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Binding Licence and Share Subscription Agreements Signed with Major Chinese Oil Services Provider Yantai Jereh Oilfield Services Group
Plexus Holdings PLC, the AIM quoted oil and gas engineering services business and owner of the proprietary POS-GRIP friction-grip method of wellhead engineering, announces that it has finalised and entered into a licence agreement dated 1 July 2015 with Yantai Jereh Oilfield Services Group Co., Ltd, a Chinese oil services provider listed on the Shenzhen stock exchange with a market capitalisation of US$6.9bn, to facilitate the rental, sale, and manufacture of Plexus’ wellhead equipment into the major Chinese, wider Asian, Brazil, Indian and Middle East oil and gas markets. The Licence Agreement is a transformational milestone for Plexus and is in line with its strategy of significantly increasing the global reach of its best in class POS-GRIP wellhead equipment in markets which offer exponential growth opportunities.
Plexus has also finalised and entered into a share subscription agreement dated 1 July 2015 with Jereh International (Hong Kong) Co., Ltd, with formal completion to occur on receipt of funds as detailed below from Jereh HK.
Licence Agreement
Under the terms of the Licence Agreement, which follows the framework agreement signed at the Beijing Oil Show and announced on 26 March 2015, Jereh has been granted an exclusive licence in China and other designated Asian territories, as well as Brazil, India, and the Middle East, to manufacture and supply Plexus’ products utilising Plexus’ trademarks, patents, technology, know-how, engineering, standards and other intellectual property and technical services. Plexus is entitled to a range of royalty percentages from Jereh in respect of the rental and sale of different Plexus POS-GRIP wellhead equipment applications made under the Licence Agreement. In particular it is anticipated that Jereh will aggressively pursue sales opportunities in the volume onshore and offshore production well market sector.
Several of the Licence Agreement relationship arrangements are already underway with Plexus holding training workshops at Jereh’s operational headquarters in Yantai, China for its engineers and sales personnel. In tandem, Plexus and Jereh are conducting collaboration meetings to best identify immediate commercial opportunities to further expedite the manufacture and supply of equipment. These early initiatives may include Jereh accelerating such opportunities through the purchase of sets of Plexus’ POS-GRIP wellhead systems manufactured in Aberdeen which would generate early cashflow for Plexus and Jereh under the terms of the Licence Agreement.
Share Subscription Agreement
The Share Subscription Agreement finalises the subscription by Jereh HK (the ‘Subscription’) for 4,468,537 new ordinary shares in the Company (“Subscription Shares”) at a price of 180 pence per Share (as announced on 26 March 2015, this price being a premium to the price at the time the parties commenced discussions regarding the proposed licencing agreement) for a total consideration of £8,043,367. The new shares will be issued and admitted to trading on AIM as soon as practicable after the Initial Subscription Completion and will result in Jereh being interested in 5 per cent of the enlarged issued share capital of Plexus.
In addition, the Share Subscription Agreement contains, inter alia, the following provisions:
· for a period of twelve months from the date of the Initial Subscription Completion, Jereh will retain the right to subscribe for further new Shares in the Company at a price the lower of: (i) 200 pence per Share (this being a premium to the price at the time the parties commenced discussions regarding the proposed licencing agreement); and (ii) a sum equal to the average middle market quotations for Shares in Plexus in the 5 business days prior to the date on which notice to subscribe is served by Jereh HK on the Company, such that Jereh could become interested in up to a further 5 per cent. of the enlarged issued share capital of Plexus;
· Jereh HK has the right to appoint a non-executive director to the board of Plexus, subject to certain conditions and the approval of the individual by the Company and its NOMAD;
· subject, inter alia, to Jereh HK maintaining a holding of not less than 75% of the Subscription Shares (representing 3.75% of the issued share capital of the Company) plus, if applicable, 75% of any Further Subscription Shares, in the event that Mutual Holdings Ltd and/or OFM Investment Ltd propose to sell, whether through a single transaction or a series of transactions Shares amounting to more than 7% of the issued share capital of the Company (the “Excess Shares”), Jereh HK has the right to demand that Mutual Holdings or OFM Investment (or a combination of the two) purchase a proportion of Jereh HK’s Shares (the “Put Option Shares”) which is equal to the proportion that the Excess Shares bears to the total number of Shares then held by Mutual Holdings and OFM Investment at a price equal to that achieved for the sale of the Excess Shares (the “Put Option”). The Put Option shall end on the 20th business day following the transfer of the Excess Shares. Mutual Holdings Ltd and OFM Investment Ltd are under no obligation to purchase the Put Option Shares if they can procure an alternative purchaser for the Put Option Shares within 10 business days of receipt of the notice from Jereh HK exercising the Put Option.
