeover Offer as an alternative to the Scheme. In
such event, the Takeover Offer will be implemented on substantially the same
terms, so far as applicable, as those which would apply to the Scheme.

If the Acquisition is effected by way of a Takeover Offer, and such Takeover
Offer becomes or is declared unconditional in all respects and sufficient
acceptances are received, Bidco intends to exercise its rights to apply the
provisions of Chapter 3 of Part 28 of the 2006 Act so as to acquire
compulsorily the remaining Velocys Shares in respect of which the Takeover
Offer has not been accepted.

Investors should be aware that Bidco may purchase Velocys Shares otherwise
than under the Scheme or any Takeover Offer, including pursuant to privately
negotiated purchases.

The Acquisition will be on the terms and subject to the conditions set out
herein and in Appendix 1, and to be set out in full in the Scheme Document.
The bases and sources for certain financial information contained in this
announcement are set out in Appendix 2. Details of undertakings received by
Bidco are set out in Appendix 3. Certain definitions and terms used in this
announcement are set out in Appendix 4. The Scheme Document will be sent to
shareholders of Velocys within 28 days of this announcement (or on such later
date as may be agreed with Velocys and the Panel).

Cavendish (as financial adviser to Bidco) and Panmure Gordon (as financial
adviser to Velocys) have each given and not withdrawn their consent to the
publication of this announcement with the inclusion herein of the references
to their names in the form and context in which they appear.

This announcement does not constitute an offer or an invitation to purchase or
subscribe for any securities.

Enquiries

 Bidco                                                                      C/O: H/Advisors Maitland

 Kevin Bone (non-executive director)

 Josh Dienstag (non-executive director)

 May Liew (non-executive director)
 Cavendish (Financial Adviser to Bidco and the Consortium)                  020 7220 0500

 Marc Milmo

 Henrik Persson

 Seamus Fricker
 H/Advisor Maitland
 Sam Cartwright / David Sturken                                             020 737 95151
 Velocys

 Henrik Wareborn, CEO                                                       +44 1865 800821

 Philip Sanderson, CFO
 Panmure Gordon (UK) Limited (Rule 3 Adviser, Financial Adviser, Nomad and  020 7886 2500
 Joint Broker to Velocys)

 Emma Earl (Corporate Finance)

 John Prior (Corporate Finance)

 Will Goode (Corporate Finance)

 Mark Rogers (Corporate Finance)

 Hugh Rich (Corporate Broking)
 Shore Capital Stockbrokers Limited (Joint Broker)                          020 7408 4090

 Henry Willcocks (Corporate Broking)

 Toby Gibbs (Corporate Advisory)

 James Thomas (Corporate Advisory)

 

Cooley (UK) LLP is acting as legal adviser to Bidco

Mayer Brown LLP is acting as legal adviser to Velocys.

Further information

Cavendish Capital Markets Limited ("Cavendish"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority, is acting
as financial adviser to the Consortium and Bidco and no one else in connection
with the matters described in this announcement and will not be responsible to
anyone other than the Consortium and Bidco for providing the protections
offered to clients of Cavendish or for providing advice in connection with any
matter referred to in this announcement. 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 this
announcement, any statement contained herein, the Takeover Offer or otherwise.
No representation or warranty, express or implied, is made by Cavendish as to
the contents of this announcement.

Panmure Gordon (UK) Limited ("Panmure Gordon"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority, is acting
as financial adviser and Rule 3 adviser, to Velocys and no one else in
connection with the matters described in this announcement and will not be
responsible to anyone other than Velocys for providing the protections offered
to clients of Panmure Gordon or for providing advice in connection with any
matter referred to in this announcement. Neither Panmure Gordon 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 Panmure Gordon in connection with this
announcement, any statement contained herein, the Takeover Offer or otherwise.
No representation or warranty, express or implied, is made by Panmure Gordon
as to the contents of this announcement.

Shore Capital and Corporate Limited ("Shore Capital"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority, is acting
as adviser to Velocys and no one else in connection with the matters described
in this announcement and will not be responsible to anyone other than Velocys
for providing the protections offered to clients of Shore Capital or for
providing advice in connection with any matter referred to in this
announcement. Neither Shore Capital 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 Shore Capital in connection with this announcement, any statement
contained herein, the Takeover Offer or otherwise. No representation or
warranty, express or implied, is made by Shore Capital as to the contents of
this announcement.

This announcement is for information purposes only and is not intended to, and
does not, constitute, or form part of, an offer, invitation or the
solicitation of an offer to purchase, otherwise acquire, subscribe for, sell
or otherwise dispose of, any securities or the solicitation of any vote or
approval in any jurisdiction pursuant to the Acquisition or otherwise, nor
shall there be any sale, issuance or transfer of securities of Velocys in any
jurisdiction in contravention of applicable law. The Acquisition will be
implemented solely pursuant to the terms of the Scheme Document (or, if the
Acquisition is implemented by way of a Takeover Offer, the offer document),
which will contain the full terms and conditions of the Acquisition, including
details of how to vote in respect of the Acquisition. Any vote in respect of
the Scheme or other response in relation to the Acquisition should be made
only on the basis of the information contained in the Scheme Document (or, if
the Acquisition is implemented by way of a Takeover Offer, the offer
document).

This announcement does not constitute a prospectus, prospectus equivalent
document or exempted document.

This announcement contains inside information in relation to Velocys for the
purposes of Article 7 of the Market Abuse Regulation. The person responsible
for arranging the release of this announcement on behalf of Velocys is David
Bate, General Counsel, Senior Vice President and Head of Compliance for
Velocys. Velocys' Legal Entity Identifier is 549300KGMQV70HA5Y715.

If you are in any doubt about the contents of this announcement or the action
you should take, you are recommended to seek your own independent financial
advice immediately from your stockbroker, bank manager, solicitor, accountant
or independent financial adviser duly authorised under the Financial Services
and Markets Act 2000 (as amended) if you are resident in the United Kingdom
or, if not, from another appropriately authorised independent financial
adviser.

Overseas Shareholders

The release, publication or distribution of this announcement in or into
jurisdictions other than the UK may be restricted by law and therefore any
persons who are subject to the law of any jurisdiction other than the UK
should inform themselves of, and observe, any applicable legal or regulatory
requirements. Any failure to comply with such requirements may constitute a
violation of the securities laws of any such jurisdiction. To the fullest
extent permitted by applicable law, the companies and persons involved in the
Acquisition disclaim any responsibility or liability for the violation of such
restrictions by any person. This announcement has been prepared in accordance
with and for the purpose of complying with English law, the Takeover Code and
the Market Abuse Regulation and information disclosed may not be the same as
that which would have been prepared in accordance with the laws of
jurisdictions outside England.

The availability of the Acquisition to Velocys Shareholders who are not
resident in and citizens of the UK may be affected by the laws of the relevant
jurisdictions in which they are located or of which they are citizens. Persons
who are not resident in the UK should inform themselves of, and observe, any
applicable legal or regulatory requirements of their jurisdictions. In
particular, the ability of persons who are not resident in the United Kingdom
to vote their Velocys Shares with respect to the Scheme at the Court Meeting,
or to appoint another person as proxy to vote at the Court Meeting on their
behalf, may be affected by the laws of the relevant jurisdictions in which
they are located. Any failure to comply with the applicable restrictions may
constitute a violation of the securities laws of any such jurisdiction. To the
fullest extent permitted by applicable law, the companies and persons involved
in the Acquisition disclaim any responsibility or liability for the violation
of such restrictions by any person. Further details in relation to Overseas
Shareholders will be contained in the Scheme Document (or, if the Acquisition
is implemented by way of a Takeover Offer, the offer document).

Unless otherwise determined by Bidco or required by the Takeover Code, and
permitted by applicable law and regulation, the Acquisition will not be made
available, directly or indirectly, in, into or from a Restricted Jurisdiction
where to do so would violate the laws in that jurisdiction and no person may
vote in favour of the Scheme by any such use, means, instrumentality or from
within a Restricted Jurisdiction or any other jurisdiction if to do so would
constitute a violation of the laws of that jurisdiction. Copies of this
announcement and any formal documentation relating to the Acquisition are not
being, and must not be, directly or indirectly, mailed or otherwise forwarded,
distributed or sent in or into or from any Restricted Jurisdiction and persons
receiving such documents (including agents, custodians, nominees and trustees)
must not mail or otherwise forward, distribute or send it in or into or from
any Restricted Jurisdiction. Doing so may render invalid any related purported
vote in respect of the Acquisition. If the Acquisition is implemented by way
of a Takeover Offer (unless otherwise permitted by applicable law and
regulation), the Takeover Offer may not be made directly or indirectly, in or
into, or by the use of mails or any means or instrumentality (including, but
not limited to, facsimile, e-mail or other electronic transmission, telex or
telephone) of interstate or foreign commerce of, or of any facility of a
national, state or other securities exchange of any Restricted Jurisdiction
and the Takeover Offer may not be capable of acceptance by any such use,
means, instrumentality or facilities.

Further details in relation to Overseas Shareholders will be included in the
Scheme Document (or, if the Acquisition is implemented by way of a Takeover
Offer, the offer document).

