Re posting of circular

Stanelco PLC
05 August 2005

5 August 2005



                          Stanelco plc (the 'Company')



                      Posting of circular to shareholders

                Re acquisition of Biotec Holding GmbH ('Biotec')



The Company announces the posting later today of a circular relating to the
acquisition of Biotec Holding GmbH.



It was announced on 6 June 2005 that the Company had entered into a conditional
agreement to acquire the whole of the share capital of Biotec for a total
consideration of US$25 million. Due to its size, under the Listing Rules, the
Acquisition requires the prior approval of Shareholders.  Further to the
announcement of 6 June 2005, the Company announced on 5 July 2005 that it had
entered into heads of agreement with SP Metal to dispose of 50 per cent. of its
interest in Biotec for US$12.5 million, thereby creating the Joint Venture with
SP Metal, subject to, amongst other things, the Acquisition being approved by
Shareholders at the EGM. The Disposal is not conditional on Shareholders'
approval.



The Circular contains a notice of an Extraordinary General Meeting to be held at
10.00a.m on 30 August 2005, at which the resolution will be proposed to approve
and implement the Acquisition.  The EGM is to be held at the offices of KBC Peel
Hunt, 111 Old Broad Street, London, EC2N 1PA.



The Directors are also now seeking authority to issue additional Ordinary Shares
for cash other than on a pre-emptive basis and to increase the borrowing powers
contained in the Company's Articles of Association. The relevant resolutions are
also contained within the notice of Extraordinary General Meeting.



Information on Biotec



Biotec is one of the world's leading exponents of starch technology and has a
considerable intellectual property portfolio, including many patents, extending
to uses in pharmaceutical and edible applications. It also has ranges of other
biodegradable materials that are ready for commercialisation within the food and
beverage industries. Biotec has a unique portfolio of products, central to which
is a proprietary starch-based pharmaceutical grade thermoplastic ('TPS'), which
uses environmentally responsible material, such as natural starch, in place of
petroleum based plastics, such as polypropylene. Natural starch is one of the
lowest cost biodegradable, compostable, renewable resource materials. TPS is
also free from genetically modified starch.



Biotec's materials are suited for a wide variety of applications, where it
replaces conventional polymers such as gelatine. Depending upon the
specification, Biotec's materials can be used to make materials which have a
cost base of between US$5 to US$8 per kilogramme, offering customers significant
cost savings when compared to gelatine and other materials which it may replace.
In addition, being a homogeneous material, as opposed to a combination of
materials (i.e. a laminate), waste generated during manufacture can often be
immediately re-used. Biotec's main customers include a range of pharmaceutical,
industrial, agricultural and food packaging businesses.  Biotec's starch
products are also currently utilised by Stanelco in its Starpol starch blend
films used in CradleWrap packaging, material used in the manufacture of food
trays, starch film for air pillows, starch pellets for food trays and starch
film for edible packaging.



Biotec's managing director, Harald Schmidt, is one of the world's leading
experts on starch polymers. He will work for the Biotec Group under a three year
service contract with Biotec Biologische Naturverpackungen Forschungs- und
Entwicklungs GmbH. In addition, he will also be employed by the Company under a
separate employment contract. Conditional on approval of the Acquisition, he
will also join the Company's Management Committee. The Directors believe
Harald's experience and skill base will add significantly to Stanelco's
businesses.



A summary of Biotec's financial performance for the three years ended 31
December 2004 is set out below.


                                                                               Year ended 31 December
                                                                       2004         2003         2002
                                                                      £'000        £'000        £'000
Turnover                                                                967        1,043        1,463
Gross profit                                                            852          863        1,355
Profit/(loss) before tax                                                102      (2,066)        (977)



As at 31 December 2004, Biotec had gross assets of approximately £2.8 million.



Information on SP Metal



SP Metal was founded in 1976 and is now a pan-European leader in institutional
catering, agricultural and household packaging with 1,300 employees, 12
factories across Europe in Italy, Denmark, France, Spain, UK, Netherlands and in
the Czech Republic and has annual turnover of approximately €254 million
(source: Audited accounts for the financial year ended 31 December 2004). SP
Metal produces 140,000 tonnes of plastic film per year, 100,000 tonnes for
refuse bags, 16,000 tonnes for shopping bags, 13,000 tonnes for freezer bags and
11,000 tonnes for other industrial films and household products. SP Metal also
produces 15,000 tonnes of aluminium foil and containers per annum. The Directors
understand that SP Metal has been actively looking for innovative,
environmentally responsible packaging material solutions and therefore believe
that SP Metal's participation in the Joint Venture delivers a solution to that
search. As a bulk user of Biotec's products, SP Metal will continue to
contribute to the Joint Venture's overhead base, thereby enabling Biotec to
concentrate resources further on its research and development activities.



