TIDMXAR
RNS Number : 0429M
Xaar PLC
12 September 2019
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF EU REGULATION 596/2014
Xaar plc
Proposed increase of investment by Stratasys in Xaar 3D with an
option for Stratasys to acquire the whole of Xaar 3D within 3
years
Xaar plc ("Xaar") is pleased to announce a significant strategic
development for Xaar 3D Limited ("Xaar 3D"), its 3D Printer
business. Xaar has entered into an agreement with Stratasys, Ltd.
("Stratasys"), its partner in Xaar 3D, to:
- sell 20% of Xaar's holding in Xaar 3D to Stratasys for US$10 million; and
- issue Stratasys a call option to acquire the remaining 55% of
Xaar 3D not held by Stratasys for at least US$33 million, which is
exercisable over three years (together, the "Proposed
Transaction").
The Proposed Transaction creates a strong strategic partnership
for the development and growth of Xaar 3D and unlocks value for
Xaar's shareholders.
Xaar 3D develops industrial grade products and services based on
a unique implementation of the High Speed Sintering technology.
These products and services target the fast growing opportunities
of low to medium volume part production by 3D Printing. Xaar 3D's
core strength lies in its capabilities and experience in machine
design of polymer powder bed systems. These capabilities include
powder management and thermal control, as well as years of
experience in application and materials development for powder
sintering applications.
On 11 July 2018, Xaar announced a joint investment agreement
(the "Initial Transaction") with Stratasys, a leading player in the
3D Printing industry, to develop 3D printing solutions based on
High Speed Sintering technologies, forming Xaar 3D. As a result of
the Initial Transaction, Stratasys currently holds a 15% equity
interest in Xaar 3D. In addition, at the time of the Initial
Transaction, Stratasys was granted an option to increase its
ownership in Xaar 3D up to a total of 30% (the "Initial
Option").
Immediately prior to the completion of the Proposed Transaction,
Stratasys will exercise part of the Initial Option, to acquire new
shares issued by Xaar 3D, which will increase Stratasys' total
ownership prior to completion of the Proposed Transaction to 25%,
in exchange for US$4 million. The unexercised part of the Initial
Option will be cancelled.
Immediately following and conditional upon the completion of the
Proposed Transaction, Stratasys and Xaar will together invest
US$3.25 million, pro rata to their new ownership interests, in Xaar
3D (the "Proposed Further Investment").
Having made significant progress over the past year and given
the potential of Xaar 3D's technology, Stratasys has expressed an
interest to Xaar to materially increase its stake in Xaar 3D. The
Board believes that the terms represent good value for Xaar
shareholders as they allow:
- Xaar 3D to benefit from increased financial resources with
which to accelerate its development;
- Xaar 3D to benefit to a greater degree from Stratasys' leading
knowledge of the 3D market and go-to-market expertise; and,
- Xaar to crystallise immediate value for its shareholders,
while giving shareholders continued exposure to an attractive
business with the potential for significant value realisation in
the future.
Principal terms of the Proposed Transaction and Proposed Further
Investment
Immediately following the exercise of part of the Initial
Option, Stratasys will acquire shares from Xaar comprising 20% of
Xaar 3D, for US$10 million, which will increase Stratasys' stake in
Xaar 3D to 45%.
Xaar will also grant Stratasys an option to acquire all of the
remaining shares held by Xaar in Xaar 3D (the "Call Option"). The
Call Option can be exercised at any time within 3 years from
completion of the Proposed Transaction, with the valuation of Xaar
3D at the time the Call Option is exercised being the greater of
US$60 million (equating to US$33 million for 55%) or two times the
revenues of Xaar 3D in the last 12 months from the date Stratasys
delivered to Xaar a notice of its intention to exercise the Call
Option. In addition, if the Call Option is exercised and Stratasys
becomes the sole shareholder of Xaar 3D, Xaar will be entitled to
an annual payment of 2% of the revenue associated with this
business for a period of 15 years starting from the date the Call
Option is exercised, up to a maximum aggregate amount of US$10
million.
Immediately following, and conditional upon, completion of the
Proposed Transaction, Stratasys and Xaar will together invest
US$3.25 million, pro rata to their new ownership interests, whereby
Stratasys and Xaar will invest US$1.46 million and US$1.79 million
respectively in Xaar 3D.
