PUR.L Regulatory News (PUR)

24 November 2015

PURE WAFER PLC

(AIM: PUR)

Proposed disposal of Pure Wafer Inc. and Notice of intention to de-list from AIM

Pure Wafer plc ("Pure Wafer" or "the Company"), a provider of high quality silicon wafer reclaim services for many of the world's leading semiconductor manufacturers as an integral part of their cost control programmes, announces that it has agreed terms for the proposed sale of its wholly owned subsidiary, Pure Wafer Inc. ("the Subsidiary").

The Disposal will result in a fundamental change to the business of the Company and is conditional upon, amongst other things, the approval of Shareholders under the AIM Rules. The Disposal will also result in the disposal of substantially all of the trading business, activities and assets of the Company and as a result, upon completion of the Disposal, the Company will be treated as an investing company for the purposes of the AIM Rules.

Background to and reasons for the Disposal

On 1st May 2015 the Board announced that, having agreed a final settlement with the Group's insurers in respect of the fire at its Swansea premises in December 2014, it did not intend to reinstate its Swansea premises. On 12th August the Board further announced the disposal of the Swansea site, leaving the facility operated by the Subsidiary in Prescott, Arizona as the Group's only remaining trading site.

As confirmed in those announcements, the Group has, during 2015, made further investment in the Prescott facility and successfully transferred to Prescott some wafer reclaim business previously serviced from Swansea. The profits attributable to the Subsidiary are as set out in the announcement of the Group's preliminary results provided on 15th October 2015.

Our Subsidiary in the US continues to perform well. However, the Board is conscious that Shareholders, on the whole, did not seek to invest in a wholly US based business and that it will be inefficient for that business to continue to be owned, supported and managed from the UK via a UK listed holding company. The Board therefore determined to investigate, on a confidential basis, whether an acceptable cash offer for the Subsidiary was available which the Board believed reflected the performance and future potential of the Group's US business. Such an offer was made by Wafer Holding Company LLC ("the Purchaser") and has resulted in the Disposal Agreement being entered into by the Company.

The Board has also been mindful, in agreeing to proceed with the Disposal (subject to the approval of Shareholders at the General Meeting) that completion of the Disposal would enable the Board to propose a course of action which would reduce ongoing administrative costs and enable surplus funds to be distributed to shareholders in a timely and absolute manner.

Commenting on the transaction, Chairman Peter Harrington said:

"Pure Wafer Inc.'s high quality wafer reclaim capability across the full wafer diameter range; well-established manufacturing capability and long-term blue-chip customer base complement Wafer Holding's existing business processes - presenting benefits through shared access to market, manufacturing and technologies."

Chief Executive Richard Howells also commented:

"Following the events last December, we are delighted to have found a new home in Wafer Holdings for our US business. This deal will enable Pure Wafer Inc. to build on the foundations of a high quality wafer reclamation business, taking the combined parties position from strength to strength in this highly technological sector."

Terms and conditions of the Disposal

The Disposal Agreement was entered into on 23 November 2015. The total price payable to the Company by the Purchaser for the entire issued share capital of Pure Wafer Inc. is $16,000,000 (subject to customary post-closing working capital adjustments).

Shareholders should note that the above purchase price takes into account the following:

(a) ongoing Group management costs associated with the Prescott operations, and with maintaining a board and corporate governance framework appropriate for a company listed on AIM;

 (b) future capital expenditure necessary for the Prescott facility to maintain its position at the forefront of technology and to enhance its product specifications to support customers moving to the next technology node;

(c) the Purchaser has agreed to structure the purchase as an acquisition of the shares in the Subsidiary, rather than a purchase of the trade and assets. The structure yields a considerable tax saving for the Company (estimates suggest that this could be up to $2,000,000) and enables the process of returning funds to Shareholders to be accelerated; and

 (d) the Purchaser accepts responsibility for any residual risk and any associated costs of losing the appeal pending before the U.S. Ninth Circuit Court of Appeals relating to the litigation with the City of Prescott relating to contractually agreed limits of certain effluents discharged from the Pure Wafer Inc.'s Prescott facility.

Taking the above factors into account, the Directors consider the purchase price to be fair and reasonable and that the Disposal is in the best interests of Shareholders.

The consideration shall be satisfied by the payment in cash to the Company on closing of the sum of $14,400,000 (including repayment of the outstanding inter-company debt owed by the Subsidiary to the Company at closing). The balance of $1,600,000 shall be held by an escrow agent on behalf of the parties on account of any claims arising under the terms of the Disposal Agreement and, provided no such claims are outstanding on that date, this balance shall be released to the Company on 31 August 2016.

Completion of the Disposal is conditional, amongst other conditions, on the approval of Shareholders and the board will today convene a General Meeting to consider a resolution to approve the Disposal accordingly ("General Meeting").

EY's Corporate Finance team, led by Tony Trussell in the UK and Ian Smith in the US acted as lead advisors. The Company was also advised by Rob Cherry of Blake Morgan LLP (UK Legal), Paul Tauber of Coblentz Patch Duffy & Bass LLP (US Legal), Simon Jones of KPMG (Tax) and John Wakefield of WH Ireland Ltd (Nominated Advisor).

Notice of Intention to de-list from AIM

Upon completion of the Disposal, the Company will be treated as an investing company for the purposes of the AIM Rules and may be required to adopt an investing policy in the circumstances and manner described below.