Background to and reasons for the Acquisition and Disposal



The Directors believe that the Acquisition represents a significant step forward
in Stanelco's strategy to become one of the world's leading exponents of viable,
alternative, environmentally responsible packaging methods. Moreover, the
Directors believe that the Disposal is an excellent demonstration of how
Stanelco plans to use joint ventures with other market-leaders in related fields
to bring immediate value to both the Company and Shareholders alike. The
operation of Biotec as a joint venture between the Company and SP Metal is
expected to enable each partner to leverage off Biotec's technology to exploit
their respective markets and facilitate cross-selling to each partners'
customers.



It has become apparent that with the rise in oil prices, the cost of
petroleum-based packaging materials is inevitably increasing faster than the
alternatives, making such alternatives increasingly attractive. In particular
Polyethylene ('PE') and Amorphous Polyethylene Terephthalate ('APET') sheet for
making food trays is currently priced in the order of £1.70 per kilo, whilst the
target price for Biotec's comparable materials will be priced in the region of
£1.80 per kilo. There are also a large number of environmental benefits that are
driving the shift from petroleum-based plastics to sustainable alternatives,
such as starch-based products.



The Directors believe that the Acquisition positions the Group to take advantage
of this rapidly expanding market place and specifically, that it will enable the
Group to sell its existing starchbased products at a price of up to 20 per cent.
less than current levels. The Directors believe that the Acquisition also
creates a further barrier to entry for potential competition in the GREENSEAL
project, since it will enable the Enlarged Group to provide a turnkey,
ecologically and environmentally responsible solution to Modified Atmosphere
Packaging ('MAP') food-packaging requirements, since the Group's Radio Frequency
Sealing and Welding technology can also be used to process starch polymers, such
as those produced by Biotec, without the degradation caused by other methods
such as thermal processing which can render the material unsuitable for food and
pharmaceutical applications.



Biotec also offers potential synergies with the Group's water-soluble and
biodegradable technologies of Adept Polymers Limited, and the packaging design
and development skills of Aquasol Limited, both wholly owned subsidiaries of
Stanelco. Furthermore Biotec is expected to provide the Enlarged Group with
access to a larger potential market place. In particular the Directors believe
that Biotec could have packaging applications capable of being exploited in
conjunction with leading supermarket chains supplying mass-markets.



The Directors expect to use Biotec's film in relation to InGel Technologies
Limited ('InGel'), the Company's joint venture with Cardinal Health 409, Inc.
which was established to commercialise Stanelco's soft edible capsule making
technology.  Interaction between Biotec and other parts of the Group has already
led to significant new patentable inventions and the pilot launch of a new
thermoplastic material marketed under its current name, Starpol 2000. Starpol
2000 has many potential uses including food packaging and can be processed on
conventional packaging machinery and does not therefore require major capital
investment by packagers converting to its use. Sample product has been
manufactured and discussions have commenced with major food retailers. Early
indications in the food rigid tray area suggest that Starpol 2000 will be able
to significantly undercut the price of polyester (in particular APET, used in
clear trays, and crystalline polyethylene terephthalate ('CPET') which is used
for microwaveable trays) whilst also providing the necessary gas barrier for
MAP. Starpol 2000 is certified biocompostable to the relevant standard on
packaging recovery through composting and biodegradation by DIN CERTCO GmbH, the
certification organisation of the German Institute for Standardisation.



Terms of the acquisition agreement



Under the terms of the Acquisition Agreement, the Vendor has agreed to sell and
the Company has agreed to purchase the whole of the issued share capital of
Biotec for an aggregate consideration of US$25 million, of which US$1.23 million
has already been paid to EKI in cash as a non-refundable deposit. A further
US$11.27 million in cash is due to be paid on completion of the Acquisition. A
further US$6.25 million in cash is due to be paid in 12 months and a final
payment of US$6.25 million in cash is due 12 months thereafter. These deferred
elements are not subject to performance criteria.



The Acquisition Agreement further provides for the assignment to Stanelco of
debts currently owed by Biotec to the Vendor amounting to approximately €16
million ('Vendor Indebtedness').  In the period between 4 June 2005 and
completion of the Acquisition Agreement, the Vendor has agreed to advance to
Biotec Group such sums as are reasonably required to fund their operations, such
sum not to exceed €300,000 (the 'Interim Seller Advance'). If Shareholders have
failed to grant approval of the Acquisition within 60 days but not later than 90
days from 4 June 2005, the cap on the Interim Seller Advance shall be increased
to €400,000. These amounts shall be repaid to the Vendor by the Company at
completion.



