Proposed Placing & Open Offer

Stanelco PLC
09 October 2006



Stanelco plc



9 October 2006



NOT FOR DISTRIBUTION OR TRANSMISSION, DIRECTLY OR INDIRECTLY, IN OR INTO THE
UNITED STATES OF AMERICA, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA OR
JAPAN.


                                  Stanelco plc

                         ('Stanelco' or the 'Company')



         Proposed Firm Placing of 1,375,000,000 New Ordinary Shares and

  Open Offer of 600,992,559 New Ordinary Shares at 0.8 pence per New Ordinary
  Share, of which 148,278,000 New Ordinary Shares are being placed subject to
           clawback to satisfy valid acceptances under the Open Offer



                    Notice of Extraordinary General Meeting



               Change of accounting reference date to 31 December





The Board of Stanelco announces that, in order to enable the Group to move into
the next phase of the commercialisation of its intellectual property portfolio
and to meet its working capital requirements, it is proposing to raise up to
£15.8m (before expenses) by way of a Firm Placing, Placing and Open Offer at 0.8
pence per New Ordinary Share (the 'Issue').



Key Highlights



  • Firm Placing of 1,375,000,000 New Ordinary Shares at 0.8 pence each;



  • Placing of 148,278,000 New Ordinary Shares at 0.8 pence each;



  • Open Offer of 600,992,559 New Ordinary Shares at 0.8 pence each, of which
    148,278,000 New Ordinary Shares are being placed subject to clawback to
    satisfy valid acceptances under the Open Offer; and



  • Issue not underwritten.



Principal terms and timing of the issue



The Company is proposing to raise up to £14.4m (net of expenses) by way of the
Issue.



Under the Open Offer, Qualifying Shareholders may subscribe at a price of 0.8
pence per New Ordinary Share for:



3 Open Offer Shares for every 5 Existing Ordinary Shares



held on the Record Date and so in proportion for any other number of Existing
Ordinary Shares then held by them. Fractional entitlements will not be allotted
to Qualifying Shareholders but will be aggregated with the Open Offer Shares
attributable to certain Overseas Shareholders not eligible to participate in the
Open Offer and included in the Placing, with the proceeds being retained for the
benefit of the Company.



The New Ordinary Shares will rank pari passu in all respects with Existing
Ordinary Shares.



Applications will be made to the FSA and to the London Stock Exchange for the
New Ordinary Shares to be admitted to the Official List and to trading on the
London Stock Exchange and Admission is expected to occur and dealings to
commence in the New Ordinary Shares on 7 November 2006. The latest time and date
for payment in full under the Open Offer is 11.00 am on 1 November 2006.



Use of Proceeds



The proceeds from the Issue will be used to move the business on from its
development and acquisition phases into the commercialisation phase of the
intellectual property portfolio. The proceeds will provide the Group with the
working capital to enable management to convert opportunities into commercial
contracts whilst allowing the Group to meet its existing financial obligations.
Specifically, funds raised will be used for the following:



-        to ensure successful completion by either Biotec, or in accordance with
the provisions of the Joint Venture Agreement, Stanelco of at least the first
two manufacturing facilities in the USA, which will cost approximately £2.8m
each, for the production of starch-based resins, including Starpol materials,
developed by Biotec;



-        to meet the final stage payment of £1.6m due in June 2007 to EKI for
the Biotec Acquisition; and



-        to provide further working capital for the Group to fund the next stage
of commercial development of the Group's existing and new products and to
provide the Company with funds to back up any negotiations with customers and
partners.



The Issue is conditional, inter alia, upon the approval of shareholders which is
to be sought at the EGM.



Teather & Greenwood is Sponsor, Financial Adviser and Stockbroker to the
Company.



Commenting on the announcement today, Philip Lovegrove, Chairman of Stanelco,
said:



'The Board is delighted to announce the proposed fundraising and recommend that
Shareholders vote in favour of the Resolutions.'



Teather & Greenwood Limited, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for the
Company as sponsor, financial adviser and stockbroker in relation to the Issue
and no-one else in connection with the arrangements described in this
announcement and will not be responsible to anyone other than the Company for
providing the protections afforded to customers of Teather & Greenwood or for
advising any other person in connection with the arrangements described in this
announcement.



For further information please contact:



Stanelco

Martin Wagner, Chief Executive

Sylvia Leavey, Investor Relations

Tel:  [phone]



Press: Financial Dynamics

Jonathon Brill/Billy Clegg

Tel: [phone]


This announcement is for information only and does not constitute an offer or
invitation to acquire or dispose of any securities or investment advice in any
jurisdiction.

Past performance is no guide to future performance and persons needing advice
should consult an independent financial advisor.

The information contained in this announcement is not for release, publication
or distribution, directly or indirectly, to persons in the United States,
Canada, Australia, Japan or the Republic of South Africa. This announcement is
not an offer of securities for sale into the United States. The New Ordinary
Shares have not and will not be registered under the US Securities Act of 1933,
as amended and may not be offered or sold directly or indirectly, in the United
States absent registration or an exemption from registration. There will be no
public offering of securities in the United States. The New Ordinary Shares have
not and will not be registered with any regulatory authority of any state within
the United States.

This announcement has been issued by Stanelco and is the sole responsibility of
Stanelco.

Defined terms used in this announcement can be found at the end of the
announcement.



INTRODUCTION



In order to enable the Group to move into the next phase of the
commercialisation of its intellectual property portfolio and to meet its working
capital requirements, the Company is proposing to raise up to £15.8m (up to
£14.4m net of expenses) by way of the Issue of, in aggregate, up to
1,975,992,559 New Ordinary Shares at 0.8 pence per New Ordinary Share. The
Prospectus, the purpose of which is to provide Shareholders with details of the
Issue and to explain why the Board considers it is in the best interests of the
Company and its Shareholders as a whole, will be posted to Shareholders as soon
as practicable.



