TIDMPOS
RNS Number : 9389M
Plexus Holdings Plc
14 January 2019
Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil
Equipment & Services
This announcement contains inside information
Plexus Holdings PLC ('Plexus' or 'the Company')
Proposed Buyback of Ordinary Shares held by Gusar
Plexus Holdings PLC, the AIM quoted oil and gas engineering
services business and owner of the proprietary POS-GRIP(R)
friction-grip method of wellhead engineering, is pleased to
announce that it has conditionally agreed to acquire 4,950,495
Ordinary Shares (the "Buyback Shares") beneficially held by LLC
Gusar (OOO Gusar) Ltd ("Gusar"), by way of an off-market buyback at
an aggregate price of GBP2,500,000 representing a price of 50.5
pence per Ordinary Share (the "Buyback").
The proposed Buyback will enable Gusar, inter alia, to finance
the purchase of two POS-GRIP jack-up exploration wellhead systems
and associated equipment and tooling from the Company (the sale of
which was originally announced by the Company on 14 February 2018)
via its preferred mechanism and will expedite the establishment of
Plexus' POS-GRIP(R) equipment in Russia and the CIS (the "Region"),
one of the top three hydrocarbon producers in the world with
significant gas reserves.
The acquisition of the Buyback Shares constitutes an off-market
purchase and, pursuant to s.693(1)(a) of the Companies Act 2006,
may only be made pursuant to a buyback contract which has been
approved by shareholders prior to the acquisition of the Buyback
Shares.
Accordingly, the Company is convening the General Meeting, to be
held at the offices of Fox Williams LLP at 10 Finsbury Square,
London EC2A 1AF on 1 February 2019 at 2.30p.m., at which the
Company will seek Shareholder approval of the Buyback
Agreement.
In order to convene the General Meeting, a circular containing a
notice of the General Meeting and form of proxy (the "Circular")
will be despatched to Shareholders of the Company shortly. The
Circular will set out further details of the Buyback, the
Resolution and a recommendation from the Directors of the Company
that Shareholders vote in favour of the Resolution.
Plexus' CEO Ben Van Bilderbeek said, "Plexus sees the share
buyback as a practical and positive move that enables the
acceleration of the delivery of the equipment into Russia, and
positions Gusar ready to fulfill anticipated rental wellhead
exploration orders in Russia, one of the world's three major
hydrocarbon producers."
Gusar's General Director Alexander Beryozkin said, "We are
delighted that after a period of intense work with Gazprom and
other customers, we are preparing to enter the stage of
participation in exploration drilling in the Russian Federation as
soon as the 2019 drilling season. As we have previously indicated,
we have reached an agreement with Gazprom for the supply of Mudline
suspension systems localized for manufacturing in Gusar's
facilities in Russia further to our License Agreement with Plexus.
With the use of POS-GRIP technology, we look forward to delivering
to our customers reduced drilling time and costs, while increasing
safety by not having to remove the BOP. The Plexus - Gusar alliance
gives us an opportunity for the first time to bring localized
products to the Russian market using advanced superior technology,
which positions us for further participation in the Russian
exploration drilling market."
**S**
For further information please visit www.posgrip.com or
contact:
Ben van Bilderbeek Plexus Holdings PLC Tel: 020 7795 6890
Graham Stevens Plexus Holdings PLC Tel: 020 7795 6890
Derrick Lee Cenkos Securities PLC Tel: 0131 220 9100
Frank Buhagiar St Brides Partners Ltd Tel: 020 7236 1177
Isabel de Salis St Brides Partners Ltd Tel: 020 7236 1177
Proposed Buyback of Ordinary Shares held by Gusar
and
Notice of General meeting
INTRODUCTION
The Company has today announced that it has conditionally agreed
to acquire 4,950,495 Ordinary Shares beneficially held by Gusar, by
way of an off-market buyback at an aggregate price of GBP2,500,000
representing a price of 50.5 pence per Ordinary Share.
The acquisition of the Buyback Shares beneficially held by Gusar
constitutes an off-market purchase and, pursuant to s.693(1)(a) of
the Companies Act 2006, may only be made pursuant to a buyback
contract which has been approved by shareholders prior to the
acquisition of the Buyback Shares.
Accordingly, the Company is convening the General Meeting, to be
held at 2.30 p.m. on 1 February 2019, at which it will seek
Shareholder approval of the Buyback Agreement. The Resolution to be
proposed at the General Meeting is set out in the Notice of General
Meeting at the end of the Circular.