Under the Acquisition Agreement the Vendor has given warranties and indemnities
in respect of certain business, taxation and other matters subject to agreed
limits of liability.



Terms of the disposal agreement



Under the terms of the Disposal Agreement to be entered into in accordance with
the Heads of Terms, SP Metal will agree to acquire a 50 per cent. interest in
Biotec, including a 50 per cent. interest in the Vendor Indebtedness from
Stanelco for an initial consideration of US$6.25 million in cash and a further
US$6.25 million to be paid in cash in two equal instalments 12 and 24 months
after the Disposal Agreement is entered into. This is expected to be shortly
after the EGM. Such deferred payments are not to be subject to the satisfaction
of performance criteria.



The consideration receivable by Stanelco under the terms of the Disposal
Agreement will be used to fund 50 per cent. of the cost of the Acquisition. In
the event that the Disposal is not completed the Company will fund the cost of
the Acquisition from its existing cash resources.  The Heads of Terms state that
Disposal is subject to a number of pre-conditions, amongst others, the Company
and SP Metal entering into a final form Joint Venture agreement in relation to
Biotec, the final approval of the Vendor and certain license agreements within
Biotec being amended and restated to the satisfaction of both parties.



The Disposal Agreement and the Joint Venture Agreement are not to be subject to
Shareholder approval. The entering into of the Disposal Agreement and the Joint
Venture agreement is not a condition to the completion of the Acquisition.  The
Joint Venture between Stanelco and SP Metal arising from the Acquisition and
Disposal is intended to be run on a 50:50 basis, with each of the partners
retaining half of the equity in Biotec, though Stanelco will have a casting vote
in the advisory council until 31 December 2009, enabling Stanelco to break any
deadlock arising in material matters relating to the Joint Venture in certain
circumstances.



Current trading and prospects of the Enlarged Group



On 29 June 2005 the Group released its interim results for the six months ending
30 April 2005. The interim results showed a loss before tax of £0.9 million
(2004: losses of £0.5 million) on turnover of £0.6 million (2004: £0.3 million).
Over the same period the Group has made investments in research and development
of £0.7 million and increased its levels of stock by £0.8 million from £0.6
million to £1.4 million, which primarily related to equipment involved in the
trials of GREENSEAL. The Group raised £4.8m (net of expenses) by way of an
equity placing in February 2005, which has mainly been utilised as working
capital.  Shareholders funds increased from £6.1 million to £10.4 million in the
period. The Group continues to invest in research and development and is
increasing its cost base in a controlled manner to facilitate the roll out phase
of revenue generating products and technologies which has now commenced. On 8
June 2005 the Company raised a further £9 million (net of expenses) which will
be used in part to fund the cost of the Acquisition, and the balance will be
used to provide funding to Biotec's business and working capital for the
Enlarged Group.



The Group's GREENSEAL trials and commercialisation continue to proceed well with
a number of recent announcements underlining continued progress with ASDA's
supplier base. The Directors also expect that the introduction of Starpol 2000
will permit the replacement of polyester in food packaging applications.



Additional Authorities



The Directors are also now seeking approval for two further resolutions.



The first such resolution seeks Shareholder approval for the issue of further
new Ordinary Shares for cash, other than on a pre-emptive basis to existing
Shareholders, under the terms of section 95 of the Act. The Directors obtained
an equivalent authority at the Company's last Annual General Meeting, though
such authority has now been exhausted by the placing undertaken by the Company
on 8 June 2005. Whilst the Directors have no current intention to use this
authority in the event that it is granted, they believe it would be useful in
providing the Company with the flexibility to raise further equity capital in
the future on a quick and cost effective basis, should market conditions so
permit and should there be a bona fide strategic reason to do so. The authority
now being sought would enable the issue of 46,432,910 new Ordinary Shares,
representing 5 per cent. of the Company's current issued share capital of
928,658,222 Ordinary Shares. The authority will lapse at the conclusion of the
Company's next annual general meeting.



The second such resolution is required to increase the borrowing powers of the
Company set out in Article 94B of the Company's Articles of Association, which
are currently limited to £10 million. Having regard to the level of deferred
consideration payable under the Acquisition Agreement and the level of trade
creditors with which the Group operates, the Directors believe that the current
borrowing limit will be insufficient, and are accordingly proposing that it be
increased to £25 million.



Recommendation and voting intentions



The Board, which has been advised by KBC Peel Hunt, considers the Resolutions to
be in the best interests of the Shareholders and the Company as a whole. In
providing advice to the Board, KBC Peel Hunt has placed reliance on the
Directors' commercial assessments.