Sanctions Disqualified Shareholders

Sanctions Disqualified Shareholders should refer to paragraph 10 of this
announcement, which contains important information in relation to such
holders.

Further details in relation to Sanctions Disqualified Shareholders will be
included in the Scheme Document (or, if the Acquisition is implemented by way
of a Takeover Offer, the offer document).

Notice to US or United States Velocys Shareholders

The Acquisition relates to the shares of an English company and is being made
by means of a scheme of arrangement provided for under the laws of England and
Wales. A transaction effected by means of a scheme of arrangement is not
subject to the tender offer or proxy solicitation rules under the US
Securities Exchange Act of 1934 (the "U.S. Exchange Act"). Accordingly, this
announcement, the Scheme and certain other documents relating to the
Acquisition are subject to the disclosure requirements and practices
applicable in the UK to schemes of arrangement which differ from the
disclosure requirements of the US tender offer and proxy solicitation rules.
The financial information included in this announcement and the Scheme
documentation has been prepared in accordance with generally accepted
accounting principles of the United Kingdom and thus may not be comparable to
financial information of US companies or companies whose financial statements
are prepared in accordance with generally accepted accounting principles in
the United States.

If, in the future, Bidco exercises its right to implement the Acquisition by
way of a Takeover Offer, which is to be made into the United States, such
Takeover Offer will be made in compliance with the applicable US laws and
regulations.

It may be difficult for US holders of Velocys Shares to enforce their rights
and any claim arising out of the US federal laws, since Bidco and Velocys are
located in a non-US jurisdiction, and some or all of their officers and
directors may be residents of a non-U.S. jurisdiction. U.S. holders of Velocys
Shares may not be able to sue a non-US company or its officers or directors in
a non-US court for violations of the US securities laws. Further, it may be
difficult to compel a non-US company and its affiliates to subject themselves
to a US court's judgement.

In accordance with normal UK practice and pursuant to Rule 14e-5(b) of the US
Exchange Act, the Consortium, certain affiliated companies or their nominees
and brokers (acting as agents), may from time to time make certain purchases
of, or arrangements to purchase, Velocys Shares outside of the US, other than
pursuant to the Acquisition, until the date on which the Acquisition becomes
Effective, lapses or is otherwise withdrawn. Also, in accordance with Rule
14e-5(b) of the U.S. Exchange Act, Cavendish will continue to act as exempt
principal traders in Velocys shares on the London Stock Exchange. These
purchases may occur either in the open market at prevailing prices or in
private transactions at negotiated prices. Any information about such
purchases will be disclosed as required in the United Kingdom, will be
reported to a Regulatory Information Service and will be available on the
London Stock Exchange website, www.londonstockexchange.com.

US Velocys Shareholders also should be aware that the transaction contemplated
herein may have tax consequences in the US and, that such consequences, if
any, are not described herein. US Velocys Shareholders are urged to consult
with legal, tax and financial advisers in connection with making a decision
regarding this transaction.

Forward Looking Statements

This announcement (including information incorporated by reference in this
announcement), oral statements made regarding the Acquisition, and other
information published by Bidco and Velocys contain statements which are, or
may be deemed to be, "forward-looking statements". Forward-looking statements
are prospective in nature and are not based on historical facts, but rather on
current expectations and projections of the management of Bidco and Velocys
about future events, and are therefore subject to risks and uncertainties
which could cause actual results to differ materially from the future results
expressed or implied by the forward-looking statements.

The forward-looking statements contained in this announcement include
statements relating to the expected effects of the Acquisition on Bidco and
Velocys (including their future prospects, developments and strategies), the
expected timing and scope of the Acquisition and other statements other than
historical facts. Often, but not always, forward-looking statements can be
identified by the use of forward-looking words such as "prepares", "plans",
"expects" or "does not expect", "is expected", "is subject to", "budget",
"projects", "synergy", "strategy", "scheduled", "goal", "estimates",
"forecasts", "cost-saving", "intends", "anticipates" or "does not anticipate",
or "believes", or variations of such words and phrases or statements that
certain actions, events or results "may", "could", "should", "would", "might"
or "will" be taken, occur or be achieved. Forward looking statements may
include statements relating to the following: (i) future capital expenditures,
expenses, revenues, earnings, synergies, economic performance, indebtedness,
financial condition, dividend policy, losses and future prospects; (ii)
business and management strategies and the expansion and growth of Bidco's,
Velocys', any member of the Velocys Group's operations and potential synergies
resulting from the Acquisition; and (iii) the effects of global economic
conditions and governmental regulation on Bidco's, Velocys', or any member of
the Velocys Group's business.

Although Bidco and Velocys believe that the expectations reflected in such
forward-looking statements are reasonable, Bidco and Velocys can give no
assurance that such expectations will prove to be correct. By their nature,
forward-looking statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future. There are a
number of factors that could cause actual results and developments to differ
materially from those expressed or implied by such forward-looking statements.

These factors include, but are not limited to: the ability to complete the
Acquisition; the ability to obtain requisite shareholder approvals and the
satisfaction of other Conditions on the proposed terms and schedule; changes
in the global political, economic, business and competitive environments and
in market and regulatory forces; changes in future exchange and interest
rates; changes in tax rates; future business combinations or disposals;
changes in general economic and business conditions; changes in the behaviour
of other market participants; changes in the anticipated benefits from the
proposed transaction not being realised as a result of changes in general
economic and market conditions in the countries in which Bidco and Velocys
operate, weak, volatile or illiquid capital and/or credit markets, changes in
tax rates, interest rate and currency value fluctuations, the degree of
competition in the geographic and business areas in which Bidco and Velocys
operate and changes in laws or in supervisory expectations or requirements.
Other unknown or unpredictable factors could cause actual results to differ
materially from those expected, estimated or projected in the forward-looking
statements. If any one or more of these risks or uncertainties materialises or
if any one or more of the assumptions proves incorrect, actual results may
differ materially from those expected, estimated or projected. Such
forward-looking statements should therefore be construed in the light of such
factors. Neither Bidco nor Velocys, nor any of their respective associates or
directors, officers or advisers, provides any representation, assurance or
guarantee that the occurrence of the events expressed or implied in any
forward-looking statements in this announcement will actually occur. You are
cautioned not to place any reliance on these forward-looking statements which
speak only as of the date of this announcement.

Specifically, statements of estimated cost savings and synergies related to
future actions and circumstances which, by their nature, involve risks,
uncertainties and contingencies. As a result, the cost savings and synergies
referred to may not be achieved, may be achieved later or sooner than
estimated, or those achieved could be materially different from those
estimated. Due to the scale of the Velocys Group, there may be additional
changes to the Velocys Group's operations. As a result, and given the fact
that the changes relate to the future, the resulting cost synergies may be
materially greater or less than those estimated.

Other than in accordance with their legal or regulatory obligations, neither
Bidco nor Velocys is under any obligation, and Bidco and Velocys expressly
disclaim any intention or obligation, to update or revise any forward-looking
statements, whether as a result of new information, future events or
otherwise.

Dealing and Opening Position Disclosure Requirements

Under Rule 8.3(a) of the Takeover Code, any person who is interested in 1% or
more of any class of relevant securities of an offeree company or of any
securities exchange offeror (being any offeror other than an offeror in
respect of which it has been announced that its offer is, or is likely to be,
solely in cash) must make an Opening Position Disclosure following the
commencement of the offer period and, if later, following the announcement in
which any securities exchange offeror is first identified. An Opening Position
Disclosure must contain details of the person's interests and short positions
in, and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s). An Opening
Position Disclosure by a person to whom Rule 8.3(a) of the Takeover Code
applies must be made by no later than 3.30 pm (London time) on the 10(th)
business day following the commencement of the offer period and, if
appropriate, by no later than 3.30 pm (London time) on the 10(th) business day
following the announcement in which any securities exchange offeror is first
identified. Relevant persons who deal in the relevant securities of the
offeree company or of a securities exchange offeror prior to the deadline for
making an Opening Position Disclosure must instead make a Dealing Disclosure.

Under Rule 8.3(b) of the Takeover Code, any person who is, or becomes,
interested in 1% or more of any class of relevant securities of the offeree
company or of any securities exchange offeror must make a Dealing Disclosure
if the person deals in any relevant securities of the offeree company or of
any securities exchange offeror. A Dealing Disclosure must contain details of
the dealing concerned and of the person's interests and short positions in,
and rights to subscribe for, any relevant securities of each of (i) the
offeree company and (ii) any securities exchange offeror(s), save to the
extent that these details have previously been disclosed under Rule 8. A
Dealing Disclosure by a person to whom Rule 8.3(b) applies must be made by no
later than 3.30 pm (London time) on the business day following the date of the
relevant dealing.

If two or more persons act together pursuant to an agreement or understanding,
whether formal or informal, to acquire or control an interest in relevant
securities of an offeree company or a securities exchange offeror, they will
be deemed to be a single person for the purpose of Rule 8.3.