Subject to the approval of the Shareholders, completion of the Disposal is expected to occur immediately following the passing of the resolutions at the General Meeting. The Company intends to call a further general meeting of the Shareholders to propose resolutions to place the Company in members' voluntary liquidation and to appoint a liquidator for the orderly winding up of the Company ("Liquidation General Meeting").

It is anticipated that the Liquidation General Meeting will be held in early January 2016 and in any event within 3 months of the date of the Disposal Circular. A relevant circular enclosing notice of the Liquidation General Meeting will be distributed to Shareholders in December 2015.

The Company is currently in active discussions with the individuals whom the Board proposes to recommend be appointed as liquidators in order to ascertain the likely timing and amount of distributions which they believe can be made to Shareholders following their appointment. Details of these distributions will be set out in the circular which will accompany the notice of the Liquidation General Meeting.

Conditional on the passing of the resolutions to be proposed at the Liquidation General Meeting, the Company gives notice in accordance with Rule 41 of the AIM Rules of its intention to de-list from AIM ("AIM Cancellation").

For the avoidance of doubt, it is expected that the Ordinary Shares will continue to be admitted to trading on AIM unless and until the resolutions to be proposed at the Liquidation General Meeting are duly passed.

In the event that the resolutions to be put to the Liquidation General Meeting are not passed, the Directors will propose that the Company adopts an investing policy in accordance with the requirements of the AIM Rules. Pending the Liquidation General Meeting the cash funds held by the Group will be held in appropriate interest-bearing deposit accounts with UK clearing banks, affording access to the proposed liquidators, if appointed, in order to effect interim distributions in such manner as they deem appropriate.

Process for and principal effects of de-listing from AIM ("the AIM Cancellation")

The Directors are aware that certain Shareholders may be unable or unwilling to hold Shares in the event that the AIM Cancellation is approved and becomes effective. To the extent that Shareholders are unable or unwilling to hold Shares in the Company following the AIM Cancellation becoming effective, such Shareholders should consider selling their interests in the Company in the market prior to the AIM Cancellation becoming effective.

Under the AIM Rules the Company is required to give at least 20 clear Business Days' notice of intended cancellation to trading on AIM. Additionally, cancellation of trading on AIM will not take effect until the issue of a cancellation of dealing notice by the London Stock Exchange. Dealings in Shares will be suspended from the date of the Liquidation General Meeting and, if the resolutions are passed at the Liquidation General Meeting, the AIM Cancellation will take effect from the next business day.

In the event that the AIM Cancellation proceeds, there will be no market facility for dealing in Shares and no price will be publicly quoted for Shares as from close of business on the date on which the resolutions to be proposed at the Liquidation General Meeting are approved. As such, interests in Shares are unlikely to be readily capable of sale following this date and, where a buyer of any Shares is identified, it may be difficult to place a fair value on any such sale. It is anticipated that the funds available for distribution to Shareholders will be distributed by the Liquidators in stages following their appointment and, unless a purchaser can be found for any Shares, such distributions are likely to be the principal means by which Shareholders will be able to realise the value of their investment in Shares following the AIM Cancellation.

Risks associated with retaining an interest in the Company following the AIM

Cancellation

The Directors draw to the attention of Shareholders the following factors which should be taken into account in assessing whether or not to retain their interests in Shares in the event that the AIM Cancellation is approved by the Shareholders and becomes effective:

• as indicated above, AIM Cancellation will only take effect conditional on the appointment of a liquidator following which interim distributions of capital will be made to Shareholders;

• there will be no market facility for dealing in the Shares and no price will be publicly quoted for the Shares. As such, interests in Shares are unlikely to be readily capable of sale and where a buyer is identified, it may be difficult to place a fair value on any such sale;

• as an unquoted company, it will no longer be subject to the AIM Rules and Shareholders will only be able to rely on the protections afforded to Shareholders under applicable English law and, for a period of 10 years following AIM Cancellation, the City Code;

• the Company will no longer be subject to the rules relating to disclosure of interests in Shares set out in the Disclosure and Transparency Rules, such that it may be difficult to ascertain the ownership of Shares from time to time; and

• the levels of transparency and corporate governance within the Company are unlikely to be as stringent as for a company quoted on AIM.

The above considerations are non-exhaustive and Shareholders should seek their own independent advice when assessing the likely impact of the AIM Cancellation on them.

Intentions of the Directors

Each of the Directors (other than Huw Lewis) is a Shareholder and each such Director has irrevocably committed himself to vote in favour of the resolution to be proposed at the General Meeting to approve the Disposal in respect of the Ordinary Shares beneficially held by him amounting to 2,265,914 Ordinary Shares, representing approximately 7.8% per cent. of the Ordinary Shares.

General Meeting

A circular containing a notice convening the General Meeting for the purposes of approving the Disposal and to be held at the offices of Blake Morgan LLP, Bradley Court, Park Place, Cardiff CF10 3DP at 10 am on 10 December 2015 is intended to be sent to shareholders on 24 November 2015.

Annual General Meeting

It is intended that the Company's Annual General Meeting ("AGM") will be held on 30 December 2015. The Company's Annual Report and Financial Statements together with a Notice convening its AGM will be posted to Shareholders week commencing 30 November 2015.