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Ceres Power Holdings plc
Bosch to increase holding in Ceres to c.18% to extend strategic relationship and Ceres to raise £38.0 million new equity to broaden available markets
· Bosch to increase its stake to c.18% of the enlarged issued share capital of Ceres via a combination of new and existing Ceres shares at a price of 320p per share
· Bosch investment in new Ceres shares will raise gross proceeds of approximately £38.0 million for Ceres which will be used to fund further product uses for solid oxide fuel cells and diversify R&D activity to potential electrolysis applications for Ceres' technology
· Strengthens the long-term partnership with Bosch and, alongside Weichai, the Company now has two commercial partners as significant strategic investors in the Company
Ceres Power Holdings plc (AIM: CWR, "Ceres", "the Company" and together with its subsidiaries, "the Group"), a world-leading developer of next generation solid oxide fuel cell (SOFC) technology, is pleased to announce that Robert Bosch GmbH ("Bosch") will increase its equity shareholding in Ceres from c.4% to c.18%. This is a significant strategic step forward in the partnership established in August 2018 and follows successful collaboration on technology development and manufacturing in both the UK and Germany.
The increased shareholding will be achieved in two transactions: -
· A subscription by Bosch for 11,888,070 new ordinary shares of 10 pence each in Ceres (the "Subscription Shares") under the disapplication of pre-emption rights granted by Ceres' shareholders in December 2019 (the "Bosch Subscription"), representing c.7.7% of the Company's existing issued share capital. Investec Bank plc is acting as sole advisor and Broker to Ceres in respect of the Bosch Subscription; and
· A reverse accelerated bookbuild ("RABB") conducted by Deutsche Bank, on behalf of Bosch, to purchase up to c.13.0 million existing Ceres shares. Bosch intends to proceed with the purchase subject to purchasing a minimum of c.12.3 million shares and pursuant to market soundings carried out prior to the release of the announcement, Bosch has received irrevocable commitments from certain existing shareholders for this minimum number of shares.
· To the extent that the RABB is oversubscribed, applications will be scaled back at the discretion of Bosch and Deutsche Bank. Full details of the RABB to be executed by Deutsche Bank on behalf of Bosch are detailed in a separate announcement published today.
· Both the new shares being issued and the existing shares being purchased from existing shareholders are being effected at a price of 320p per ordinary share (a premium of 29.5% to the 3-month VWAP)
Since signing a strategic agreement in August 2018, Ceres and Bosch have been successfully collaborating in the development of fuel-cell stacks for stationary power applications. This has enabled Bosch to start initial low-volume production of pilot systems in late 2019 in Bamberg, Germany. Bosch's increased stake in Ceres is intended to further support the collaboration towards potential future scale up and mass manufacture of the Ceres SteelCell® for multiple applications.
The Board of Directors believes that there is significant future value for shareholders in broadening the application of Ceres' technology and further strengthening its relationship with Bosch. The Ceres Board is delighted to have two commercial partners, Weichai and Bosch as significant strategic investors in the Company and believes that this transaction is in the best interests of all existing shareholders. The Ceres Board believes that this transaction further strengthens its relationship with Bosch and also demonstrates Bosch's commitment to its partnership with Ceres.
Over the past 12 months, Ceres has strengthened its position as the partner of choice in SOFC technology for global original equipment manufacturers (OEMs). As a clean energy technology licensing business, it is essential that Ceres remains at the forefront of developing new innovative products for its OEM customers. The gross proceeds of £38.0m raised through the Bosch Subscription, along with the Group's existing cash balances, will allow the Group to both consolidate its position as a leader in solid oxide fuel cell systems, expanding into high power applications, and also to diversify its technology into complementary areas which align with its core purpose of providing clean energy technology to address climate change and improve air quality and help reduce emissions to net zero.
One promising additional application for Ceres' SOFC technology is solid oxide electrolysis, essentially the process of reversing fuel cells to produce hydrogen and e-fuels from renewable energy. Early stage testing on the application of Ceres' technology as a solid oxide electrolyser (SOEC) has delivered encouraging results.
Dr. Christian Fischer, member of the Bosch management board responsible for the Energy and Building Technology business sector reiterated his earlier support for the collaboration between Bosch and Ceres: "Bosch strongly believes that the highly efficient fuel cell has an important role to play in energy systems' security of supply and flexibility. Together with our development partner Ceres, Bosch has made good progress in the development of fuel cell stacks for stationary power applications. With this enlarged investment in Ceres, we intend to further strengthen our successful collaboration with our development partner Ceres."
Phil Caldwell, Chief Executive of Ceres said: "We welcome this investment by Bosch which is further endorsement of our technology and the work done by our respective teams over the past year. Our successful partnership with some of the world's leading OEMs, including Bosch, has seen us develop fuel cell applications for home, commercial and heavy transportation applications and establish Ceres as one of the leaders in the fuel cell industry. This new investment will allow us to build upon this strong position and grow the business further into new areas which are needed for the energy transition such as electrolysis for hydrogen and synthetic e-fuels and developing higher power applications while also continuing to focus on the commercialisation of our core power systems."
