NANO Nanoco Group Plc

11 March 2024                                                                                                                   For immediate release

THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION IN WHOLE OR IN PART IN AUSTRALIA, CANADA, JAPAN, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE ITS RELEASE, PUBLICATION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

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

Nanoco Group PLC

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

Proposed return of up to £33.0 million to shareholders

Retained proceeds to invest in exciting growth prospects

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

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

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

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

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

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

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

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

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

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

Background to the Return of Capital

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

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

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

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

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

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

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

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

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

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

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

Allocation of proceeds

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

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

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

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

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

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

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

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

Details of the Tender Offer

The key points to the Tender Offer are as follows:

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

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

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

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

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

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

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

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

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

Benefits of the Tender Offer for Shareholders

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

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

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

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

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

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

Notice of General Meeting

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

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

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

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

Timetable

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

Circular

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

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

For further information, please contact:

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

About Nanoco Group plc

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

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

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

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

IMPORTANT INFORMATION

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

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

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

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

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