Opening Position Disclosures must also be made by the offeree company and by
any offeror and Dealing Disclosures must also be made by the offeree company,
by any offeror and by any persons acting in concert with any of them (see
Rules 8.1, 8.2 and 8.4).

Details of the offeree and offeror companies in respect of whose relevant
securities Opening Position Disclosures and Dealing Disclosures must be made
can be found in the Disclosure Table on the Takeover Panel's website at
www.thetakeoverpanel.org.uk, including details of the number of relevant
securities in issue, when the offer period commenced and when any offeror was
first identified. You should contact the Panel's Market Surveillance Unit on
+44 (0)20 7638 0129 if you are in any doubt as to whether you are required to
make an Opening Position Disclosure or a Dealing Disclosure.

Publication on a website

In accordance with Rule 26.1 of the Takeover Code, a copy of this announcement
and the documents required to be published under Rule 26 of the Takeover Code
will be made available, subject to certain restrictions relating to persons
resident in Restricted Jurisdictions, on Bidco's website at
www.madisonmomentum.com and Velocys' website at http://offer.velocys.com by no
later than 12 noon (London time) on the Business Day following this
announcement. For the avoidance of doubt, neither the content of this website
nor of any website accessible from hyperlinks is incorporated by reference or
forms part of this announcement.

No profit forecasts, estimates or quantified benefits statements

No statement in this announcement is intended as a profit forecast, profit
estimate or quantified benefits statement for any period and no statement in
this announcement should be interpreted to mean that earnings or earnings per
share for Velocys or Bidco for the current or future financial years would
necessarily match or exceed the historical published earnings or earnings per
share for Velocys or Bidco.

Right to switch to a Takeover Offer

Bidco reserves the right to elect, with the consent of the Takeover Panel and
subject to the terms of the Cooperation Agreement, to implement the
Acquisition by way of a Takeover Offer for the entire issued and to be issued
share capital of Velocys as an alternative to the Scheme. In such an event,
the Takeover Offer will be implemented on the same terms or, if Bidco so
decides, on such other terms being no less favourable (subject to appropriate
amendments), so far as applicable, as those which would apply to the Scheme
and subject to the amendment referred to in Part B of Appendix 1 to this
announcement.

Requesting hard copy documents

In accordance with Rule 30.3 of the Takeover Code, Velocys Shareholders,
persons with information rights and participants in Velocys Share Plans may
request a hard copy of this announcement by contacting Link Group on 0371 664
0321. Calls are charged at the standard geographic rate and will vary by
provider. Calls outside the United Kingdom will be charged at the applicable
international rate. The helpline is open between 9 am - 5.30 pm, Monday to
Friday excluding public holidays in England and Wales. Please note that Link
Group cannot provide any financial, legal or tax advice and calls may be
recorded and monitored for security and training purposes. For persons who
receive a copy of this announcement in electronic form or via a website
notification, a hard copy of this announcement will not be sent unless so
requested. Such persons may also request that all future documents,
announcements and information (and any information incorporated into them by
reference to another source) in relation to the Acquisition be sent to them in
hard copy form.

Electronic communications

Please be aware that addresses, electronic addresses and certain other
information provided by Velocys Shareholders, persons with information rights
and other relevant persons for the receipt of communications from Velocys may
be provided to Bidco during the offer period as required under Section 4 of
Appendix 4 of the Takeover Code to comply with Rule 2.11(c) of the Takeover
Code.

Rounding

Certain figures included in this announcement have been subjected to rounding
adjustments. Accordingly, figures shown for the same category presented in
different tables may vary slightly and figures shown as totals in certain
tables may not be an arithmetic aggregation of figures that precede them.

General

If the Acquisition is effected by way of a Takeover Offer, and such a Takeover
Offer becomes or is declared unconditional in all respects and sufficient
acceptances are received, Bidco intends to exercise its rights to apply the
provisions of Chapter 3 of Part 28 of the 2006 Act so as to acquire
compulsorily the remaining Velocys Shares in respect of which the Takeover
Offer has not been accepted.

Investors should be aware that Bidco may purchase Velocys Shares otherwise
than under any Takeover Offer or the Scheme, including pursuant to privately
negotiated purchases.

Rule 2.9 of the Takeover Code

For the purposes of Rule 2.9 of the Takeover Code, Velocys confirms that, as
at close of business on the Latest Practicable Date, it had 1,651,798,992
ordinary shares of 1p each in issue. Velocys holds no shares in treasury.
Accordingly, the total number of voting rights in Velocys is 1,651,798,992.
The International Securities Identification Number ("ISIN") of Velocys' shares
is GB00B11SZ269.

Disclaimer

The Acquisition will be subject to English law, the jurisdiction of the Court,
and the applicable requirements of the Takeover Code, the Panel, the London
Stock Exchange and the Registrar of Companies.

Appendix 1

Conditions and Further Terms of the Transaction

Conditions to the Scheme and Acquisition

1.    The Acquisition will be conditional upon the Scheme becoming
unconditional and becoming Effective, subject to the provisions of the
Takeover Code, by no later than 11.59 p.m. on the Long Stop Date or such later
date (if any) as Bidco and Velocys may, with the consent of the Panel, agree
and (if required) the Court may allow.

Conditions of the Scheme

2.    The Scheme will be subject to the following Conditions:

 

2.1          (i) its approval by a majority in number representing
not less than 75 per cent. in value of Scheme Shares held by Velocys
Shareholders who are on the register of members of Velocys (or the relevant
class or classes thereof) at the Voting Record Time, present and voting,
whether in person or by proxy, at the Court Meeting and at any separate class
meeting which may be required (or any adjournment thereof), and (ii) such
Court Meeting being held on or before the 22nd day after the expected date of
the Court Meeting to be set out in the Scheme Document in due course (or such
later date as may be agreed between Bidco and Velocys with the consent of the
Panel (and that the Court may approve if required));

 

2.2          (i) the Resolutions being duly passed at the General
Meeting (or any adjournment thereof) and (ii) such General Meeting being held
on or before the 22nd day after the expected date of the General Meeting to be
set out in the Scheme Document in due course (or such later date as may be
agreed between Bidco and Velocys with the consent of the Panel (and that the
Court may approve if required));

 

2.3          (i) the sanction of the Scheme by the Court (with or
without modification (but subject to such modification being acceptable to
Bidco and Velocys)); and (ii) the Sanction Hearing being held on or before the
22nd day after the expected date of the Sanction Hearing to be set out in the
Scheme Document in due course (or such later date as may be agreed between
Bidco and Velocys with the consent of the Panel (and that the Court may
approve if required)); and

 

2.4          the delivery of a copy of the Court Order to the
Registrar of Companies.

General conditions

3.    In addition, subject as stated in Part B (Further terms of the
Acquisition) of this Appendix 1 (Conditions and further terms of the
transaction), Bidco and Velocys have agreed that the Acquisition will be
conditional upon the following Conditions and, accordingly, the necessary
actions to make the Acquisition Effective will not be taken unless the
following Conditions (as amended if appropriate) have been satisfied or, where
relevant, waived:

 

 

Other third party clearances

 

 

3.1          no central bank, government or governmental,
quasi‑governmental, supranational, statutory, regulatory, environmental,
administrative, fiscal or investigative body, court, trade agency,
association, institution, environmental body, employee representative body or
any other body or person whatsoever in any jurisdiction (each a "Third Party")
having given notice of a decision to take, institute, implement or threaten
any action, proceeding, suit, investigation, enquiry or reference, or having
required any action to be taken or otherwise having done anything or having
enacted, made or proposed any statute, regulation, decision, order or change
to published practice and there not continuing to be outstanding any statute,
regulation, decision or order which would or might reasonably be expected to:

 

3.1.1      make the Acquisition, its implementation or the acquisition or
proposed acquisition of any shares or other securities in, or control or
management of, any member of the Wider Velocys Group by any member of the
Wider Bidco Group void, illegal and/or unenforceable under the laws of any
relevant jurisdiction, or otherwise directly or indirectly prevent, prohibit,
or restrain, restrict, impede, challenge, delay or otherwise interfere with
the implementation of, or impose material additional conditions or obligations
with respect to, the Acquisition or the acquisition of any shares or other
securities in, or control or management of, any member of the Wider Velocys
Group by any member of the Wider Bidco Group or require an amendment of the
Scheme;

 

3.1.2      require, prevent or materially delay the divestiture or
materially alter the terms envisaged for such divestiture by any member of the
Wider Bidco Group or by any member of the Wider Velocys Group of all or any
part of their businesses, assets or property or impose any limitation on the
ability of all or any of them to conduct their respective businesses (or any
part thereof) or to own, control or manage any of their assets or properties
(or any part thereof) to an extent which is material in the context of the
Wider Bidco Group taken as a whole or in the context of the Acquisition;

 

3.1.3      impose any material limitation on, or result in a material
delay in, the ability of any member of the Wider Bidco Group directly or
indirectly to acquire or hold or to exercise effectively all or any rights of
ownership in respect of shares or other securities in Velocys (or any member
of the Wider Velocys Group) or on the ability of any member of the Wider
Velocys Group or any member of the Wider Bidco Group directly or indirectly to
hold or exercise effectively any rights of ownership in respect of shares or
other securities (or the equivalent) in, or to exercise management control
over, any member of the Wider Velocys Group to an extent which is material in
the context of the Wider Velocys Group taken as a whole or in the context of
the Acquisition;

