Disposal & EGM Notice

RNS Number:2001K
Celoxica Holdings PLC
18 December 2007


18 December 2007

                             CELOXICA HOLDINGS PLC

                         ("CELOXICA", "THE COMPANY" OR "THE GROUP")

      Proposed sale of Celoxica's Electronic System Level ("ESL") business
                                      and
                                 Notice of EGM

Celoxica Holdings plc (AIM: CXA) - a leading provider of FPGA based High
Performance Computing solutions, today announces the proposed sale of its ESL
business to Catalytic, Inc. for a total cash consideration of US$3.0 million.

Highlights:


   *   Sale in line with strategy to focus on the accelerated computing market

   *   US$3.0 million cash consideration

   *   Significant reduction in annual overheads

   *   Proceeds to be used to develop products in the accelerated computing
       market

   *   Continued right to distribute DK technology in the accelerated computing
       market for 3 years following the sale

Due to the size of the ESL business relative to Celoxica, the sale is deemed to
result in a fundamental change of business under the AIM Rules and therefore
requires shareholder approval. Celoxica has therefore today sent a circular to
Celoxica Shareholders convening an extraordinary general meeting of the Company
to be held at 10.00 a.m. on 3 January 2008 at the offices of Charles Russell
LLP, 7600 The Quorum, Oxford Business Park North, Oxford OX4 2JZ.

To be valid, forms of proxy in respect of the extraordinary general meeting must
be returned to the Company's registrars no later than 10.00 a.m. on 1 January
2008.

Jack Fryer, Chairman commented, "The sale of the ESL business represents a
significant step-change for Celoxica, enabling the Group to focus fully on the
growing opportunities within the accelerated computing market. Awareness of our
technology is increasing and we are already experiencing traction in our key
verticals. This is an exciting time for Celoxica and we look to the future with
confidence."


ENQUIRIES

Celoxica Holdings plc                Tel. [phone]
Lee Staines, CEO
Michelle Young, CFO

ICIS                                 Tel. [phone]
Tom Moriarty
Caroline Evans-Jones

Arbuthnot                            Tel. [phone]
Tom Griffiths
Alasdair Younie


THE PROPOSED SALE OF CELOXICA'S ESL BUSINESS

The following has been extracted from the Circular to be posted to Celoxica
shareholders today, a copy of which will be available on the Company's website
www.celoxica.com from 19 December 2007.

                       PROPOSED SALE OF THE ESL BUSINESS

                                      AND

                    NOTICE OF EXTRAORDINARY GENERAL MEETING

Introduction

The Company announces the proposed sale of its ESL business to Catalytic, Inc
for an aggregate cash consideration of USD3 million. The sale is in line with
the Company's strategy to focus on the accelerated computing market where the
Directors believe that the Company is developing traction within a number of
sectors for its products.

The size of the ESL business relative to the Company means that the sale is
deemed to result in a fundamental change of business under the AIM Rules and
therefore requires Shareholders' approval.

Background and reasons for the Sale

The Company raised approximately £6.1 million on its admission to AIM on 27
October 2005 by way of a placing of 19,424,000 ordinary shares having a nominal
value of 25p each at 31.25p per share with institutional and other investors.
The net proceeds of the Placing were used to fund the next growth phase of the
business, including product creation and the launch of new products and to
provide working capital for the Group. At the time of the Company's admission to
AIM, the Company had licensed approximately 400 commercial seats of its design
tools, making it a leading provider of ESL design solutions.

The Company raised a further £3.0 million (£2.9 million net of expenses) in
February 2007 by way of a placing of 18,756,250 Ordinary Shares at 16p per share
with institutional, trade and other investors. The net proceeds of the placing
were used to fund investment in growth of the Company, specifically in the
accelerated computing market, and for working capital purposes. Celoxica also
raised £0.66 million (before expenses) in October 2007 by way of a placing of
14,000,000 Ordinary Shares at 4.75p per share for working capital purposes.

The Directors believe that companies with intensive computing demands are
finding that the requirement for greater processing capability cannot be
satisfied by larger clusters of the current server technology. Furthermore, the
Directors believe that companies are constrained by floor space, power
requirements for processing with associated cooling requirements and diminishing
efficiency. The Directors believe that one solution to the problem is to use
FPGAs as co-processors alongside existing microprocessors.

The Company's focus since its shares were initially admitted to trading on AIM
has shifted to the accelerated computing market. Following this shift in the
Company's focus, Lee Staines was appointed Chief Executive in July 2007.
Subsequently the Board has concluded that in order to focus effectively on the
accelerated computing market it should dispose of its ESL business.

To address this opportunity, Celoxica has developed solutions incorporating
FPGAs that operate in two major hardware architectures supplied by AMD and
Intel. Furthermore, the Company has used its expertise in FPGA software to
develop a comprehensive and easy-to-use programming suite that enables quick
implementation. Using these solutions the customer can continue to benefit from
investment in legacy technology whilst securing a major improvement in
processing throughput and speed.