· during the period ending three years after the Initial Subscription Completion Jereh HK shall be offered the opportunity and shall have the right (but not the obligation) to subscribe in any future funding round at the same subscription price as that offered to all other Shareholders or new investors in the Company such that Jereh HK could maintain a holding not less than 75% of the Subscription Shares and in the event that Further Subscription Shares are subscribed, 75% of the aggregate of the Subscription Shares and the Further Subscription Shares;
· prior to the first anniversary of each of the Initial Subscription Completion and the completion of the Further Subscription (if applicable) respectively, the aggregate holding of Jereh Group shall not exceed 10% of the Company’s issued share capital (other than by Jereh HK taking up rights or similar entitlements granted in respect of a rights issue or other pre-emptive share offering by the Company); and
· prior to the first anniversary of the Initial Subscription Completion Jereh HK will not, without the prior written consent of the Company, directly or indirectly offer, sell, lend, pledge, contract to sell, grant any option, right or warrant to purchase or otherwise dispose of any of the Subscription Shares; and prior to the first anniversary of the completion of the Further Subscription (if applicable), Jereh HK will not, without the prior written consent of the Company, directly or indirectly offer, sell, lend, pledge, contract to sell, grant any option, right or warrant to purchase or otherwise dispose of any of the Further Subscription Shares.
Plexus’ CEO Ben Van Bilderbeek said, “This agreement with Jereh, which is a world-class supplier of oil and gas field equipment and services, operating in more than 60 countries, moves Plexus from a supplier of specialist wellhead equipment for exacting applications, into the main stream volume market, where the ability to engineer and manufacture to high standards whilst controlling costs by design and practice, are the necessary ingredients for success. The timing of this union is most appropriate as Plexus is launching its Python™ Subsea Wellhead System at the Aberdeen Offshore Europe Exhibition in September 2015, whilst Jereh is focused on developing its supply chain into Brazil where the subsea applications from our unique technology have the potential of delivering the greatest dividend.
“In addition Jereh is strongly established in China and Asia and is further poised to pursue opportunities for our technology in the Middle East, at a time where this region presents major challenges for Western companies.
“According to Infield the energy analysts, China and wider Asia is in the process of implementing the largest regional offshore capital expenditure programme which, from 2012 to 2018, has been estimated to amount to US$146 bn. In global terms a World Oilfield Services Market Forecast expects a 47% growth rate in the global oil services market to US$521bn in 2018.
“Plexus and Jereh share the ambition of delivering oil and gas drilling equipment and services, which are best in class in terms of safety, performance and reliability. By incorporating patented POS-GRIP technology, our companies will push the boundaries in terms of wellhead performance and safety standards, where we now can match the integrity of premium casing products in all drilling and production applications. In the field of High Temperature and High Pressure operations, at the surface and subsea, POS-GRIP technology simply sets a standard no other wellhead technology can match.
“Whilst Plexus will continue to expand its global presence in the North Sea, Europe, MENA and Australasia, and has vested interests in Asia with Malaysian and Singaporean sales hubs, we believe this Licence Agreement can over time generate substantial revenues from the partnership with Jereh, who have an exceptional proven track record as licensees for major partners around the world.
“Finally I would like to thank Chairman Sun and his excellent team at Jereh, who have worked closely with the Plexus team to ensure a smooth completion process following the signing of the Framework Agreement between Kunxiao Wang, President and Co-founder of Jereh, and myself at the Beijing Oil Show in March 2015.”