In a trading update on 17 August 2006, the Company estimated that its current
cash balance of £0.9m, together with projected receivables and working capital
needs, was sufficient to meet its cash requirements for a further three months
in the absence of further funding or new revenue streams commencing in that
period. It also stated that with a cash balance of £0.9m and an unused overdraft
facility of £0.2m that the Company was exploring all financing options including
a public equity issue.



Having explored all financing options, the Board has resolved to seek further
funding by way of the Issue.



The Issue involves:



- the Firm Placing in respect of 1,375,000,000 New Ordinary Shares at
the Issue Price;



- the Placing in respect of 148,278,000 New Ordinary Shares at the Issue
Price; and



- the Open Offer in respect of 600,992,559 New Ordinary Shares at the
Issue Price to be offered to Qualifying Shareholders pursuant to the Open Offer.
These New Ordinary Shares include the 148,278,000 New Ordinary Shares placed
under the Placing which are subject to clawback to satisfy valid applications
from Qualifying Shareholders under the Open Offer.



The Issue Price represents an effective discount of approximately 16.67 per
cent. to the middle market price of 0.96 pence per Existing Ordinary Share at
the time of the release of this announcement. The Directors have been advised by
Teather & Greenwood that an equity fundraising could only be carried out
successfully if priced at a significant discount and therefore the Company
proposes to seek specific approval of the Issue Price and the discount from
Shareholders at the EGM in accordance with the Listing Rules.



The Issue is conditional inter alia on the passing of the Resolutions to be
proposed at the EGM.



The Issue is not underwritten, in whole or in part, by Teather & Greenwood, and
is subject to the terms and conditions set out in the Placing and Open Offer
Agreement.



Shareholders should be aware that if the Resolutions to be proposed at the EGM
are not passed and Admission does not take place, the net proceeds of the Issue
will not be received by the Company. If Admission does not take place, the
Company's cash requirements would be likely to exceed the amount available under
its existing overdraft facility with Barclays Bank PLC by the end of November
2006 and, in any event, this facility would be subject to immediate review and
potential withdrawal. In addition, under the terms of the current funding
granted to the Company, certain lenders have the right to demand immediate
repayment of outstanding amounts of £0.9m due by the end of November 2006, which
the Company would not be in a position to repay.



The Board considers that, in this scenario, they would seek to agree new
facilities with an appropriate lender and/or seek alternative means of funding,
such as convertible loans, asset-based finance or supplier financing. However,
the Board believes that any such facilities or loans, on the assumption that
such facilities or loans could be agreed, would be on significantly restrictive
terms and may necessitate the Group undertaking to effect certain actions and
grant certain rights to the lenders. In these circumstances, the Board believes
that the Group would not be able to continue the development of its intellectual
property portfolio to commercialisation in a manner in which would allow the
Group to retain all of its key staff and intellectual property rights. The Board
consequently believes that any such arrangements would not be in the best
interests of Shareholders. Unless funds are received pursuant to the Issue or
unless the Company obtains further funding, there is a material risk that the
Company will not be able to meet its debts as they fall due and will become
insolvent.



DIRECTORS' INTENTION



The Directors, who in aggregate are beneficially interested in 6,217,083
Ordinary Shares, representing 0.63 per cent. of the existing issued ordinary
share capital of the Company, have entitlements under the Open Offer to
3,730,249 New Ordinary Shares. Philip Lovegrove and Ian Balchin intend to apply
for their entitlement in full.



INFORMATION ON STANELCO



History and background to the Group

Stanelco's business was for many years based on the manufacture and supply of
high frequency thermal processing systems, including RF equipment. In the late
1990s, Stanelco, utilising solid-state technologies and types of power supply
being newly developed at that time, embarked on the production of RF furnaces
for use in the production of fibre optic cable. Stanelco became a leading
independent supplier of solid-state furnaces to the fibre optics industry at
that time.



During this period, Stanelco also developed a mobile solid-state machine for
sealing bags containing potentially hazardous waste. This has become an
established product that continues to sell in the UK, with some sales in
international markets.



Early in 2000, the Directors broadened the base of the business and Stanelco
commenced several research projects. One such project was a joint venture with
Cardinal Health relating to the RF welding of ingestible water soluble
pharmaceutical capsules. This project was intended to produce a substitute for
gelatine enclosures and led to the decision to investigate substitute materials.
Following this venture, project materials science became a priority for the
Group.



In August 2003, Stanelco acquired Adept by the issue of 10 million Ordinary
Shares at a mid-market price of 3.35 pence each. Adept brought considerable
knowledge of the formulation of water soluble films into the Group, specifically
Polyvinyl Alcohol-based films ('PVOH') and the properties required to seal them,
initially in capsule form. This capsule project led to the start of close
co-operation with Biotec in Germany. Combining the knowledge of all the parties
opened the way to developing into new areas of packaging and the pursuit of a
cost-comparable alternative to gelatine encapsulation. At the start of 2004,
Stanelco carried out a 1 for 12 rights issue, raising £1.6m to provide working
capital and to fund these developments.



In June 2004, Stanelco acquired Aquasol, an intellectual property based company
with particular expertise in water-soluble packaging, by the issue of 10 million
Ordinary Shares of 0.1 pence each in Stanelco with a value of £0.5m and further
deferred consideration of up to a maximum of £2.6m subject to performance in
accordance with the terms of the Aquasol Agreement. This brought packaging
design skills and patents into the Stanelco Group and also brought a portfolio
of leading packaging products which are now, in certain cases, providing sales
and royalty income to the Group.