The Directors consider that, within the USD14.9 billion high performance
computing market, there are accelerated computing opportunities. The Company has
decided to focus initially on the financial, oil and gas and life sciences
sectors as, in the Directors opinion, they exhibit the most acute need for
processing power, large IT spend and the likelihood of production rollout. The
Company has won orders in all three of these sectors. The Directors believe that
the Company is building traction with potential customers in the accelerated
computing market and that the level of interest in the Company's technology is
growing.

Under the terms of the sale, the Company will receive a cash consideration of
USD3.0 million. The Company intends to invest the net proceeds of the sale as
follows:

*    to further develop application specific IP and products for the
     accelerated computing market, continuing to focus specifically on the
     finance, oil and gas and bioinformatic application sectors;

*    to enable the Company to expand its strategic partnerships within the
     accelerated computing market; and

*    to provide working capital for the Company.

Following Completion, the Directors believe that the Company's annual overheads
will be significantly reduced.

Information on the ESL business

The Company is selling the assets which constitute the business that it
undertakes in the ESL market.

The products included in the sale are:

*    DK Design suite - a C based software technology for high level design,
     entry simulation and co-simulation as well as compiling the Handel-C
     language into hardware description languages;

*    Agility compiler - the product which implements software models to
     hardware from the SystemC language;

*    PixelStreams - a library of high performance IP Cores for digital image
     and video processing;

*    the range of owned hardware boards used to support the above business

*    all the owned IP rights for the above products; and

*    three patents covering the above technology.

In addition as part of the sale, eighteen employees will transfer with the
business from Celoxica to the Catalytic Group. The Catalytic Group will also
assume the current Japanese and US offices of the Group.  The ESL business
generated revenue for the 12 months ended 31 December 2006 of £3.3 million. The
Directors believe that the ESL business was loss making for the 12 months ended
31 December 2006. The Directors are not able to state the actual loss because
the ESL business is not a stand alone business within the Group and it is
therefore not possible to apportion costs to the ESL business.

Furthermore, as a result of the sale, the Group will have certain rights to use
and distribute the DK Design Suite in order to deliver its products in the
Accelerated Computing market. Catalytic, Inc has granted distribution rights to
the Group in respect of the DK Design Suite in the Financial Services market for
3 years from the date of Completion with further possibilities for exclusivity
in the Oil and Gas and Life/Medical Sciences sectors if the Group achieves 
certain targets.

Principal terms of the Sale

Under the terms of the SPA, the Group has agreed to sell, subject to obtaining
Shareholders' approval, its ESL business to Catalytic, Inc. for a cash
consideration of USD3.0 million.

USD2.7 million of the consideration will be paid at Completion (less
approximately USD64,000 which shall be paid by a Japanese subsidiary of
Catalytic, Inc. in respect of the Japanese assets shortly after Completion).
Completion is due to take place as soon as reasonably practicable after Celoxica
Shareholders have approved the sale, provided that there has been no material
adverse change since the date the SPA was entered into (for the purposes of the
SPA there will have been a material adverse change if there shall have occurred
(i) any actual or threatened litigation with respect to the ESL business with a
quantum of claim in excess of USD0.3 million or (ii) the granting of an
injunction against any revenue producing activity of the ESL business).

The balance of USD0.3 million will be held in an escrow account until the end of
the warranty period in respect of non-IP claims, being 12 months after
Completion, subject to any subsisting warranty claims by Catalytic, Inc. at that
time. The Group has given, what the Directors believe to be, normal warranties
and indemnities appropriate to a transaction of this type (subject to certain
limitations).

Celoxica has agreed to pay an amount equal to the legal, accounting and other
third party advisory fees and expenses paid or payable by Catalytic, Inc. in
connection with the transaction up to a maximum amount of USD150,000 if Celoxica
Shareholders' approval for the sale is not obtained by 25 January 2008.

Irrevocable Undertakings

The Company has received irrevocable undertakings from certain Celoxica
Shareholders (including all of the Directors who hold Ordinary Shares) to vote
in favour of the Resolution in respect of, in aggregate, 42,474,979 Ordinary
Shares representing approximately 50.4 per cent. of the issued ordinary share
capital of the Company.

Recommendation

The Directors believe that the terms of the sale, as set out in this
announcement are in the best interests of the Company and the Celoxica
Shareholders as a whole.

Accordingly, the Celoxica Directors unanimously recommend Celoxica Shareholders
to vote in favour of the Resolution to be proposed at the EGM as they and other
shareholders have irrevocably undertaken to do in respect of their beneficial
shareholdings, which in aggregate amount to 42,474,979 Ordinary Shares,
representing approximately 50.4 per cent. of the Ordinary Shares.

END






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