At the same time as signing the additional investment agreement,
Xaar 3D has signed an agreement for distribution of 3D Printers
with Stratasys and Xaar has signed a supply agreement for the
supply of printheads to Xaar 3D, which will continue if Stratasys
exercises the Call Option (together the "Proposed Transaction
Agreements").
At 31 December 2018 Xaar 3D had gross assets of GBP13.1 million
and in the year to 31 December 2018 made a loss before tax of
GBP0.4 million.
Reasons for the Proposed Transaction and the Proposed Further
Investment
Xaar 3D has an important partnership with Stratasys which
enables it to access the distribution network of a major player in
the world 3D market and maximise the commercial opportunity for
Xaar's attractive technology in the area of 3D printing known as
High Speed Sintering. Stratasys has expressed an interest for a
larger holding in Xaar 3D to enable a deeper collaboration and to
unlock the synergies between both companies, and also an option to
acquire the remaining equity in Xaar 3D on an agreed basis at a
price which would represent a strong return for Xaar in relation to
the investment made to date.
The Proposed Further Investment of US$3.25 million ensures Xaar
3D remains well funded to complete its commercialisation activities
and successfully launch its 3D Printer product in the market.
The investment by Stratasys positions Xaar 3D for further
growth, whilst also unlocking significant value for Xaar
shareholders. The gross proceeds received by Xaar and Xaar 3D on
completion of the Proposed Transaction and Proposed Further
Investment is shown in the table below:
US$ Millions Proceeds
Xaar Consolidated For use For use
by Xaar by the remaining
3D Xaar group
--------- ------------------
Initial Option Part Exercise
(10%) 4.00 4.00
Proposed transaction (20%) 10.00 10.00
Proposed further investment 1.46 3.25 (1.79)
Total 15.46 7.25 8.21
------------------------------ ------------------ --------- ------------------
Completion of the Proposed Transaction and Proposed Further
Investment is conditional on the following:
1. Approval by Xaar's shareholders as the Proposed Transaction
and Proposed Further Investment (when aggregated with the Proposed
Transaction) is a Class 1 transaction, and also a Related Party
transaction (since Stratasys is a substantial shareholder of Xaar
3D) for Xaar under the Listing Rules; and
2. Other customary conditions.
The Proposed Transaction and Proposed Further Investment are
both expected to close before the end of the year.
As part of the investment agreement which will become effective
on completion of the Proposed Transaction, Doug Edwards will remain
as Chairman of Xaar 3D. The Board of Xaar 3D will have up to three
Xaar nominated Directors and up to two Stratasys nominated
Directors.
Professor Neil Hopkinson, Xaar 3D's Director of Technology, is
the inventor of the High Speed Sintering technology and a
recognised world-wide expert in 3D Printing. Professor Hopkinson
has committed to remaining with the business.
Further details of the Proposed Transaction will be provided in
a Circular which, together with a notice to convene a general
meeting, is expected to be sent to Xaar shareholders within the
next 75 days.
Use of proceeds
The Board believes that it is appropriate for Xaar to retain a
strong balance sheet and thus Xaar will retain the gross proceeds
of US$15.46 million from the Proposed Transaction and Proposed
Further Investment of which US$7.25 million will be used
exclusively by Xaar 3D. As previously announced, Xaar is currently
undertaking a strategic review of its Thin Film business. On
completion of this strategic review, Xaar will evaluate its ongoing
cash requirements and the optimal shape of its balance sheet.
Doug Edwards, Chief Executive Officer, Xaar, said:
"Xaar 3D has great potential and we look forward to continuing
to work with Stratasys to develop its full potential in this deeper
relationship. I am pleased that this transaction will create good
value for Xaar shareholders and unlocks the ability for more
significant value in due course."
Omer Krieger, EVP Products, Stratasys, said:
"Xaar 3D has made significant progress over the past year and we
see benefits to Stratasys in extending its investment in Xaar 3D's
innovative High Speed Sintering based solutions. We look forward to
continue developing the technology together with Xaar and believe
the combined expertise of both parties will lead to exploitation of
the technology's promising potential. This continues our company's
strategy of complementing our own robust R&D efforts with
partnerships and investments in other innovative companies to
develop new capabilities and products that create new value to our
customers."