Overall detail of transactions
Bosch has today agreed to subscribe for 11,888,070 new ordinary shares in Ceres as part of an overall transaction to increase Bosch's holding in Ceres from just under 4% to c.18%. As part of the transaction Bosch and Ceres have signed a relationship agreement, which gives Bosch the right to appoint a Non-Executive Director onto the Board of Ceres Power Holdings plc, once the Bosch Subscription has completed. Bosch will be subject to an 18-month lock-up period in respect of the shares acquired pursuant to the Bosch Subscription and the RABB following the transactions and will also have certain anti-dilution rights. The Ceres board welcomes the experience a Bosch representative will bring on board.
The issue price for the Bosch Subscription is 320p per share, which is a 29.5% premium to the volume weighted average closing mid-market share price for the 3 months to 21 January 2020 ("VWAP") and a 7.8% discount to the mid-market share price on 21 January 2020.
The issue of new shares in Ceres by way of the Bosch Subscription means that existing shareholders' interests in Ceres will be diluted by 7.2%. Weichai Power, Ceres' largest strategic shareholder has anti-dilution rights and, assuming that it will exercise those rights and will subscribe for 3,488,980 new ordinary shares at 320p per share to maintain its shareholding at 20% of the enlarged share capital following the Bosch Subscription, the overall impact of the issue of new shares to both Bosch and Weichai means that existing shareholders' interests in Ceres will be diluted by 9.1% in aggregate.
The Bosch Subscription is conditional on, inter alia, (i) admission of the Subscription Shares to trading on AIM ("Admission"), (ii) the RABB completing in circumstances where Bosch has completed the acquisition of at least c.12.3 million existing Ceres shares (representing 8.0% of the Company's issued share capital) and (iii) approval by the German and Brazilian anti-trust authorities prior to the end of 31 March 2020 (or such other date as agreed between the parties). Application will be made for Admission of the Subscription Shares to trading on AIM. It is expected that Admission of the Subscription Shares, which will rank pari passu to existing ordinary shares in the Company in all respects, will occur by the end of March 2020. Following completion of the Bosch Subscription and the RABB, and assuming Weichai Power exercises its anti-dilution rights, the Bosch Group and its subsidiaries will hold between 17.8% and 18.2% of the enlarged issued share capital of Ceres Power.
Following the issue of the Bosch Subscription Shares and on the assumption that Weichai exercises its anti-dilution rights, the total number of voting rights in the Company will be 169,326,571. The Company does not hold any shares in Treasury.
Reverse Accelerated Bookbuild ("RABB")
As detailed in a separate RNS announcement issued today, Deutsche Bank, acting for Bosch, has launched a reverse accelerated bookbuild to purchase up to c.13.0 million shares in Ceres (representing c.8.0% of the existing issued share capital of Ceres prior to the issue of the Bosch Subscription Shares) from existing qualifying professional shareholders at a price of 320p per share. Neither Weichai nor any Directors of Ceres intend to offer their shares for purchase as part of the RABB. To the extent that the RABB is oversubscribed, applications will be scaled back at the discretion of Bosch and Deutsche Bank.
More details on the proposed RABB are available in the separate announcement released today by Deutsche Bank.
Use of funds
The Bosch Subscription for new ordinary shares in Ceres will enable the Group to continue to grow and commercialise its clean energy technology to maximise shareholder value. The Board believes that the gross proceeds of the Bosch subscription of £38.0 million, along with the Group's existing cash balances and the proceeds from any exercise of Weichai Power's anti-dilution provisions, will provide sufficient capital for the Group to both consolidate its position as a leader in fuel cell systems and also expand its technology into complementary areas which align with its core purpose of providing clean energy technology to address climate change and improve air quality.
As a clean energy technology licensing business, it is essential that Ceres remains at the forefront of developing new innovative products for its OEM customers.
Further investment in the Fuel Cell Power systems business
A portion of the proceeds from the Bosch Subscription will help strengthen and accelerate commercialisation activity of the core power system to meet the needs of the Group's OEM customers as follows:
· Further development of high power systems and associated investment in capital for test capability. This capacity increase is required near term to meet increased customer demand for high power applications from 30kW systems to over 200kW systems over the next few years.
· To expand manufacturing capacity of fuel cell stacks initially from 2MW to 3MW during 2020, and in parallel to continue developing manufacturing processes to potentially expand beyond 3MW and support partners in manufacturing scale up.
· Investment in Business Development activities and supporting engineering capability to accelerate and broaden customer adoption to increase the number of addressable end markets with the aim of establishing the Ceres Steel Cell technology as the global standard in the industry for SOFC. This involves expanding business development reach geographically and building capability to access new market applications.
· Provide additional balance sheet strength to give the ability for future tactical acquisitions if required, where this is additive, accelerates the Group's purpose and is consistent with its licensing business model.
· Have sufficient funds on the balance sheet for investment into the joint venture with Weichai Power, which is expected to be formed in late 2020, and provide the option to maintain a 49% shareholding in the joint venture in future years.