At the same time, Stanelco continued to invest in the development, patenting and
commercialisation of its RF technology for applications including ingestible
capsules, food sachets, detergent capsules and packaging materials. During 2004,
Stanelco developed a product which applied its RF sealing platform to the
welding of recyclable plastic mono materials for tray lidding and thermoforming,
specifically in the food packaging area. This process was trademarked as
GREENSEAL. Stanelco commenced fullscale commercial pack-house trials with a
supplier to ASDA in November 2004, with the expectation from the Board that a
successful conclusion to these trials would result in ASDA introducing the high
integrity sealing of microwaveable food trays into other parts of its supplier
base.



A placing of 38 million Ordinary Shares raised £4.7m after expenses in February
2005 to fund this new technology towards achieving commercialisation of
GREENSEAL. Following some successful initial in-house trials an exclusive
agreement was signed in March 2005 with ASDA, commencing in July 2005, which
gave an option for a year on the introduction of the GREENSEAL technology into
the manufacturing process of their suppliers. Similar discussions followed with
ASDA's parent company, Wal-Mart, in the US.



In June 2005, the Group announced that it had agreed to supply its GREENSEAL
technology to Hitchen Foods for the first of up to four machines for use in
their ASDA salad production area, subject to successful trials.



Discussions took place with a number of equipment manufacturers with regard to
the roll out of the Group's tray lidding technology. Stanelco announced it had
signed non-binding heads of terms with Reiser for the use of RF sealing
technology in Reiser's tray lidding machines in the USA and Canada. An annual
licence fee would be agreed for each machine. This agreement is currently on
hold pending the outcome of ongoing discussions with potential customers.



In June 2005, the Group acquired Biotec from EKI, providing the Group with
additional expertise in biodegradable materials and a considerable intellectual
property portfolio, including many patents. A placing of 44 million Ordinary
Shares in Stanelco, raising £9m, took place primarily to fund this acquisition.
Shortly following the acquisition of Biotec, Stanelco entered into a joint
venture by selling on 50 per cent. of Biotec to SPhere, a European manufacturer
of household packaging products.



In September 2005, an agreement with Carclo plc was announced under which the
Group developed a hard shell capsule which was ready for submission for
regulatory approval and an announcement was also made of an agreement with
Elwood Packaging Inc. under which Elwood had entered into an exclusive agreement
to manufacture Aquasol's FrogPack product in the US.



In October 2005, the Group took the strategic decision to seek buyers for its
two patents relating to biodegradable starch based cigarette filters, which it
considered non-core to the business.



By February 2006, full FDA approval for Starpol 2000 had been received and in
May 2006 FDA approval for WRAP 100 was also received. During February 2006,
Stanelco also announced its involvement in Wal-Mart's Packaging Sustainable
Value Network.



In June 2006, Stanelco raised a further £3.7m (net of expenses) by way of an
equity placing to use as working capital and to meet a stage payment for the
Biotec Acquisition and in July 2006, the Group announced that it was considering
its funding requirements and funding options for the next phase of its
development.



In February 2006, the litigation which related to a dispute over patents on
methods for dialectric welding of materials with BioProgress plc was concluded,
enabling both parties to exploit the disputed patents on a non-exclusive basis
as part of the settlement. Stanelco issued approximately 7.2 million Ordinary
Shares to BioProgress plc and approximately 1.3 million Ordinary Shares to
Isracaps to release exclusivity clauses under a licence agreement associated
with the patents.



Overview of the current business

The Stanelco Group comprises a number of autonomously managed businesses which
own and develop specialist technologies for use in the packaging industry. The
Group's philosophy is that new products and processes must offer solutions and
applications which provide added value and environmental benefits and which are
greener and more environmentally sustainable than those that they replace.
Stanelco's major businesses are set out below:



Biotec

Biotec is a subsidiary jointly-owned in equal shares with SPhere, a European
manufacturer of household packaging products. Biotec is considered to be an
established exponent of starch technology and has developed a number of products
that represent an effective biodegradable alternative to plastics. It owns the
patents associated with the technology it has developed and is based in
Emmerich, Germany. Under Stanelco's trade names Biotec's range of products
includes:



- Starpol 2000 - a plasticiser-free, biodegradable thermoplastic
material, which has been approved for food contact in the US and the EU. Starpol
2000 is currently selling in the US and Europe for applications including food
trays and food packaging.



- Starpol 3000 - a family of multilayered thermoplastic materials with
up to 100 per cent. biodegradability and sustainability. Starpol 3000 materials
can combine the properties of different biodegradable materials to give higher
functionality and competitive overall cost. Formulations of Starpol 3000
materials also provide gas and moisture barriers required for MAP matching
industry standards. The product has completed initial stages of development and
food contact approval is being sought.



- WRAP 100 - a biodegradable plasticiser-free thermoplastic material
with paper-like properties that inhibit the passing of oil through it, whilst
permitting water vapour to permeate out. The product has been approved by the
FDA in the US for food contact and is currently undergoing trials with a major
fast food company.



- Starpol NS - a blend of plasticiser-free thermoplastic starch with
biodegradable aromatic/aliphatic or aliphatic co-polyesters suitable for a range
of applications and in particular for those involving relatively thin, strong
films.



- TPS - a thermoplastic starch, biodegradable and compostible.



Biotec's main customer is currently SPhere, whose orders account for
approximately 80 per cent. of all production.



RF GREENSEAL

RF GREENSEAL sealing technology is an application of RF which seals plastic and
biodegradable containers using RF energy. The technology is aimed at saving
costs for packaging companies by reducing waste and leakage, reducing
electricity usage and cutting staffing costs. Trials have been ongoing with
several major packaging companies and a number of OEMs are closely monitoring
the progress of the trials and have expressed their interest in developing
machines incorporating GREENSEAL technology.