 

3.1.4      other than pursuant to the implementation of the Scheme or, if
applicable, sections 974 to 991 of the 2006 Act, require any member of the
Wider Bidco Group or the Wider Velocys Group to acquire or offer to acquire
any shares, other securities (or the equivalent) or interest in any member of
the Wider Velocys Group or any asset owned by any third-party which is
material in the context of the Wider Velocys Group or the Wider Bidco Group,
in either case taken as a whole;

 

3.1.5      require, prevent or delay a divestiture by any member of the
Wider Bidco Group of any shares or other securities (or the equivalent) in any
member of the Wider Velocys Group;

 

3.1.6      result in any member of the Wider Velocys Group ceasing to be
able to carry on business under any name under which it presently carries on
business to an extent which is material in the context of the Wider Velocys
Group taken as a whole or in the context of the Acquisition;

 

3.1.7      impose any limitation on the ability of any member of the
Wider Bidco Group or any member of the Wider Velocys Group to conduct,
integrate or co‑ordinate all or any part of their respective businesses with
all or any part of the business of any other member of the Wider Bidco Group
and/or the Wider Velocys Group in a manner which is adverse and material to
the Wider Bidco Group and/or the Wider Velocys Group, in either case, taken as
a whole or in the context of the Acquisition; or

 

3.1.8      except as Disclosed, otherwise affect the business, assets,
value, profits, prospects or operational performance of any member of the
Wider Velocys Group or any member of the Wider Bidco Group in each case in a
manner which is adverse to and material in the context of the Wider Velocys
Group taken as a whole or of the financing of the Acquisition;

and all applicable waiting and other time periods (including any extensions
thereof) during which any such Third Party could decide to take, institute,
implement or threaten any such action, proceeding, suit, investigation,
enquiry or reference or take any other step under the laws of any jurisdiction
in respect of the Acquisition or proposed acquisition of any Velocys Shares or
otherwise intervene having expired, lapsed, or been terminated;

3.2          other than the obtaining of a licence from the Office of
Financial Sanctions Implementation in connection with the transfer of Velocys
Shares held by any Sanctions Disqualified Shareholder, all necessary
notifications, filings or applications having been made in connection with the
Acquisition and all necessary waiting and other time periods (including any
extensions thereof) under any applicable legislation or regulation of any
jurisdiction having expired, lapsed or been terminated (as appropriate) and
all statutory and regulatory obligations in any jurisdiction having been
complied with and all Authorisations which are deemed by Bidco to be necessary
or reasonably considered to be appropriate in any jurisdiction for or in
respect of the Acquisition or the proposed acquisition of any shares or other
securities in, or control of, Velocys by any member of the Wider Bidco Group
having been obtained on terms and in a form reasonably satisfactory to Bidco
from all appropriate Third Parties or (without prejudice to the generality of
the foregoing) from any person or bodies with whom any member of the Wider
Velocys Group or the Wider Bidco Group has entered into contractual
arrangements in each case where the direct consequence of a failure to make
such notification or filing or to wait for the expiry, lapse or termination of
any such waiting or other time period or to comply with such obligation or
obtain such Authorisation would be unlawful in any relevant jurisdiction or
have a material adverse effect on the Wider Velocys Group, or the ability of
Bidco to implement the Scheme and all such Authorisations remaining in full
force and effect at the time at which the Scheme becomes otherwise
unconditional in all respects and there being no notice or intimation of an
intention to revoke, suspend, restrict, modify or not to renew such
Authorisations;

 

3.3          other than the obtaining of a licence from the Office of
Financial Sanctions Implementation in connection with the transfer of Velocys
Shares held by any Sanctions Disqualified Shareholder, no temporary
restraining order, preliminary or permanent injunction, preliminary or
permanent enjoinment, or other order issued and being in effect by a court or
other Third Party which has the effect of making the Acquisition or any
acquisition or proposed acquisition of any shares or other securities or
control or management of, any member of the Wider Velocys Group by any member
of the Wider Bidco Group, or the implementation of either of them, void,
voidable, illegal and/or unenforceable under the laws of any relevant
jurisdiction, or otherwise directly or indirectly prohibiting, preventing,
restraining, restricting, delaying or otherwise interfering with the approval
of the Acquisition, the Acquisition becoming Effective or any matter arising
from the proposed acquisition of any shares or other securities in, or control
or management of, any member of the Wider Velocys Group by any member of the
Wider Bidco Group;

Confirmation of absence of adverse circumstances

3.4          except as Disclosed, there being no provision of any
arrangement, agreement, licence, permit, franchise, lease or other instrument
to which any member of the Wider Velocys Group is a party or by or to which
any such member or any of its assets is or may be bound, entitled or be
subject or any event or circumstance which, as a consequence of the
Acquisition or the proposed acquisition by any member of the Wider Bidco Group
of any shares or other securities in Velocys or because of a change in the
control or management of any member of the Wider Velocys Group or otherwise,
would or might reasonably be expected to result in, in each case to an extent
which is material in the context of the Wider Velocys Group taken as a whole
or to the financing of the Acquisition:

 

3.4.1      any monies borrowed by, or any other indebtedness, actual or
contingent of, or any grant available to, any member of the Wider Velocys
Group being or becoming repayable, or capable of being declared repayable,
immediately or prior to its or their stated maturity date or repayment date,
or the ability of any such member to borrow monies or incur any indebtedness
being withdrawn or inhibited or being capable of becoming or being withdrawn
or inhibited;

 

3.4.2      the rights, liabilities, obligations, interests or business of
any member of the Wider Velocys Group or any member of the Wider Bidco Group
under any such arrangement, agreement, licence, permit, lease or instrument or
the interests or business of any member of the Wider Velocys Group or any
member of the Wider Bidco Group in or with any other firm or company or body
or person (or any agreement or arrangement relating to any such business or
interests) being or likely to become terminated or adversely modified or
affected or any onerous obligation or liability arising or any adverse action
being taken or arising thereunder;

 

3.4.3      any member of the Wider Velocys Group ceasing to be able to
carry on business under any name under which it presently carries on business
to an extent which is material in the context of the Wider Velocys Group taken
as a whole or in the context of the Acquisition;

 

3.4.4      any assets or interests of, or any asset the use of which is
enjoyed by, any member of the Wider Velocys Group being or falling 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 Velocys Group otherwise than in the
ordinary course of business;

 

3.4.5      other than in the ordinary course of business, the creation or
enforcement of any mortgage, charge or other security interest over the whole
or any part of the business, property or assets of any member of the Wider
Velocys Group or any such mortgage, charge or other security interest
(whenever created, arising or having arisen), becoming enforceable;

 

3.4.6      the business, assets, value, financial or trading position,
profits, prospects or operational performance of any member of the Wider
Velocys Group being prejudiced or adversely affected;

 

3.4.7      the creation or acceleration of any material liability (actual
or contingent) by any member of the Wider Velocys Group other than trade
creditors or other liabilities incurred in the ordinary course of business; or

 

3.4.8      any liability of any member of the Wider Velocys Group to make
any severance, termination, bonus or other payment to any of its directors or
other officers other than in the ordinary course of business.

No material transactions, claims or changes in the conduct of the business of
the Velocys Group

3.5          except as Disclosed, no member of the Wider Velocys
Group having since 30 June 2023:

 

3.5.1      save as between Velocys and its wholly‑owned subsidiaries or
between such wholly‑owned subsidiaries and save for the issue or transfer
out of treasury of Velocys Shares on the exercise of options or vesting of
awards granted in the ordinary course under the Velocys Share Plans, issued or
agreed to issue or authorised or proposed or announced its intention to
authorise or propose the issue of additional shares of any class, or
securities or securities convertible into, or exchangeable for, or rights,
warrants or options to subscribe for or acquire, any such shares or
convertible securities or transferred or sold or agreed to transfer or sell or
authorised or proposed the transfer or sale of Velocys Shares out of treasury;

 

3.5.2      recommended, declared, paid or made or agreed to recommend,
declare, pay or make any bonus issue, dividend or other distribution (whether
payable in cash or otherwise) other than to Velocys or one of its
wholly‑owned subsidiaries;

 

3.5.3      save as between Velocys and its wholly‑owned subsidiaries or
between such wholly‑owned subsidiaries, merged with (by statutory merger or
otherwise) or demerged from or acquired any body corporate, partnership or
business or acquired or disposed of, or, other than in the ordinary course of
business, transferred, mortgaged or charged or created any security interest
over, any assets or any right, title or interest in any asset (including
shares and trade investments) or authorised, proposed or announced any
intention to do so, in each case to an extent which is material in the context
of the Wider Velocys Group taken as a whole;

 

3.5.4      save as between Velocys and its wholly‑owned subsidiaries or
between such wholly‑owned subsidiaries, made, authorised, proposed or
announced an intention to propose any change in its loan capital other than in
the ordinary course of business and to an extent which is material in the
context of the Wider Velocys Group taken as a whole;