Enquiries:
Xaar plc
Doug Edwards, Chief Executive Officer
Shomit Kenkare, Chief Financial Officer +44 (0)1223 423 663
Jefferies International (Financial advisor
and Sponsor) +44 (0)20 7029 8000
Max Jones
Will Soutar
Tulchan Communications
James Macey White
David Ison +44 (0)20 7353 4200
About Xaar
Xaar is a world leader in the development of digital inkjet
technology. Our technology drives the conversion of analogue
printing and manufacturing methods to digital inkjet which is more
efficient, more economical and more productive than the traditional
methods which have been in use for years. We design and manufacture
printheads as well as systems for product decoration and 3D
Printing which use our inkjet technology.
About Stratasys
Stratasys is a global leader in additive technology solutions
for industries including Aerospace, Automotive, Healthcare,
Consumer Products and Education. For nearly 30 years, a deep and
ongoing focus on customers' business requirements has fueled
purposeful innovations - 1,200 granted and pending additive
technology patents to date - that create new value across product
lifecycle processes, from design prototypes to manufacturing tools
and final production parts.
Important notices
Jefferies International Limited, which is authorised and
regulated by the Financial Conduct Authority in the United Kingdom,
is acting exclusively for Xaar plc and no one else in connection
with the matters referred to in this announcement and will not be
responsible to anyone other than Xaar plc for providing the
protections afforded to clients of Jefferies International Limited,
or for providing advice in connection with the contents of this
announcement or any other matter referred to herein.
This announcement contains statements which are, or may be
deemed to be, "forward-looking statements" which are prospective in
nature. All statements other than statements of historical fact are
forward-looking statements. Often, but not always, forward-looking
statements can be identified by the use of forward-looking words
such as "plans", "expects", "is expected", "is subject to",
"budget", "scheduled", "estimates", "forecasts", "intends",
"anticipates", "believes", "targets", "aims", "projects" or words
or terms of similar substance or the negative thereof, as well as
variations of such words or phrases or statements that certain
actions, events or results "may", "could", "should", "would",
"might" or "will" be taken, occur or be achieved. Such statements
are qualified in their entirety by the inherent risks and
uncertainties surrounding future expectations. Forward-looking
statements include statements relating to (a) future capital
expenditures, expenses, revenues, earnings, economic performance,
indebtedness, financial condition, dividend policy, losses and
future prospects, (b) business and management strategies and the
expansion and growth of Xaar's operations, and (c) the effects of
global economic conditions on Xaar's business.
Such forward-looking statements involve known and unknown risks
and uncertainties that could significantly affect expected results
and are based on certain key assumptions. Many factors may cause
actual results, performance or achievements of Xaar to be
materially different from any future results, performance or
achievements expressed or implied by the forward-looking
statements. Important factors that could cause actual results,
performance or achievements of Xaar to differ materially from the
expectations of Xaar, include, among other things, general business
and economic conditions globally, industry trends, competition,
changes in government and other regulation and policy, including in
relation to the environment, health and safety and taxation, labour
relations and work stoppages, interest rates and currency
fluctuations, changes in its business strategy, political and
economic uncertainty and other factors. Such forward-looking
statements should therefore be construed in light of such factors.
Neither Xaar nor any of its 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 undue reliance on these
forward-looking statements, which speak only as of the date hereof.
Other than in accordance with its legal or regulatory obligations
(including under the UK Listing Rules and the Disclosure Guidance
and Transparency Rules), Xaar is not under any obligation and Xaar
expressly disclaims (to the maximum extent permitted by law) any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events
or otherwise.
No statement in this announcement is intended as a profit
forecast or estimate for any period and no statement in this
announcement should be interpreted to mean that earnings, earnings
per share or income, cash flow from operations or free cash flow
for Xaar or the Xaar group post-transaction for the current or
future financial years would necessarily match or exceed the
historical published earnings, earnings per share or income, cash
flow from operations or free cash flow for Xaar.
This announcement is not intended to, and does not constitute,
or form part of, any offer to sell or an invitation to purchase or
subscribe for any securities or a solicitation of any vote or
approval in any jurisdiction. Xaar shareholders are advised to read
carefully the formal documentation in relation to the Proposed
Transaction once it has been despatched. Any response to the
Proposed Transaction should be only on the basis of the information
in the formal documentation to follow.
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
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