Following initial trials in 2005 to prove the concepts, further trials have been
ongoing to September 2006 to resolve various complexities to reaching a product
for commercialisation. Co-ordinating opportunities for prolonged trials with
ASDA's packaging processors have proved problematic. To overcome these, Stanelco
has had to obtain suitable equipment to which GREENSEAL can be fitted in advance
of full scale operation being possible.



The exclusive agreement between ASDA and Stanelco for Stanelco's GREENSEAL
technology has been extended for another 12 months by verbal agreement as at 10
August 2006. The exclusivity will be waived after the first machine has been
installed in an ASDA packaging supplier's factory. This will then allow Stanelco
to roll out GREENSEAL to non-exclusive ASDA sites.



RF Traditional

RF Traditional is a manufacturer and developer of high frequency thermal
processing equipment and processes. This traditional business has given Stanelco
a presence, mainly in the UK, in markets such as mobile welders.



Aquasol

Aquasol invents and develops packaging applications and related products, with a
particular expertise in water soluble packaging. Once a product has been
developed and patented, Aquasol teams up with manufacturers and distributors to
bring the product to market, subsequently receiving royalties from sales of the
products. Aquasol's current product portfolio includes:



- the packaging of Finish Quantum, Reckitt Benckiser's automatic
dishwashing product;



- FrogPack, a box designed to replace traditional packaging for
transporting delicate or valuable items that are vulnerable to damage in
transit;



- Pulsline, a security seal designed to reveal a personalised validation
message; and



- FrogMat, a biodegradable cushioning material which is subject to
continuing product development.



Royalty and commission agreements are in place for Finish Quantum with Reckitt
Benckiser, for FrogPack with Merlin Products and for Pulsline with Berkshire
Labels. The FrogPack and Pulsline agreements are for the UK only.



Adept

Adept develops and manufactures a range of biodegradable plastics that combine
water soluble and non-toxic properties with much of the versatility and
functionality of their traditional counterparts.



Adept's products include sheet, film and bags, which either dissolve in water at
pre-determined temperatures or compost naturally. Whilst stable in use, once
discarded they will biodegrade without adverse environmental effect. Under a
patent owned by Aquasol, under which Carclo plc has certain rights, Adept has
been involved in the development of a hard shell capsule, which is a starch
based polymer designed as a replacement for gelatine in the dietary and
pharmaceutical markets. The capsules are currently being supplied by Carclo plc
to a veterinary customer as a replacement for gelatine capsules in animal use.
Development is ongoing for a number of versions for human ingestion, including a
form of delayed release capsule. Discussions are being held between Stanelco and
Carclo plc with regards to a joint development agreement.



Other, non-core, activities of Stanelco include:



Starch Filters

Stanelco is in the process of manufacturing a number of sample starch based
cigarette filters, having invested in the appropriate equipment. Stanelco has
appointed advisers to seek suitable buyers for this technology and will be
continuing with their discussions once Stanelco has produced suitable sample
filters.



InGel Project

InGel is Stanelco's commercial application for RF technology in soft capsule
welding. The InGel project is not a current priority but the Board intend to
continue development when sufficient resources become available.



Group Strategy

Since 2000, Stanelco's business model has transformed from a manufacturer and
supplier of capital goods into an intellectual property company, as can be seen
by the acquisiton of Aquasol, with interests in markets with significant growth
potential, which include sustainable packaging and environmentally responsible
sealing solutions for the packaging industry. The next stage of development for
the Group is to convert its technology into a portfolio of commercially viable
products.



The Group will seek to generate revenue through licensing royalties and the sale
of raw materials it has manufactured.



Stanelco will continue to be run as a group of autonomous businesses overseen by
Martin Wagner under the umbrella of the Stanelco Group, which continue to work
together to achieve technology synergies and advance commercialisation.



In July 2005, thirteen top grocery retailers demonstrated their commitment to
waste minimisation by signing up to an agreement, known as the Courtauld
Commitment. The aim is to reduce the amount of packaging and food waste that is
thrown away by households in the UK. The retailers, who represent 92 per cent.
of the UK grocery market, are ASDA, Boots, Budgens, The Co-operative Group,
Londis, Iceland, Kwik Save, Marks & Spencer, Morrisons, Sainsbury's, Somerfield,
Tesco and Waitrose.



Over recent years, world opinion has advanced regarding energy consumption,
biodegradeable products and sustainability. These factors have driven
governments, major retailers and fast food chains to consider carefully their
range of products. The retailers and fast food chains are reacting by moving
away from plastics into biodegradeable products.



They have pledged their commitment at executive level to support the UK
Government's 'Waste Resources Action Plan' in achieving its objectives which
are:



- to design out packaging waste growth by 2008;



- to deliver absolute reductions in packaging waste by March 2010; and



- to identify ways to tackle the problem of food waste.



ASDA's environmental policies are in line with its parent company, Wal-Mart's,
strategy. In October 2005, Lee Scott, Wal-Mart's CEO declared the long-term
environmental goals for the company:



- to be supplied 100 per cent. by renewable energy;



- to create zero waste;



- to sell products that sustain our resources and our environment;



- to help restore balance to climate systems;



- to reduce greenhouse gas emissions; and



- to reduce dependence on oil.



With GREENSEAL, Stanelco has a product which reduces both packaging and food
waste and its Starpol range of materials are made using sustainable materials
that address all of the above aims and is not dependent on oil.