 

3.5.5      issued, authorised or proposed or announced an intention to
authorise or propose the issue of, or made any change in or to the terms of,
any debentures or (save in the ordinary course of business and save as between
Velocys and its wholly‑owned subsidiaries or between such wholly‑owned
subsidiaries) incurred or increased any indebtedness or become subject to any
contingent liability to an extent which is material in the context of the
Wider Velocys Group taken as a whole or in the context of the Acquisition;

 

3.5.6      entered into or varied, to a material extent, authorised or
proposed entry into or variation of, or announced its intention to enter into
or vary, any contract, transaction, arrangement or commitment (whether in
respect of capital expenditure or otherwise) (otherwise than in the ordinary
course of business) which is of a long-term, unusual or onerous nature, or
which involves or could reasonably be expected to involve an obligation of a
nature or magnitude which is or is likely to be materially restrictive on the
business of any member of the Wider Velocys Group to an extent which is or is
reasonably likely to be material to the Wider Velocys Group taken as a whole;

 

3.5.7      entered into any licence or other disposal of intellectual
property rights of any member of the Wider Velocys Group which are outside the
normal course of business;

 

3.5.8      entered into, varied, authorised or proposed entry into or
variation of, or announced its intention to enter into or vary the terms of or
made any offer (which remains open for acceptance) to enter into or vary the
terms of, any contract, commitment, arrangement or any service agreement with
any director or senior executive of the Wider Velocys Group save for salary
increases, bonuses or variations of terms in the ordinary course;

 

3.5.9      proposed, agreed to provide or modified the terms of any share
option scheme, incentive scheme, or other benefit relating to the employment
or termination of employment of any employee of the Wider Velocys Group which,
taken as a whole, are material in the context of the Wider Velocys Group taken
as a whole;

 

3.5.10    (i) (excluding the trustee of any pension scheme(s) established
by a member of the Wider Velocys Group other than Velocys itself) made, agreed
or consented to or procured any significant change to: (a) the terms of any
existing trust deeds, rules, policy or other governing documents, or entered
into or established any new trust deeds, rules, policy or other governing
documents, constituting any pension scheme or other retirement or death
benefit arrangement established for the directors, former directors, employees
or former employees of any entity in the Wider Velocys Group or their
dependants and established by a member of the Wider Velocys Group (a "Relevant
Pension Plan"); (b) the basis on which benefits accrue, pensions which are
payable or the persons entitled to accrue or be paid benefits, under any
Relevant Pension Plan; (c) the basis on which the liabilities of any Relevant
Pension Plan are funded or valued; or (d) the basis or rate of employer
contribution to a Relevant Pension Plan, in each case to the extent which is
material in the context of the Wider Velocys Group taken as a whole or in the
context of the Acquisition and other than as required in accordance with
applicable law; or (ii) enter into or propose to enter into one or more bulk
annuity contracts in relation to any Relevant Pension Plan; or (iii) carried
out any act: (a) which would or could reasonably be expected to lead to the
commencement of the winding up of any Relevant Pension Plan; (b) which would
or is reasonably likely to create a material debt owed by an employer to any
Relevant Pension Plan; (c) which would or might accelerate any obligation on
any employer to fund or pay additional contributions to any Relevant Pension
Plan; or (d) which would, having regard to the published guidance of the
Pensions Regulator give rise directly or indirectly to a liability in respect
of a Relevant Pension Plan arising out of the operation of sections 38 and 38A
of the Pensions Act 2004 in relation to a Relevant Pension Plan, in each case
to the extent which is material in the context of the Wider Velocys Group
taken as a whole or in the context of the Acquisition and other than as
required in accordance with applicable law;

 

3.5.11    changed the trustee or trustee directors or other fiduciary of
any Relevant Pension Plan;

 

3.5.12    entered into, implemented or effected, or authorised, proposed or
announced its intention to implement or effect, any joint venture, asset or
profit sharing arrangement, partnership, composition, assignment,
reconstruction, amalgamation, commitment, scheme or other transaction or
arrangement (other than the Scheme) otherwise than in the ordinary course of
business which is material in the context of the Wider Velocys Group taken as
a whole or in the context of the Acquisition;

 

3.5.13    purchased, redeemed or repaid or announced any proposal to
purchase, redeem or repay any of its own shares or other securities or reduced
or, save in respect of the matters mentioned in sub-paragraph 3.5.1 above,
made any other change to any part of its share capital to an extent which
(other than in the case of Velocys) is material in the context of the Wider
Velocys Group taken as a whole;

 

3.5.14    other than with respect to claims between Velocys and its wholly
owned subsidiaries (or between such subsidiaries), waived, compromised or
settled any claim otherwise than in the ordinary course of business which is
material in the context of the Wider Velocys Group taken as a whole or in the
context of the Acquisition;

 

3.5.15    made any alteration to its articles of association or other
constitutional documents (in each case, other than in connection with the
Scheme) which is material in the context of the Acquisition;

 

3.5.16    (other than in respect of a member of the Wider Velocys Group
which is dormant and was solvent at the relevant time) taken or proposed any
steps, corporate action or had any legal proceedings instituted or threatened
against it in relation to the suspension of payments, a moratorium of any
indebtedness, its winding‑up (voluntary or otherwise), dissolution,
reorganisation or for the appointment of any administrator, receiver, manager,
administrative receiver, trustee or similar officer of all or any of its
assets or revenues or any analogous proceedings in any jurisdiction or
appointed any analogous person in any jurisdiction or had any such person
appointed which is material in the context of the Wider Velocys Group taken as
a whole or in the context of the Acquisition;

 

3.5.17    been unable, or admitted in writing that it is unable, to pay its
debts or commenced negotiations with one or more of its creditors with a view
to rescheduling or restructuring any of its indebtedness, 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 which is material in the context of the Wider Velocys Group taken as
a whole or in the context of the Acquisition;

 

3.5.18    entered into any contract, commitment, agreement or arrangement
which would be materially restrictive on the business of any member of the
Wider Velocys Group or the Wider Bidco Group and otherwise than in the
ordinary course of business or passed any resolution or made any offer (which
remains open for acceptance) with respect to or announced an intention to, or
to propose to, effect any of the transactions, matters or events referred to
in this Condition;

 

3.5.19    terminated or varied the terms of any agreement or arrangement
between any member of the Wider Velocys Group and any other person in a manner
which would or might be expected to have a material adverse effect on the
financial position of the Wider Velocys Group taken as a whole; or

 

3.5.20    taken (or agreed or proposed to take) any action which requires,
or would require, the consent of the Panel or the approval of Velocys
Shareholders in general meeting in accordance with, or as contemplated by,
Rule 21.1 of the Takeover Code.

No material adverse change

3.6          since 30 June 2023, and except as Disclosed, there
having been:

 

3.6.1      no adverse change and no circumstance having arisen which
would be expected to result in any adverse change or deterioration in the
business, assets, value, financial or trading position, profits, prospects or
operational performance of any member of the Wider Velocys Group to an extent
which is material to the Wider Velocys Group taken as a whole or to the
financing of the Acquisition;

 

3.6.2      no litigation, arbitration proceedings, prosecution or other
legal proceedings including with regard to intellectual property rights used
by the Wider Velocys Group having been threatened, announced or instituted by
or against or remaining outstanding against any member of the Wider Velocys
Group or to which any member of the Wider Velocys Group is or may become a
party (whether as claimant or defendant or otherwise) which, in any such case,
might be expected to have a material adverse effect on the Wider Velocys Group
taken as a whole, and no enquiry, review, investigation or enforcement
proceedings by, or complaint or reference to, any Third Party against or in
respect of any member of the Wider Velocys Group having been threatened,
announced or instituted by or against, or remaining outstanding in respect of,
any member of the Wider Velocys Group which, in any such case, might be
expected to have a material adverse effect on the Wider Velocys Group taken as
a whole;

 

3.6.3      no contingent or other liability having arisen, increased or
become apparent (other than in the ordinary course of its business) which is
reasonably likely to adversely affect the business, assets, financial or
trading position, profits, prospects or operational performance of any member
of the Wider Velocys Group to an extent which is material to the Wider Velocys
Group taken as a whole;

 

3.6.4      no steps having been taken and no omissions having been made
which are reasonably likely to result in the withdrawal, cancellation,
termination or modification of any licence held by any member of the Wider
Velocys Group, which is necessary for the proper carrying on of its business
and the withdrawal, cancellation, termination or modification of which is
material and reasonably likely to have a material adverse effect on the Wider
Velocys Group taken as a whole; and

 

3.6.5      no member of the Wider Velocys Group having conducted its
business in material breach of any applicable laws and regulations which in
any case is material in the context of the Wider Velocys Group taken as a
whole.