The purpose of the Circular is to provide you with information
on and the reasons for the Buyback, to explain why the Board
considers the Buyback to be in the best interests of the Company
and its Shareholders as a whole and why the Directors recommend
that you vote in favour of the Resolution to be proposed at the
General Meeting.
You will find set out at the end of the Circular a notice of the
General Meeting and a Form of Proxy is also enclosed with the
Circular. Completion of the Form of Proxy will not preclude you
from attending the General Meeting and voting in person.
REASONS FOR THE BUYBACK
Background
Following the sale of the jack-up exploration business of the
Company to FMC Technologies Limited ("TFMC") which completed on 7
February 2018, the Company has been working on expanding its
presence in the Region, one of the top three hydrocarbon producers
in the world, initially in the jack-up exploration drilling
sector.
This is possible as it was a condition of the sale to TFMC that
the Company retained the Existing IP Licence Agreement with Gusar
in the Region as a "carve out" from the general exclusivity which
was granted to TFMC in relation to the jack-up exploration business
which was sold.
The Existing IP Licence Agreement permits Gusar to, amongst
other things, manufacture, market, supply and service POS-GRIP
jack-up exploration wellhead systems in the Region.
The Region has significant gas reserves which is an area in
which the technology of the Company excels. The Company believes
there is a sizeable commercial opportunity in the Region for its
jack-up exploration drilling equipment and it is possible that
further applications of the Company's technology may also be able
to be introduced in the Region in the future. The Directors believe
this will enhance its prospects of further establishing the
reputation and market position of its POS-GRIP equipment beyond
jack-up exploration.
As a consequence of this strategy, the Company has been working
hard with Gusar over the past three years to win a first major
contract in the Region. On 14 February 2018, the Company announced
the sale of two POS-GRIP rental wellhead sets and associated
mudline equipment and tooling to Gusar for c.GBP1.4 million which
at the time was the equipment which had been agreed to be purchased
by Gusar. On 27 September 2018, the Company announced that Gusar
had entered into an initial agreement to supply Gazprom with two
sets of Plexus' Tersus(TM) - TRT Mudline Suspension System in
relation to Gazprom activity on the Kara Sea Shelf in 2019.
In addition, Gusar has indicated that it is in advanced
discussions with customers in the Region regarding the potential
provision of the Company's wellhead equipment for the construction
of exploration gas wells in the Region. The two wellheads which
form the main part of the Equipment which is proposed to be
purchased by Gusar under the Equipment Supply Agreement were
retained from the existing stock which the Company held prior to
the sale of the majority of the wellheads and jack up exploration
equipment pursuant to the TFMC transaction.
In order to fulfil its anticipated and future commitments with
customers, Gusar needs to complete the purchase of the Equipment
from the Company. The Equipment is intended to act as a "kick off"
set of equipment for Gusar's jack-up rental equipment inventory and
the Directors believe this should facilitate and accelerate the
generation of further ongoing contract opportunities in the
Region.
Gusar needs to finance the purchase of the Equipment prior to
shipping and wishes to do so by selling some of the Ordinary Shares
which it holds in the capital of the Company. The Company has,
subject to shareholder approval, agreed to purchase such Ordinary
Shares on the terms of the Buyback Agreement.
As part of the Buyback it is agreed that the existing equipment
supply agreement, which was in place at the time of the
announcement by the Company on 14 February 2018, will be superseded
and replaced by the updated Equipment Supply Agreement which
reflects the new terms and list of Equipment which it is agreed is
being sold and purchased.