The Board is aware of the need for registration and protection of the
intellectual property around which the Group's core products are based. Part IV
of the Prospectus will illustrate the depth of patent registration which
Stanelco believes is key for maintaining the base of technology which it is
looking to license and will protect intellectual property on the
commercialisation of the products, for example in its joint venture agreements
and licence agreements.



The main focus of the Board's efforts to drive near term revenues reside with:



Biotec - Biodegradable Materials

The market for ridged and flexible plastic packaging is expected to grow from
US$140 billion per annum in 2004 to a forecast of approximately US$190 billion
per annum by 2009. With current oil prices and prevailing environmental concerns
encouraging both the public and private sectors worldwide to look for
alternatives to oil-based packaging materials the Board believe that Stanelco
will be able to offer solutions in this market. The interest in the number of
applications offered by Stanelco's Starpol and WRAP products has been
encouraging. As part of the Wal-Mart Packaging Sustainable Value Network (the '
Wal-Mart PSVN'), Stanelco has access to the Wal-Mart supply chain who have shown
an interest in products such as meat trays, blister-packs and food film. The
Wal-Mart PSVN is made up of a number of invited suppliers including suppliers of
global brands, leading global converters (tray makers etc.) and exponents of new
and innovative technologies such as Stanelco. Membership of the Wal-Mart PSVN
provides Stanelco with the opportunity to network and build relationships with
these key suppliers. For the Biotec products to 'get to market' as quickly as
possible Stanelco intends to utilise available plant capacity at Biotec in
Germany to manufacture resin which will be supplied to converters such as UZET
World in the US.



In order to move to the next level of high volume resin production to meet the
demands of global retailers and fast food companies as well as other
opportunities, the Directors believe it will be necessary to invest in plant and
machinery to manufacture resin, which is then supplied to joint venture partners
in the US, for use in their manufacturing plants. The Directors have identified
suitable joint venture partners and are in advanced negotiations with a number
of interested parties.



Starpol 3000 is the next product from Biotec and is nearing completion. The
material is expected to provide barrier properties that are equal or better than
traditional non-biodegradable plastics.



Biotec is a subsidiary of Stanelco jointly-owned in equal shares with SPhere.
The intellectual property in Biotec's products is owned by Biotec and its
subsidiaries. Under the terms of the Joint Venture Agreement Stanelco and SPhere
agreed that Biotec would manufacture all products to be manufactured pursuant to
Biotec's IP and processes ('Biotec Materials'), but that the parties would be
entitled to manufacture Biotec Materials themselves should the capacity of the
joint venture be insufficient to meet their respective needs. In such event,
Stanelco has the exclusive right to manufacture Biotec Materials relating to
MAP.



Stanelco has developed various opportunities for the sale of Biotec products in
the US which require the building of micro-manufacturing facilities in the US.
Stanelco intends to exploit these opportunities in accordance with the
provisions of the Joint Venture Agreement. As such, in the first instance these
opportunities would be available to Biotec to the extent that Biotec, with the
agreement of Stanelco and SPhere, is willing and able to construct facilities in
the US to meet such demand. To the extent that Biotec is not able or willing to
create sufficient capacity to meet this demand, Stanelco intends to do so itself
in accordance with the provisions of the Joint Venture Agreement.



In order to exploit opportunities in the US relating to the manufacture of
Biotec Materials relating to MAP, it will be necessary for Stanelco to make use
of Biotec's intellectual property. The Joint Venture Agreement does not,
however, explicitly create a licence for Stanelco to use Biotec's intellectual
property nor does it expressly provide for SPhere to co-operate with Stanelco in
order to procure that Biotec grants Stanelco the appropriate licence to use
Biotec's intellectual property. Having taken confirmatory legal advice on the
interpretation of the Joint Venture Agreement (on the basis, inter alia, that
Biotec has insufficient capacity to meet Stanelco's requirements for Biotec
Materials relating to MAP, particularly in the US, that it is unable or
unwilling to build the facilities in the US to meet such requirements and the
parties have or will have unsuccessfully tried to find alternative solutions to
minimise the impact on Biotec's business in accordance with the provisions of
the Joint Venture Agreement), Stanelco believes that there is an implicit
obligation on SPhere to co-operate with Stanelco to pass a shareholder
resolution directing Biotec Holding GmbH to grant the appropriate licence to
Stanelco or to procure that the relevant Biotec entity does so.



There is, however, a risk that in such event SPhere will not co-operate with
Stanelco in which case Stanelco would need to refer the matter to arbitration
under the terms of the Joint Venture Agreement. In such event, there is also a
risk that the arbitrator would find against Stanelco and would not oblige SPhere
to co-operate in procuring that Biotec grants Stanelco the appropriate licence.
In addition, unless and until such time as Stanelco obtains the appropriate
licence from Biotec, there is a risk that the relevant Biotec entity will seek
to bring an action against Stanelco for infringement of its intellectual
property rights and that the German courts will uphold any such action.



GREENSEAL RF Sealing Technology

The Board acknowledges that Stanelco has encountered delays in rolling out
GREENSEAL to the market. The delays have primarily resulted from the limited
capacity of the food packaging industry to facilitate the conversion of
machines. The potential customers (namely, Hitchen Foods, Geest and Kanes Foods)
and OEMs (namely Reiser and Multivac) are all co-operating with Stanelco to
implement the technology. A number of OEMs continue to monitor the progress of
the tray lidding application trials closely and are expected to open discussions
on offering the GREENSEAL technology on their machines to packaging companies
once the retrofits are proven in the factory environment. The Directors believe
this again illustrates Stanelco's ability to operate at each level of the supply
chain to achieve the retailer's objectives.