Broader Purpose to develop complementary clean energy technologies - electrolysers for H2 and e-fuels
This additional funding will enable Ceres to invest in additional R&D activity to apply its technology as a Solid Oxide Electrolyser (SOEC) to produce hydrogen and e-fuels. Electrolysis with Ceres' technology could use low cost electricity and, unique to higher temperature electrolysers, waste heat to convert water and carbon dioxide to high value chemicals such as hydrogen and other synthetic transport fuels, precursors for fertilisers and replacements for other petrochemical products. High temperature electrolysis can potentially play a significant role in the decarbonisation of the "hard-to-abate" sectors like steel, other industrial heat consumers and even aviation. The Board believes that there is significant future value associated with this opportunity.
The Company has already run early stage tests in this area with encouraging results that could lead to the Ceres technology being sufficiently differentiated from other electrolyser technologies.
Rule 2.8 statement
Bosch has confirmed to Ceres that is does not intend to make an offer for the Company. This is a statement to which Rule 2.8 of the City Code on Takeovers and Mergers (the "Code") applies. Accordingly Bosch and any person acting in concert with it will, except with the consent of the Panel on Takeovers and Mergers, be bound by the restrictions under Rule 2.8 of the Code.
In accordance with Note 2 on Rule 2.8 of the Code, Bosch, and any person acting in concert with Bosch, reserves the right to set aside the restrictions in Rule 2.8 in the following circumstances: (i) with the agreement of the board of Ceres; (ii) if a third party announces a firm intention to make an offer for Ceres; (iii) if Ceres announces a "whitewash" proposal (see Note 1 of the Notes on Dispensations from Rule 9) or a reverse takeover (as defined in the Code); or (iv) if there has been a material change of circumstances (as determined by the Panel on Takeovers and Mergers).
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014. The person responsible for the release of this announcement on behalf of the Company is Richard Preston.
For further information visit www.Cerespower.com or contact:
Ceres Power Holdings plc
Tel: +44 (0)1403 273 463
Investec Bank plc (Nominated Adviser and Broker to Ceres)
Jeremy Ellis / Patrick Robb / Ben Griffiths / Cassie Herlihy
Tel: +44 (0) 20 7597 4000
Berenberg (Joint Broker to Ceres)
Ben Wright / Mark Whitmore
Tel: +44 (0) 20 3207 7800
Powerscourt (PR adviser to Ceres)
Peter Ogden/James White
Tel: +44 (0) 207 250 1446
About Ceres Power
Ceres is a world-leading developer of next generation solid oxide fuel cell (SOFC) technology. Its asset-light, licensing model has seen it establish partnerships with some of the world's largest engineering and technology companies, such as Weichai in China, Bosch in Germany, Miura in Japan, and Doosan in South Korea, to develop systems and products that address climate change and air quality challenges for transportation, industry, data centres and everyday living. Ceres is listed on the AIM market of the London Stock Exchange ("LSE") (AIM: CWR) and is classified by the LSE Green Economy Mark, which recognises listed companies that derive more than 50% of their activity from the green economy.
The Bosch Group is a leading global supplier of technology and services. It employs roughly 410,000 associates worldwide (as of December 31, 2018). The company generated sales of 78.5 billion euros in 2018. Its operations are divided into four business sectors: Mobility Solutions, Industrial Technology, Consumer Goods, and Energy and Building Technology. As a leading IoT company, Bosch offers innovative solutions for smart homes, smart cities, connected mobility, and connected manufacturing. It uses its expertise in sensor technology, software, and services, as well as its own IoT cloud, to offer its customers connected, cross-domain solutions from a single source. The Bosch Group's strategic objective is to deliver innovations for a connected life. Bosch improves quality of life worldwide with products and services that are innovative and spark enthusiasm. In short, Bosch creates technology that is "Invented for life." The Bosch Group comprises Robert Bosch GmbH and its roughly 460 subsidiary and regional companies in over 60 countries. Including sales and service partners, Bosch's global manufacturing, engineering, and sales network covers nearly every country in the world. The basis for the company's future growth is its innovative strength. At nearly 130 locations across the globe, Bosch employs some 68,700 associates in research and development.
The company was set up in Stuttgart in 1886 by Robert Bosch (1861-1942) as "Workshop for Precision Mechanics and Electrical Engineering." The special ownership structure of Robert Bosch GmbH guarantees the entrepreneurial freedom of the Bosch Group, making it possible for the company to plan over the long term and to undertake significant upfront investments in the safeguarding of its future. Ninety-two percent of the share capital of Robert Bosch GmbH is held by Robert Bosch Stiftung GmbH, a charitable foundation. The majority of voting rights are held by Robert Bosch Industrietreuhand KG, an industrial trust. The entrepreneurial ownership functions are carried out by the trust. The remaining shares are held by the Bosch family and by Robert Bosch GmbH.
Additional information is available online at www.bosch.com, www.iot.bosch.com, www.bosch-press.com, www.twitter.com/BoschPress.