Accordingly, the Directors unanimously recommend that Shareholders vote in
favour of the Resolutions to be proposed at the Extraordinary General Meeting,
as they intend to do in respect of their holdings of 6,217,083 Ordinary Shares,
representing approximately 0.7 per cent. of the Company's existing issued
ordinary share capital. The Directors have also received irrevocable
undertakings to vote in favour of the Resolutions from the Age of Reason
Foundation and Richards and Appleby Limited in respect of a further 23.38 per
cent. and 8.04 per cent. respectively, of the Company's issued ordinary share
capital.



Availability of Circular



The Circular to Shareholders, including a notice of extraordinary General
Meeting, is being posted to Shareholders today. Copies of the circular will be
available from KBC Peel Hunt Ltd, 111 Old Broad Street, London, EC2N 1PH until
30 August and will be submitted to the UK Listing Authority, and will be
available for inspection at the UK Listing Authority's Document Viewing
Facility, which is situated at:



Financial Services Authority

25 The North Colonnade

Canary Wharf

London

E14 5HS



DEFINITIONS



The following definitions apply throughout this announcement, unless the context
otherwise requires:




'Act'                                       the Companies Act 1985, as amended
'Acquisition'                               the proposed acquisition of the entire share capital of Biotec
                                            by the Company
'Acquisition Agreement'                     the conditional agreement dated 4 June 2005 between the Vendor
                                            and the Company
'Articles'                                  the articles of association of the Company
'Biotec'                                    Biotec Holding GmbH
'Biotec Group'                              Biotec and its subsidiary undertakings
'Board' or 'Directors'                      the directors of the Company
'Circular'                                  the circular to Shareholders dated 5 August 2005
'Disposal'                                  the conditional disposal of a 50 per cent. interest in Biotec
'Disposal Agreement'                        the agreement to be entered into between SP Metal and the
                                            Company
'Enlarged Group'                            the Group as enlarged by the Acquisition
'Extraordinary General Meeting'             the extraordinary general meeting of the Company to be held on
                                            30 August 2005
'Group'                                     the Company and its subsidiary undertakings
'Heads of Terms'                            the heads of terms relating to the Disposal
'Joint Venture'                             the joint venture between Stanelco and SP Metal to be formed
                                            in accordance with the Heads of Terms
'KBC Peel Hunt'                             KBC Peel Hunt Ltd
'Listing Rules'                             the Listing Rules of the UK Listing Authority
'Management Committee'                      the Group's management committee
'Ordinary Shares'                           ordinary shares of 0.1p each in the capital of the Company
'Resolutions'                               the resolutions to be proposed at the Extraordinary General
                                            Meeting
'Shareholders'                              holders of Ordinary Shares
'SP Metal                                   SP Metal S.A.
'UK Listing Authority'                      the Financial Services Authority acting in its capacity as the
                                            competent authority for the purposes of Part VI of the
                                            Financial

                                            Services and Markets Act 2000
'Vendor' or 'EKI'                           E Khashoggi Industries LLC, a limited liability company formed
                                            in Delaware



Ends





For further information please contact:

Ian Balchin, Chief Executive
Stanelco PLC
Tel: [phone]

Jonathon Brill/Billy Clegg
Financial Dynamics
Tel: [phone]





About Stanelco plc



The Stanelco Group of companies (the Group) has brought together expertise in
radio frequency (RF) technology, RF applications and biodegradable material
sciences to create a revolutionary range of packaging technologies.



Stanelco's philosophy is that new products and processes must offer solutions
and applications which:



  • give higher added value,
  • are greener, more environmentally sustainable than those they replace
  • and have protectable intellectual property rights.



Stanelco will develop the products and processes to a demonstration stage and
then work with partners in order to reach the markets; and under these
circumstances Stanelco will usually seek to license its technology. Stanelco
invests considerable time and resources in ensuring its technologies are
protected via layers of patents wherever possible.



In this way Stanelco believes it can minimise commercial risk and preserve the
highest value for shareholders.



The products offering the prospect of near term revenue generation are being
given priority over the Group's resources.



Stanelco was founded in 1953 and is a world leader in the development of radio
frequency technologies for processing polymers for edible and packaging
applications and the design and manufacture of optical fibre technology,
induction heating and dielectric welding equipment.  Stanelco's Current
developments include GREENSEAL Food tray lidding technology, STARPOL (starch /
pva blended material), FrogPack high impact low cost packaging format,
CradleWrap range of biodegradable air cushion packaging, Soluble tape, 100%
water-soluble films and adhesives, Biodegradable Airbag (void fill) packaging,
water-soluble detergent capsules, edible sachets and waste packing.



GREENSEAL, STARPOL, Frog Pack and CradleWrap are all trademarks of the Stanelco
plc group.






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