The Directors believe the cost benefit case presented to the packaging companies
clearly demonstrates that savings are achievable. The savings come mainly from
lower product wastage by reducing the number of rejections and packages that
leak as a result of poor sealing.



Stanelco has extended GREENSEAL into vertical form fill machines, which are
used, for example, for salad bags, sealed both horizontally and vertically. The
Directors believe the wastage problem in this market is much greater than with
the tray lidding application and represents another significant opportunity for
Stanelco and that GREENSEAL in vertical form fill machines will, if adopted by
the market, significantly reduce food packaging wastage.



The Directors believe that the GREENSEAL technology will be successfully
commercialised and it remains an important part of the Company's strategy.
However, the Board anticipates the retrofit roll out will be slower than
originally anticipated mainly because each machine type may require different
engineering approaches. The long term strategy is to license the technology for
OEMs to incorporate into their equipment.



The historical Stanelco RF business continues in the UK and the Company is
assessing the potential of expanding into overseas markets and in particular the
USA, where nuclear electricity generation exceeds that in the UK by more than
ten-fold.



Aquasol

Aquasol has a strong track record, with three products currently commercially
available, being FrogPack, Pulsline and technology for dishwasher capsules
(Electrasol Gelpacs in the USA and Finish Quantum in Europe) currently
generating revenue for the Group under their various royalty and commission
agreements. The Directors are confident that Aquasol will continue to introduce
revenue generating products.



Management Structure

To deliver the strategy, the key management structure and their remits will be
as follows:



Martin Wagner (Chief Executive Officer)

Martin was Head of Packaging Development at ASDA where he spent five years
heading up a number of different commercial teams delivering both significant
savings to the business and leading groundbreaking strategic initiatives.
Martin's primary function within Stanelco is to set strategic direction and
utilise an understanding of 'retail routes to market' particularly in the USA.
He is also responsible for ensuring organisational structure is in place to
deliver profitable commercialisation for all Stanelco's technologies as well as
delivering executive level strategic commercial relationships.



Clive Warner (Finance Director)

Clive leads the corporate planning, budget and forecasting processes to ensure
that credible and achievable plans are created. He is responsible for enforcing
strong cost controls, for ensuring that all major expenditure is properly
evaluated, for managing the cash and treasury requirements of the business, and
for implementing a robust system for the collection of royalties. Clive is also
responsible for the management of IT and administration.



Howard White (Executive Managing Director)

Howard is responsible for developing major client relationships and exploring
business development opportunities nationally and internationally.



Ian Balchin (Executive Vice Chairman)

Ian is responsible for a number of key projects in the Group and chairs
executive management meetings and three subsidiary boards, including Biotec.



Robert Duggan (Company Secretary and Financial Controller)

As Company Secretary, Robert is responsible for supporting and advising the
Board on regulatory and compliance matters. As Financial Controller he supports
the Finance Director and the Management Team with financial reporting and
decision making and is responsible for the financial reporting of the Group.



Harald Schmidt (Managing Director - Biotec)

Harald is responsible for research and development of the biodegradable range of
products and the resin manufacturing facility at Emmerich.



Mike Feast (Technical Director)

Mike's primary function is to continue to lead the development (to include
technical and sales support) in the areas of RF tray lidding, RF VFFS and RF
Traditional. Mike is also responsible for ensuring the RF Traditional business
is rekindled wherever possible by outsourcing or licensing and for encouraging
and supporting growth in this area, particularly in the US and Japanese markets.



Bruce Drew (Managing Director - Aquasol)

Bruce's main focus is to continue fostering development of new technologies, to
utilise his understanding of and contacts in the pharmaceutical and medical
markets, focusing on licensing opportunities for the Aquasol portfolio. Bruce is
also responsible for supporting the protection of the Company's intellectual
property portfolio.



Graham Whitchurch (Managing Director - Group Commercialisation)

Graham is responsible for matching the Group's intellectual property to
commercial markets. He also develops relationships within the UK and European
packaging communities to ensure Stanelco has access to machinery and development
partners as required. Additionally, Graham supports Starpol and other resin
development within the US.



Stanelco intends to incorporate into the structure a permanent Sales Director
and Programme Director to replace the two interim staff members currently in
these positions. The Sales Director will take global responsibility for all
sales, including a US sales team. The Programme Director will manage all of the
Group's major projects including taking each GREENSEAL customer from
introduction through to commercialisation.



The management team, through the CEO, will report to the Board on a periodic
basis. The Board is responsible for setting the strategy and performance targets
of the Group and monitoring the performance. The Board is also responsible for
the financial management of the Group and regulatory compliance.



FINANCIAL REVIEW, CURRENT TRADING AND PROSPECTS



In the year to 31 October 2005, the Group's balance sheet was strengthened via
fundraisings and the acquisition of Biotec with an increase in net assets of
£12.8m and a cash inflow of £3.5m for the year.



The accounts for the year showed a pre-tax loss for the Group of £3.2m on a
turnover of £1.45m. Turnover was primarily related to sales of traditional RF
equipment, the receipt of royalties from Aquasol products and two months of
sales of materials from Biotec which had been acquired in September 2005. The
operating loss of £3.3m was principally due to substantial further investment in
research and development and management involvement in procuring joint venture
partners and building the Group's capabilities to grow the business. An
additional £0.7m charge in the year related to the settlement of the legal
dispute with Bioprogress plc in regard to defence of patents.



The Group's balance sheet was strengthened as funds were raised on two occasions
during the year. In addition to obtaining funding in the form of a government
grant for a proposed facility in Wales, £14.3m of equity funding (net of
expenses) was raised in order to continue the Group's investment in technology.
£7.1m of this was utilised in relation to the first instalment of the purchase
of Biotec. A further investment of €1.5m was made in Biotec in order to fund
expansion of Biotec's research and production facilities.