 

 

3.7          since 1 January 2023, except as Disclosed, Bidco not
having discovered:

 

3.7.1      that any financial, business or other information concerning
the Wider Velocys Group publicly announced or disclosed to any member of the
Wider Bidco Group at any time prior to the date of this announcement by or on
behalf of any member of the Wider Velocys Group or to any of their advisers is
misleading, contains a misrepresentation of fact or omits to state a fact
necessary to make that information not misleading and which was not
subsequently corrected before the date of this announcement by disclosure
either publicly or otherwise to Bidco or its professional advisers and which
is, in any case, material in the context of the Wider Velocys Group taken as a
whole or in the context of the Acquisition;

 

3.7.2      that any member of the Wider Velocys Group is subject to any
liability, contingent or otherwise and which is material in the context of the
Wider Velocys Group taken as a whole; or

 

3.7.3      any information which affects the import of any information
disclosed to Bidco at any time prior to the date of this announcement by or on
behalf of any member of the Wider Velocys Group which is material in the
context of the Wider Velocys Group taken as a whole;

Environmental liabilities

3.8          except as Disclosed, Bidco not having discovered that,
in relation to any release, emission, accumulation, discharge, disposal or
other similar circumstance which has impaired or is likely to impair the
environment (including property) or harmed or is likely to harm the health of
humans, animals or other living organisms or eco‑systems, no past or present
member of the Wider Velocys Group, in a manner or to an extent which is
material in the context of the Wider Velocys Group, (i) having committed any
violation of any applicable laws, statutes, regulations, Authorisations,
notices or other requirements of any Third Party giving rise to a material
liability; and/or (ii) having incurred any material liability (whether actual
or contingent) to any Third Party; and/or (iii) being likely to incur any
material liability (whether actual or contingent), or being required, to make
good, remediate, repair, re‑instate or clean up the environment (including
any property) in each case of (i), (ii) or (iii) which such liability or
requirement would be material to the Wider Velocys Group taken as a whole;

Intellectual property

3.9          except as Disclosed, no circumstance having arisen or
event having occurred in relation to any intellectual property owned or used
by any member of the Wider Velocys Group which would be reasonably likely to
have a material adverse effect on the Wider Velocys Group taken as a whole or
is otherwise material in the context of the Acquisition; including:

 

3.9.1      any member of the Wider Velocys Group losing its title to any
intellectual property material to its business, or any intellectual property
owned by the Wider Velocys Group and material to its business being revoked,
cancelled or declared invalid;

 

3.9.2      any claim being asserted in writing or threatened in writing
by any person challenging the ownership of any member of the Wider Velocys
Group to, or the validity or effectiveness of, any of its intellectual
property; or

 

3.9.3      any agreement regarding the use of any intellectual property
licensed to or by any member of the Wider Velocys Group being terminated or
varied;

Anti‑corruption and sanctions

3.10        except as Disclosed, Bidco not having discovered that (to
an extent that is material in the context of the Wider Velocys Group taken as
a whole):

 

3.10.1    any past or present member of the Wider Velocys Group or any
person that performs or has performed services for or on behalf of any such
company is or has at any time engaged in any activity, practice or conduct (or
omitted to take any action) in contravention of the UK Bribery Act 2010, the
U.S. Foreign Corrupt Practices Act of 1977, as amended or any other applicable
anti‑corruption legislation;

 

3.10.2    any member of the Wider Velocys Group is ineligible to be awarded
any contract or business under section 23 of the Public Contracts
Regulations 2006 or section 26 of the Utilities Contracts Regulations 2006
(each as amended);

 

3.10.3    any past or present member of the Wider Velocys Group has engaged
in any activity or business with, or made any investments in, or made any
payments to any government, entity or individual covered by any of the
economic sanctions administered by the United Nations or the European Union
(or any of their respective member states) or the United States Office of
Foreign Assets Control or any other governmental or supranational body or
authority in any jurisdiction;

 

3.10.4    a member of the Velocys Group has engaged in a transaction which
would cause Bidco to be in breach of any law or regulation on the Acquisition
becoming Effective, including the economic sanctions administered by the
United States Office of Foreign Assets Control or HM Treasury & Customs
or any government, entity or individual targeted by any of the economic
sanctions of the United Nations, United States or the European Union or any of
its member states; or

No criminal property

3.11        except as Disclosed, Bidco not having discovered that any
asset of any member of the Wider Velocys Group constitutes criminal property
as defined by section 340(3) of the Proceeds of Crime Act 2002 (but
disregarding paragraph (b) of that definition).

 

 

Part B

Further terms of the Acquisition

1.    Subject to the requirements of the Panel, Bidco reserves the right in
its sole discretion to waive, in whole or in part, all or any of the
Conditions set out in Part A (Conditions to the Scheme and Acquisition) of
Appendix 1 (Conditions and Further Terms of the Transaction), except
Conditions 1, 2.1(i), 2.2(i) and 2.3(i) which cannot be waived. If any of
Conditions 2.1(ii), or 2.2(ii) or 2.3(ii) is not satisfied by the relevant
deadline specified in the relevant Condition, Bidco shall make an announcement
by 8.00 a.m. on the Business Day following such deadline confirming whether it
has invoked the relevant Condition, waived the relevant deadlines or agreed
with Velocys to extend the relevant deadline.

 

2.    Bidco shall be under no obligation to waive (if capable of waiver),
to determine to be or remain satisfied or to treat as fulfilled any of the
Conditions in Part A(Conditions to the Scheme and Acquisition) of Appendix 1
(Conditions and Further Terms of the Transaction) above that are capable of
waiver by a date earlier than the latest date for the fulfilment of that
Condition notwithstanding that the other Conditions of the Acquisition 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.

 

3.    Under Rule 13.5(a) of the Code and subject to paragraph 3 below,
Bidco may only invoke a Condition so as to cause the Acquisition not to
proceed, to lapse or to be withdrawn with the consent of the Panel. The Panel
will normally only give its consent if the circumstances which give rise to
the right to invoke the Condition are of material significance to Bidco in the
context of the Acquisition. This will be judged by reference to the facts of
each case at the time that the relevant circumstances arise.

 

4.    Condition 1 (subject to Rule 12 of the Takeover Code), Condition 2 in
Part A (Conditions to the Scheme and Acquisition) of Appendix 1 (Conditions
and Further Terms of the Transaction) above, and, if applicable, any
acceptance condition if the Acquisition is implemented by means of a Takeover
Offer, are not subject to Rule 13.5(a) of the Takeover Code.

 

5.    Any Condition that is subject to Rule 13.5(a) of the Takeover Code
may be waived by Bidco.

 

6.    If the Panel requires Bidco to make an offer or offers for Velocys
Shares under the provisions of Rule 9 of the Takeover Code, Bidco may make
such alterations to the Conditions as are necessary to comply with the
provisions of that Rule.

 

7.    Bidco reserves the right to elect to implement the Acquisition by way
of a Takeover Offer as an alternative to the Scheme, subject to the Panel's
consent and (while the Cooperation Agreement is continuing) to the terms of
the Cooperation Agreement. In such event, such Takeover Offer will be
implemented on the same terms and conditions so far as applicable, as those
which would apply to the Scheme (subject to appropriate amendments, including
and for so long as the Cooperation Agreement is continuing and the Takeover
Offer arises in accordance with the terms of the Cooperation Agreement an
acceptance condition set at 75 per cent. of the Velocys Shares (or such other
percentage as Bidco may decide after, to the extent necessary, consultation
with Velocys and, to the extent necessary, the Panel, being in any case more
than 50 per cent. of the Velocys Shares)). If the Acquisition is effected by
way of a Takeover Offer, and such Takeover Offer becomes or is declared
unconditional and sufficient acceptances are received in respect of such
Takeover Offer, Bidco intends to exercise its rights to apply the provisions
of Chapter 3 of Part 28 of the 2006 Act so as to acquire compulsorily the
remaining Velocys Shares in respect of which the Takeover Offer has not been
accepted.

 

8.    The Acquisition will be subject, inter alia, to the Conditions and
certain further terms which are set out in this Appendix 1 (Conditions and
Further Terms of the Transaction) and to the full terms which will be set out
in the Scheme Document and such further terms as may be required to comply
with the provisions of the Takeover Code and the applicable requirements of
the Panel and the London Stock Exchange.

 

9.    Velocys Shares will be acquired by Bidco fully paid and free from all
liens, charges, encumbrances and other third-party rights of any nature
whatsoever and together with all rights attaching to them as at the Effective
Date, including the right to receive and retain all dividends and
distributions (if any) declared, made or paid after the Acquisition becomes
Effective.

 

10.  If, on or after the date of this announcement and prior to the
Acquisition becoming Effective, any dividend and/or distribution and/or other
return of capital or value is announced, declared, made or paid in respect of
the Velocys Shares, Bidco reserves the right to reduce the consideration
payable under the terms of the Acquisition for the Velocys Shares by an amount
up to the aggregate amount of all or part of any such dividend and/or
distribution and/or other return of capital or value, in which case any
reference in this announcement to the consideration payable under the terms of
the Acquisition will be deemed to be a reference to the consideration as so
reduced. Any exercise by Bidco of its rights referred to in this paragraph 9
shall be the subject of an announcement and, for the avoidance of doubt, shall
not be regarded as constituting any revision or variation of the Scheme or the
Acquisition. In such circumstances, Velocys Shareholders would be entitled to
retain any such dividend, distribution and/or return of capital or value.