Key Deal Terms
The Company has agreed, subject to shareholder approval, a deal
with Gusar which encompasses a number of different aspects, each of
which the Board believes is in the best interests of the Company
and furthers the commercial objectives of the Company in the
Region. The relevant aspects of the proposed deal are as
follows:
-- pursuant to the Buyback Agreement, the Company will buy back
4,950,495 Ordinary shares from Gusar for an aggregate price of
GBP2,500,000 representing a price of 50.5 pence per Ordinary Share,
being the closing market bid price on the business day before the
date on which the Buyback Agreement was signed;
-- of the GBP2,500,000 paid by the Company for the Buyback
Shares, GBP1,727,376.08 will be immediately paid back to the
Company to satisfy the obligations of Gusar to make the Agreed
Gusar Payments, which include the agreed payments in respect of the
Equipment Supply Agreement, the sum of GBP76,389.13 owed by Gusar
to POSL under an existing invoice and the sum of GBP50,000 as a
contribution to the legal costs of the Buyback; and the balance of
GBP772,623.92 will be paid to Gusar in cash following receipt of
the shares being purchased;
-- as a condition to the Buyback, the Company and Gusar will
also enter into the Royalty Agreement under which Gusar has agreed
that it will pay a royalty to the Company of 20% in relation to any
revenue generated by Gusar in relation to the rental of POS-GRIP
wellhead systems (other than mudline systems), this royalty being
in addition to the 20% royalties already payable by Gusar to the
Company under the Existing IP Licence Agreement;
-- subject to the Buyback being approved by the shareholders,
the Company and Gusar will enter into the Equipment Supply
Agreement under which Gusar will purchase the following items from
the Company for the aggregate amount of GBP1,600,986.95:
a. GBP311,146.48 for the purchase of mudline equipment;
b. GBP1,048,125.47 for the purchase of two wellhead systems; and
c. GBP241,715.00 for the purchase of other agreed items of equipment.
-- the additional royalty under the Royalty Agreement is payable
for one of the following periods:
- if the minimum licence fee of US$5,000,000 under the Existing
IP Licence Agreement has been paid in full to the Company by Gusar
prior to the expiry of the Equipment Rental Agreement, the duration
of the Equipment Rental Agreement; or
- if the minimum licence fee of US$5,000,000 has not been paid
in full prior to the expiry of the Equipment Rental Agreement,
until the minimum licence fee of US$5,000,000 has been paid.
There are a number of reasons why the Board believes the Buyback
is in the best interests of the Company as follows:
Reasons for the Buyback
-- The Buyback will enable Gusar to finance the purchase of the
two POS-GRIP wellhead systems and associated equipment and tooling
from the Company which it is anticipated will be rented to
customers of Gusar in the Region. Following the purchase of the
equipment, Gusar should be well placed to promote Plexus' products
to its clients which should enable the Company to establish an
increased presence in the Region;
-- Gusar has indicated to the executive directors of the Company
that it intends to use the balance of the consideration for the
Buyback, after payment of the Agreed Gusar Payments, on essential
items of equipment which should accelerate the ability of Gusar to
service and supply the market in the Region with the products of
the Company. Gusar is considering using the balance of the
consideration on the purchase of further associated equipment from
the Company, the purchase of connectors from a third party and
towards the cost of building a testing facility;
-- The Buyback Agreement arrangements enable Gusar to fund the
purchase of the equipment by its preferred route - monetizing a
non-core asset, which is intended to expedite the process of Plexus
establishing a presence in the Region; and
-- The execution of the Royalty Agreement means that the
royalties due to the Company for the sale or rental of POS-GRIP
wellhead systems in the Russian Federation by Gusar will increase
from 20% to 40% of revenue generated (being 20% under the Existing
IP Licence Agreement and 20% under the Royalty Agreement) for an
agreed period (as described above) and this increased royalty
percentage should enhance the margins of the Company.
PRINCIPAL TERMS AND CONDITIONS OF THE BUYBACK AGREEMENT
The Company has signed the Buyback Agreement with Gusar, which,
subject to shareholder approval, sets out the terms on which the
Company will purchase the Buyback Shares beneficially held by
Gusar.
Buyback Agreement
Pursuant to the Buyback Agreement, the Company has agreed to
purchase the Buyback Shares beneficially held by Gusar at an
aggregate price of GBP2,500,000 representing a price of 50.5 pence
per Buyback Share, being the closing market bid price of the
Ordinary Shares on 10 January 2019 (the last trading day prior to
the announcement of the Buyback), subject to (inter alia):
(i) the Company obtaining shareholder approval, such approval to
be sought at the General Meeting convened pursuant to the Notice of
General Meeting set out at the end of the Circular; and
(ii) the Royalty Agreement being executed, dated and delivered; and
(iii) the Equipment Supply Agreement being executed, dated and delivered.
It is intended that, subject to the conditions being satisfied
including receipt of the Buyback Shares by the Company, settlement
of the Buyback will occur within two business days after all the
conditions in the Buyback Agreement are satisfied. On this date,
the Company will pay the GBP2,500,000 of consideration payable in
respect of the Buyback Shares to Gusar by making such payment into
an escrow account operated by Fox Williams LLP, the solicitors to
the Company.