The Group announced its unaudited interim results for the six months to 30 April
2006 on 14 July 2006. The Group announced it had increased revenue from £0.6m to
£2.6m for the period ended 30 April 2006 compared to the corresponding period
last year. The increase was due to inclusion of six months sales by Biotec which
had not been acquired by the Group until the second half of the previous
financial year. This compared favourably with full year sales of £1.45m for the
year to 31 October 2005. The Group made a loss of £2.3m for the six month period
compared with £1m for the corresponding period last year.



The Group started the period with a cash balance of £4.4m and made investments
in research and development of £0.6m and increased its levels of stock from
£2.6m at the year end to £3.1m. The Group also invested £1.2m in capital
expenditure in the period. Closing cash was £0.3m at 30 April 2006.



Since the half year end, the Group raised £3.7m (net of expenses) by way of an
equity placing in June 2006, of which £1.6m was used to meet a stage payment for
the Biotec Acquisition and £2.1m was utilised as working capital. Of that £2.1m,
£2m was used for the ongoing commercialisation of the Group's technologies and
meeting the Group's operational running expenses since 1 May 2006, and £0.1m was
used for capital expenditure. The Group also announced at the time of the
interim results that it was considering its funding requirements and funding
options for the next phase of its development.



In a trading update on 17 August 2006, the Company estimated that its current
cash balance of £0.9m, together with projected receivables and working capital
needs, was sufficient to meet its cash requirements for a further 3 months in
the absence of further funding or new revenue streams commencing in that period.
It also stated that with a cash balance of £0.9m and an unused overdraft
facility of £0.2m that the Company was exploring all financing options including
a public equity issue.



In a further trading update on 8 September 2006, the Company announced that the
costs involved in commercialising its portfolio of products had increased
relative to those in the first half of the current financial year. As a result,
the Company stated that it expected the loss for the six months to 31 October
2006 moderately to exceed that of the first half.



Since 30 April 2006, it has become clear that significant further funding is
required to convert its technology into a portfolio of commercially viable
products and, in addition, to meet its ongoing obligations, including further
instalments due under the terms of the acquisition agreement governing the
Biotec Acquisition. The Group has an unused overdraft facility with Barclays
Bank with a limit of £0.2m.



The Board is concentrating on converting opportunities into commercial contracts
and believe that the current management team bring expertise, energy and
commitment to meet these challenges. The Group has developed strong partnerships
and key relationships over the last two years and is confident that its
intellectual property portfolio will in time bring environmental benefits to
both the packaging industry and the consumer and as a result enhance shareholder
value. However, in order to achieve its goals and ensure the commercial success
of its product portfolio, the Group needs significant further investment. The
Group is therefore proposing to raise the required funding by means of the
Issue, details of which are set out below.



The proceeds will provide the Group with the working capital to enable
management to convert opportunities into commercial contracts whilst allowing
the Group to meet its existing financial obligations. Specifically, funds raised
will be used for the following:



-        to ensure successful completion by either Biotec, or in accordance with
the provisions of the Joint Venture Agreement, Stanelco of at least the first
two manufacturing facilities in the USA, which will cost approximately £2.8m
each, for the production of starch-based resins, including Starpol materials,
developed by Biotec;



-        to meet the final stage payment of £1.6m due in June 2007 to EKI for
the Biotec Acquisition; and



-        to provide further working capital for the Group to fund the next stage
of commercial development of the Group's existing and new products and to
provide the Company with funds to back up any negotiations with customers and
partners.



DETAILS OF THE ISSUE



The Company is proposing to raise up to £15.8m (up to £14.4m net of expenses) by
way of:



- the Firm Placing in respect of 1,375,000,000 New Ordinary Shares at
the Issue Price;



- the Placing in respect of 148,278,000 New Ordinary Shares at the Issue
Price; and



- the Open Offer in respect of 600,992,559 New Ordinary Shares at the
Issue Price to be offered to Qualifying Shareholders pursuant to the Open Offer.
These New Ordinary Shares include the 148,278,000 New Ordinary Shares placed
under the Placing which are subject to clawback to satisfy valid applications
from Qualifying Shareholders under the Open Offer.



Under the terms of the Placing and Open Offer Agreement, Teather & Greenwood is
not underwriting the Placing and has agreed to use its reasonable endeavours to
place the Firm Placing Shares and the Placing Shares at the Issue Price.



Subject to the fulfilment of the conditions below, Qualifying Shareholders are
being given the opportunity to subscribe for the Open Offer Shares at the Issue
Price free from expenses, pro rata to their existing shareholdings, on the basis
of:



3 Open Offer Shares for every 5 Existing Ordinary Shares



held on the Record Date and so in proportion for any other number of Existing
Ordinary Shares then held. Entitlements to Open Offer Shares will be rounded
down to the nearest whole number of Open Offer Shares. Fractional entitlements
will not be allotted to Qualifying Shareholders but will be aggregated with the
Open Offer Shares attributable to Overseas Shareholders not eligible to
participate in the Open Offer and included in the Placing, with such proceeds
being retained for the benefit of the Company. Qualifying Shareholders may apply
for any whole number of Open Offer Shares up to their maximum entitlement which,
in the case of Qualifying non-CREST Shareholders, is equal to the number of Open
Offer Shares as shown on their Application Form or, in the case of Qualifying
CREST Shareholders, is equal to the number of Open Offer Entitlements standing
to the credit of their stock account in CREST. No application in excess of a
Qualifying Shareholder's maximum entitlement will be met and any Qualifying
Shareholder so applying will be deemed to have applied for his or her maximum
entitlement only. Qualifying Shareholders with holdings of Existing Ordinary
Shares in both certificated and uncertificated form, or under different account
designations, will be treated as having separate holdings for the purposes of
calculating their pro rata entitlements under the Open Offer.