 

11.  The availability of the Acquisition to persons not resident in the
United Kingdom may be affected by the laws or regulatory requirements of the
relevant jurisdictions. Persons who are not resident in the United Kingdom
should inform themselves about and observe any applicable requirements.

 

12.  The Acquisition is not being made, directly or indirectly, in, into or
from, or by use of the mails of, or by any means of instrumentality
(including, but not limited to, facsimile, e-mail or other electronic
transmission, telex or telephone) of interstate or foreign commerce of, or of
any facility of a national, state or other securities exchange of, any
jurisdiction where to do so would violate the laws of that jurisdiction.

 

13.  The Scheme will be governed by English law and be subject to the
jurisdiction of the Court, to the Conditions set out above and full terms to
be set out in the Scheme Document. The Acquisition will be subject to the
applicable requirements of the Takeover Code, the Panel, the London Stock
Exchange and the Registrar of Companies.

 

14.  Each of the Conditions shall be regarded as a separate Condition and
shall not be limited by reference to any other Condition.

 

 

Appendix 2

Sources and Bases of Information

In this announcement, unless otherwise stated or the context otherwise
requires, the following sources and bases have been used.

1.    The fully diluted issued ordinary share capital of 1,651,798,992
Velocys Shares is based on 1,651,798,992 Velocys Shares in issue as at the
Latest Practicable Date. For these purposes, it is assumed that there are no
Velocys Shares which will be issued on or after the date of this announcement
pursuant to the Velocys Share Plans, given that all of the options issued
pursuant to the Velocys Share Plans as at the Latest Practicable Date have
exercise prices higher than the Acquisition Price.

 

2.    A value of approximately £4.1 million for the entire issued and to
be issued share capital of Velocys is based on:

 

·    the Acquisition Price of 0.25 pence per Velocys Share; and

 

·    Velocys' fully diluted issued ordinary share capital of 1,651,798,992
Velocys Shares, as set out in paragraph 1 above.

3.    Unless otherwise stated, the financial information of Velocys is
extracted (without material adjustment) from the annual report and audited
accounts of the Velocys Group for the 12 months ended 31 December 2022, and
the unaudited, interim financial statements of the Velocys Group for the six
months ended 30 June 2023.

 

4.    Unless otherwise stated, all prices and closing prices for Velocys
Shares are closing middle market quotations derived from the London Stock
Exchange.

 

5.    Amounts converted from US$ to pound sterling have been derived using
the exchange rate of US$1.27:£1.00 at the Latest Practicable Date.

 

6.    Certain figures included in this announcement have been subject to
rounding adjustments.

Appendix 3

Details of Irrevocable Undertakings

1.    Directors

The following Velocys Directors have on 5 December 2023 given irrevocable
undertakings to vote (or procure the voting) in favour of the resolutions
(including the Scheme) relating to the Acquisition at the Meetings (or in the
event that the Acquisition is implemented by way of a Takeover Offer, to
accept, or procure the acceptance of, the Takeover Offer) in respect of their
own beneficial holdings (or those Velocys Shares over which they have control)
of Velocys Shares:

 Name              Total Number of  Percentage of existing issued share capital

Velocys Shares
 Henrik Wareborn   3,118,445        0.18%
 Philip Sanderson  600,000          0.03%
 Philip Holland    1,743,634        0.10%
 Ann Markey        525,000          0.03%
 Tom Quigley       525,000          0.03%
 Darran Messem     558,333          0.03%

 

The irrevocable undertakings referred to in this paragraph 1 cease to be
binding on the earlier of the following occurrences (i) this announcement not
having been released by 5.00 p.m. (London time) on the date that is one
Business Day from the date of the undertaking (or such later date as Bidco and
Velocys may agree); (ii) the Scheme Document is not sent to Velocys
Shareholders within 28 days (or such later period as the Panel may agree)
after the date of this announcement; or (iii) the Scheme lapses or is
withdrawn in accordance with its terms.

2.    Lansdowne Partners

Lansdowne Partners has on 5 December 2023 given an irrevocable undertaking to
vote in favour of the resolutions relating to the Acquisition at the Meetings
in respect of its own beneficial holding of 303,156,632 Velocys Shares,
representing 18.35 per cent. of Velocys' existing ordinary issued share
capital.

The obligations contained in the irrevocable undertaking given by Lansdowne
Partners lapse and cease to have effect if (i) this announcement not having
been released by 5.00 p.m. (London time) on the date that is one Business Day
from the date of the undertaking (or such later date as Bidco and Velocys may
agree); (ii) the Scheme Document is not sent to Velocys Shareholders within 28
days (or such later period as the Panel may agree) after the date of this
announcement; or (iii) the Scheme lapses or is withdrawn in accordance with
its terms or (iv) on the date on which any competing offer for the entire
issued and to be issued share capital of Velocys is declared wholly
unconditional or, if proceeding by way of scheme of arrangement, becomes
effective.

 

Appendix 4

Definitions

The following definitions apply throughout this document unless the context
otherwise requires:

 "2006 Act"                                                the Companies Act 2006, as amended from time to time
 "2022 Velocys Annual Report"                              the annual report and audited accounts of the Velocys Group for the year ended
                                                           31 December 2022
 "Acquisition"                                             the proposed cash acquisition by Bidco of the entire issued, and to be issued,
                                                           share capital of Velocys by means of the Scheme, or should Bidco so elect
                                                           (subject to the consent of the Panel and the terms of the Cooperation
                                                           Agreement), by means of a Takeover Offer and, where the context admits, any
                                                           subsequent revision, variation, extension or renewal thereof
 "Acquisition Price"                                       0.25 pence per Velocys Share
 "AIM"                                                     the AIM market of the London Stock Exchange
 "associated undertaking"                                  shall be construed in accordance with paragraph 19 of Schedule 6 to The Large
                                                           and Medium sized Companies and Groups (Accounts and Reports) Regulations 2008
                                                           (SI 2008/410) but for this purpose ignoring paragraph 19(1)(b) of Schedule 6
                                                           to those regulations
 "Authorisations"                                          authorisations, orders, grants, recognitions, confirmations, consents,
                                                           licences, clearances, certificates, permissions or approvals, in each case of
                                                           a Third Party
 "Bidco"                                                   Madison Bidco Limited
 "Business Day"                                            a day, not being a public holiday, Saturday or Sunday, on which clearing banks
                                                           in London are open for normal business
 "Carbon Direct Capital"                                   Carbon Direct Capital Management LLC
 "Carbon Direct Fund"                                      Carbon Direct Fund II LP
 "Cavendish"                                               Cavendish Capital Markets Limited
 "certificated" or "certificated form"                     in relation to a share or other security, a share or other security title to
                                                           which is recorded in the relevant register of the share or other security as
                                                           being held in certificated form (that is, not in CREST)
 "Condition"                                               each of the conditions listed in Appendix 1 and any reference to a numbered
                                                           Condition shall be a reference to the Condition set out in the paragraph
                                                           within Appendix 1 bearing such number
 "Confidentiality Agreements"                              the confidentiality agreements between each member of the Consortium and
                                                           Velocys described in paragraph 11
 "Consortium"                                              (i) a fund advised by Lightrock, (ii) a fund advised by Carbon Direct Capital,
                                                           (iii) GenZero and (iv) Kibo Investments
 "Cooperation Agreement"                                   the cooperation agreement dated on or around the date of this announcement
                                                           between Bidco and Velocys
 "Court"                                                   the High Court of Justice in England and Wales
 "Court Meeting"                                           the meeting of Velocys Shareholders to be convened at the direction of the
                                                           Court pursuant to Part 26 of the 2006 Act at which a resolution will be
                                                           proposed to approve the Scheme, including any adjournment thereof
 "Court Order"                                             the order of the Court sanctioning the Scheme under Part 26 of the 2006 Act
 "CREST"                                                   the relevant system (as defined in the Regulations) in respect of which
                                                           Euroclear UK & International Limited is the operator (as defined in CREST)
 "Dealing Disclosure"                                      an announcement by a party to an offer or a person acting in concert as
                                                           required by Rule 8 of the Takeover Code
 "Disclosed"                                               the information disclosed by or on behalf of Velocys: (i) in the 2022 Velocys
                                                           Annual Report; (ii) in the half year results for the six months period ended
                                                           30 June 2023; (iii) in this announcement (or any of the documents listed in
                                                           paragraph 16 of this announcement); (iv) in any other announcement to a
                                                           Regulatory Information Service prior to the publication of this announcement;
                                                           and (v) as otherwise fairly disclosed to Bidco or the Consortium (or their
                                                           respective officers, employees, agents or advisers) prior to the date of this
                                                           announcement (including via the virtual data room operated by or on behalf of
                                                           Velocys in respect of the Acquisition)
 "Effective"                                               (i) if the Acquisition is implemented by way of the Scheme, the Scheme having
                                                           become effective pursuant to its terms; or (ii) if the Acquisition is
                                                           implemented by way of a Takeover Offer, the Takeover Offer having been
                                                           declared or having become unconditional in all respects in accordance with the
                                                           requirements of the Takeover Code
 "Effective Date"                                          the date on which the Acquisition becomes Effective
 "Facility Letter"                                         the facility letter entered into on 5 December 2023 between the Carbon Direct
                                                           Fund, Velocys and certain of Velocys' subsidiaries (as guarantors)
 "Forms of Proxy"                                          the blue form of proxy for use at the Court Meeting and the pink form of proxy
                                                           for use at the General Meeting and "Form of Proxy" shall mean either one of
                                                           them
 "General Meeting"                                         the general meeting of Velocys Shareholders to be convened to consider and if
                                                           thought fit pass, the Resolution(s) in relation to the Scheme including any
                                                           adjournments thereof
 "GenZero"                                                 Carbon Solutions Investments Pte. Ltd
 "Kibo Investments"                                        Kibo Investments Pte. Ltd
 "Latest Practicable Date"                                  4 December 2023
 "Licence"                                                  to the extent necessary to deal in the Velocys Shares held by a Sanctions
                                                           Disqualified Shareholder, a specific licence from the Office of Financials
                                                           Sanctions Implementation of His Majesty's Treasury
 "Licence Grant Date"                                       the date on which any Licence is granted in relation to a Sanctions
                                                           Disqualified Shareholder
 "Lightrock"                                                Lightrock Climate Impact Fund SCSp
 "London Stock Exchange"                                   the London Stock Exchange plc or its successor
 "Long Stop Date"                                          5 June 2024 or such later date as may be agreed between Bidco and Velocys and,
                                                           if required, the Panel and the Court may allow
 "Market Abuse Regulation"                                 Regulation (EU) 596/2014, as it forms part of domestic law of the United
                                                           Kingdom by virtue of the European Union (Withdrawal) Act 2018, as amended
 "Meetings"                                                the Court Meeting and the General Meeting
 "Opening Position Disclosure"                             an announcement pursuant to Rule 8 of the Takeover Code containing details of
                                                           interests or short positions in, or rights to subscribe for, any relevant
                                                           securities of a party to the Acquisition
 "Overseas Shareholders"                                   holders of Scheme Shares who are resident in, ordinarily resident in, or
                                                           citizens of, jurisdictions outside the United Kingdom
 "Panel"                                                   the Panel on Takeovers and Mergers
 "Panmure Gordon"                                          Panmure Gordon & Co., Ltd
 "Registrar of Companies"                                  the Registrar of Companies in England and Wales
 "Regulations"                                              the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755);
 "Regulatory Information Service"                          a regulatory information service approved by the London Stock Exchange for the
                                                           distribution to the public of announcements and included within the list
                                                           maintained on the London Stock Exchange's website
 "relevant securities"                                     as the context requires, Velocys Shares, other Velocys share capital and any
                                                           securities convertible into or exchangeable for, and rights to subscribe for,
                                                           any of the foregoing
 "Resolutions"                                             the Resolutions to be proposed at the General Meeting in connection with,
                                                           inter alia, implementation of the Scheme
 "Restricted Jurisdiction"                                 any jurisdiction where local laws or regulations may result in a significant
                                                           risk of civil, regulatory or criminal exposure if information concerning the
                                                           Takeover Offer is sent or made available to Velocys Shareholders in that
                                                           jurisdiction
 "Sanction Hearing"                                        the Court hearing to sanction the Scheme
 "Sanctions"                                                any economic or financial sanctions laws, or regulations, as amended from
                                                           time to time, administered, enacted or enforced by (a) the United Kingdom, (b)
                                                           the European Union or any member state thereof; (c) the United States; (d) the
                                                           United Nations; or (any other jurisdiction application to Velocys (excluding
                                                           Russia)
 "Sanctions Disqualified Shareholder"                       any person from time to time who (a) is the target of Sanctions (including
                                                           by reason of ownership, control or agency, in accordance with the relevant
                                                           Sanctions, with or by any person that is the target of Sanctions) that impose
                                                           restrictions or prohibitions on (i) dealing in any Velocys Shares which the
                                                           Sanctions Disqualified Shareholder owns, holds or controls, or on dealing in
                                                           any cash consideration payable by Bidco for the Scheme Shares to or for the
                                                           benefit of the Sanctions Disqualified Shareholder (including, without
                                                           limitation, accepting, receiving, holding or transferring such consideration);
                                                           or (ii) engaging in any transaction contemplated by the Explanatory Statement
                                                           in connection with or related to the Sanctions Disqualified Shareholder; or
                                                           (b) acting for or on behalf of any Sanctions Disqualified Shareholder,
                                                           including by virtue of directly or indirectly holding any interest in the
                                                           Velocys Shares on behalf of Sanctions Disqualified Shareholder
 "Scheme"                                                  the proposed scheme of arrangement under Part 26 of the 2006 Act between
                                                           Velocys and the holders of the Scheme Shares, with or subject to any
                                                           modification, addition or condition approved or imposed by the Court and
                                                           agreed by Velocys and Bidco
 "Scheme Document"                                         the document to be sent to Velocys Shareholders and persons with information
                                                           rights containing, amongst other things, the Scheme and the notices of the
                                                           Meetings
 "Scheme Record Time"                                      the time and date to be specified in the Scheme Document, expected to be 6.00
                                                           p.m. on the second Business Day immediately following the date of the Sanction
                                                           Hearing
 "Scheme Restricted Shares"                                 Velocys Shares which are held by Sanctions Disqualified Shareholders
 "Scheme Shares"                                           all Velocys Shares: (i) in issue at the date of the Scheme Document;
                                                           (ii) (if any) issued after the date of the Scheme Document but before the
                                                           Voting Record Time; and (iii) (if any) issued at or after the Voting Record
                                                           Time and before the Scheme Record Time in respect of which the original or any
                                                           subsequent holders thereof are, or shall have agreed in writing to be, bound
                                                           by the Scheme, in each case other than any Velocys Shares registered in the
                                                           name of and/or beneficially held by Bidco or any member of the Wider Bidco
                                                           Group
 "Significant Interest"                                    in relation to an undertaking, a direct or indirect interest of 30 per cent.
                                                           or more of the total voting rights conferred by the equity share capital (as
                                                           defined in section 548 of the 2006 Act) of such undertaking
 "subsidiary", "subsidiary undertaking" and "undertaking"  shall be construed in accordance with the 2006 Act
 "Takeover Code"                                           the City Code on Mergers and Acquisitions issued by the Panel on Takeovers and
                                                           Mergers, as amended from time to time
 "Takeover Offer"                                          if Bidco elects to effect the Acquisition by means of an offer, the offer to
                                                           be made by or on behalf of Bidco to acquire the entire issued and to be issued
                                                           ordinary share capital of Velocys including, where the context so requires,
                                                           any subsequent revision, variation, extension or renewal thereof;
 "UK" or "United Kingdom"                                   United Kingdom of Great Britain and Northern Ireland
 "US" or "United States"                                   the United States of America
 "uncertificated" or "in uncertificated form"              a share or other security title to which is recorded in the relevant register
                                                           of the share or security as being held in uncertificated form, in CREST, and
                                                           title to which, by virtue of the Regulations may be transferred by means of
                                                           CREST
 "Velocys"                                                 Velocys plc
 "Velocys Board" or "Velocys Directors"                    the directors of Velocys
 "Velocys Group"                                           Velocys and its subsidiary undertakings and where the context permits, each of
                                                           them
 "Velocys Share Plans"                                     the Velocys Share Option Plan 2012 and the Velocys Share Option Plan 2021, in
                                                           each case as the same may be validly amended from time to time
 "Velocys Shareholder(s)"                                  holders of Velocys Shares
 "Velocys Share(s)"                                        the ordinary shares of 1p each in the capital of Velocys and "Velocys Share"
                                                           means any one of them
 "Voting Record Time"                                      the time and date to be specified in the Scheme Document by reference to which
                                                           entitlement to vote on the Scheme will be determined, expected to be 6:00 p.m.
                                                           on the day which is two Business Days before the date of the Court Meeting or
                                                           if the Court Meeting is adjourned, 6:00 p.m. on the day which is two Business
                                                           Days before such adjourned meeting
 "Wider Bidco Group"                                       Bidco and associated undertakings and any other body corporate, partnership,
                                                           joint venture or person in which Bidco and such undertakings (aggregating
                                                           their interests) have a Significant Interest
 "Wider Velocys Group"                                     Velocys and associated undertakings and any other body corporate, partnership,
                                                           joint venture or person in which Velocys and such undertakings (aggregating
                                                           their interests) have a Significant Interest (excluding, for the avoidance of
                                                           doubt, Bidco and all of its associated undertakings which are not members of
                                                           the Velocys Group)

References to an enactment include references to that enactment as amended,
replaced, consolidated or re-enacted by or under any other enactment before or
after the date of this announcement.

All references to "pounds", "pounds Sterling", "Sterling", "GBP", "£",
"pence", "penny" and "p" are to the lawful currency of the United Kingdom.

All references to "US$", "USD", "$" or "cents" are to the lawful currency of
the United States.

All times referred to are London time unless otherwise stated.

A reference to "includes" shall mean "includes without limitation", and
references to "including" and any other similar term shall be construed
accordingly.

 

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