Once Fox Williams LLP has received such payment on behalf of
Gusar, it has the authority to pay the Agreed Gusar Payments to the
Company and to pay the balance in cash to Gusar.
Once the Buyback Shares have been transferred to the CREST
account of the Company, the equipment will be shipped to Gusar
pursuant to the terms of the Equipment Supply Agreement.
Any Ordinary Shares purchased by the Company pursuant to the
Buyback Agreement will be held in treasury and will not rank for
any future dividends and no voting rights will be exercised in
respect of such Ordinary Shares.
FINANCING OF THE BUYBACK
The Company will fund the consideration of GBP2,500,000 payable
under the Buyback Agreement from the Plexus Group's existing cash
reserves.
It is a requirement of the Companies Act 2006 that the Company
must finance the Buyback out of distributable profits and the
Company shall have sufficient distributable profits to comply with
the Companies Act in relation to the Buyback. The Directors have
confirmed that the Company will have sufficient distributable
profits at the anticipated date of the Buyback.
EFFECT OF THE BUYBACK
Following the Buyback there will be 100,435,744 Ordinary Shares
of the Company in issue (not including the 4,950,495 Buyback Shares
which will be placed into treasury).
As at 11 January 2019 (being the latest practicable date prior
to the date of publication of the Circular), so far as the
Directors are aware, the Buyback will not immediately result in any
Shareholder becoming a substantial shareholder of the Company,
holding 10 per cent. or more of the Company's issued share
capital.
A summary of the principal terms of the Buyback Agreement is set
out in the Circular.
Once the Buyback is complete the Ordinary Shares which have been
bought back will be placed into treasury.
RECOMMATION
The Directors believe that the Buyback will help promote the
success of the Company for the benefit of its Shareholders as a
whole.
The Directors unanimously recommend Shareholders to vote in
favour of the Resolution to be proposed at the General Meeting as
they intend to do so in respect of their own beneficial holdings*
amounting, in aggregate, to 59,700,673 Ordinary Shares,
representing approximately 56.65 per cent. of the Existing Ordinary
Shares.
* J. Jeffrey Thrall, has an indirect beneficial interest in a
company which controls 32.477% of Mutual Holdings Limited. The
number of Ordinary shares held by Mutual Holdings Limited in the
Company at the date of this circular is 42,700,001. Additionally,
J. Jeffrey Thrall has an indirect beneficial interest in Nazdar
Limited, a company which holds 1,591,512 Ordinary shares in the
Company and he holds 4,000 Ordinary shares through Thrall
Enterprises Inc.
Ben van Bilderbeek is settlor of a trust which controls 59.962%
of the shares of Mutual Holdings Limited and the entire issued
share capital of OFM Investment Limited. At the date of this
circular, Mutual Holdings Limited holds 42,700,001 shares and OFM
Investment Limited holds 15,069,767.
Additionally, Ben van Bilderbeek holds 307,693 Ordinary shares
directly, Graham Stevens holds 15,100 Ordinary Shares directly and
Craig Hendrie holds 12,600 Ordinary Shares directly.
Capitalised terms in this announcement have the same meaning as
in the Circular published by the Company in connection with the
proposed Buyback
NOTES:
AIM-traded oil and gas engineering services company Plexus (AIM:
POS) is an IP-led company that has developed a range of products
and applications based on its patent-protected POS-GRIP
friction-grip technology. Having proved the superior qualities of
POS-GRIP within the jack-up wellhead exploration market through the
sale of this business to FMC Technologies Limited ("FMCT"), a
subsidiary of TechnipFMC (Paris:FTI, NYSE:FTI), in early 2018, the
Company is now focused on establishing its technology and equipment
in other markets including surface production, subsea and
de-commissioning.
Its suite of new products and applications includes: the
Python(TM) Subsea Wellhead (a new standard for subsea wellheads -
supported by BG, Royal Dutch Shell, Wintershall, Maersk, Total,
Tullow Oil, eni, Senergy, and Oil States Industries Inc); the
POS-SET(TM) Connector for the growing de-commissioning and
abandonment market; HP/HT dual marine barrier risers which provide
an efficient, safe and cost effective solution for use on jack-up
rigs; an innovative HP/HT Tie-Back connector product; and a new
Well Tree product. Importantly, the Company has a Collaboration
Agreement with TFMC, which provides a platform to seek to further
develop and commercialise these and other applications utilising
POS-GRIP technology.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
POSGGUAUGUPBGUW
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