The New Ordinary Shares will rank pari passu in all respects with Existing
Ordinary Shares and assuming that the Issue is fully subscribed will represent
approximately 66 per cent. of the Company's Enlarged Share Capital at Admission.



If a Qualifying Shareholder does not take up his Open Offer Entitlement his
interest will be diluted by 66 per cent. Furthermore, even if a Qualifying
Shareholder does take up his Open Offer Entitlement his interest will be diluted
by 46 per cent.



Application will be made for the Open Offer Entitlements to be admitted to
CREST. It is expected that the Open Offer Entitlements will be admitted to CREST
on 12 October 2006. The Open Offer Entitlements will also be enabled for
settlement in CREST on 12 October 2006. Applications through the CREST system
may only be made by the Qualifying CREST Shareholder originally entitled or by a
person entitled by virtue of a legitimate market claim.



Qualifying non-CREST Shareholders will receive an Application Form with the
Prospectus which sets out their maximum entitlement to Open Offer Shares as
shown by the number of Open Offer Shares allocated to them. Qualifying CREST
Shareholders will receive a credit to their appropriate stock accounts in CREST
in respect of their Open Offer Entitlements on 12 October 2006. The latest time
and date for payment in full under the Open Offer is 11.00 a.m. on 1 November
2006.



Applications will be made to the FSA and to the London Stock Exchange for the
New Ordinary Shares to be admitted to the Official List and to trading on the
London Stock Exchange. Admission is expected to occur and dealings to commence
in the New Ordinary Shares on 7 November 2006.



The Issue is conditional, upon the following:



(i)           the passing of the Resolutions;



(ii)      the Placing and Open Offer Agreement becoming unconditional and not
having been terminated in accordance with its terms; and



(iii)  Admission becoming effective on or before 8.00 a.m. on 7 November 2006
(or such later date and/or time as the Company and Teather & Greenwood may
agree, being no later than 8.00 a.m. on 30 November 2006).



If such conditions are not fulfilled or (where capable of waiver) waived on or
before 8.00 a.m. on 7 November 2006 (or such later time and dates as Teather &
Greenwood may, in its absolute discretion, elect being no later than 8.00 a.m.
on 30 November 2006) application monies will be returned to applicants, without
interest, as soon as practicable thereafter and any Open Offer Entitlements
admitted to CREST will be disabled.



The Open Offer is not a rights issue. Qualifying CREST Shareholders should note
that although the Open Offer Entitlements will be admitted to CREST and be
enabled for settlement, applications in respect of entitlements under the Open
Offer may only be made by the Qualifying CREST Shareholders originally entitled
or by a person entitled by virtue of a legitimate market claim raised by
CRESTCo's Claims Processing Unit. Qualifying non-CREST Shareholders should note
that the Application Form is not a negotiable document and cannot be traded.
Qualifying Shareholders should also be aware that in the Open Offer, unlike in a
rights issue, any Open Offer Shares not applied for will not be sold in the
market or placed for the benefit of Qualifying Shareholders who do not apply
under the Open Offer, but will be placed under the Placing for the benefit of
the Company at the Issue Price.



For Qualifying non-CREST Shareholders, to be valid, Application Forms should be
completed and returned, accompanied by the appropriate remittance so as to reach
Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU as soon as possible, but in any event by no later than
11.00 a.m. on 1 November 2006. For Qualifying CREST Shareholders the relevant
CREST instructions must have been settled as will be explained in the Prospectus
by no later than 11.00 a.m. on 1 November 2006.



It is expected the definitive documents of title in respect of the New Ordinary
Shares, which will be in registered form, will be delivered in uncertificated
form in CREST by 7 November 2006 and in certificated form by 21 November 2006.



Temporary documents of title will not be issued pending the despatch by post of
definitive certificates for the New Ordinary Shares (other than in respect of
those shares held through CREST). Pending the despatch of definitive
certificates for the New Ordinary Shares (other than in respect of those shares
held through CREST), transfers will be certified against the register held by
the Registrars.



Further details of the Open Offer (including the conditions to which it is
subject) are to be set out in Part II of the Prospectus and, where relevant, in
the Application Form accompanying the Prospectus.



USE OF PROCEEDS



The proceeds from the Issue will be used to move the business on from its
development and acquisition phases into the commercialisation phase of the
intellectual property portfolio. The proceeds will provide the Group with the
working capital to enable management to convert opportunities into commercial
contracts whilst allowing the Group to meet its existing financial obligations.
Specifically, funds raised will be used for the following:



-        to ensure successful completion by either Biotec, or in accordance with
the provisions of the Joint Venture Agreement, Stanelco of at least the first
two manufacturing facilities in the USA, which will cost approximately £2.8m
each, for the production of starch-based resins, including Starpol materials,
developed by Biotec;



-        to meet the final stage payment of £1.6m due in June 2007 to EKI for
the Biotec Acquisition; and



-        to provide further working capital for the Group to fund the next stage
of commercial development of the Group's existing and new products and to
provide the Company with funds to back up any negotiations with customers and
partners.



LONG TERM INCENTIVE PLAN ('LTIP')



The Directors believe that it would be in the best interests of Shareholders to
set up an LTIP to ensure that Martin Wagner and Clive Warner are appropriately
rewarded if the Company achieves certain goals. The Company is therefore
intending to prepare such a scheme which it aims to put in place at the earliest
possible opportunity. A further announcement will be made by the Company at the
appropriate time.



OUTSTANDING OPTIONS



Some of the Outstanding Options are not subject to a provision which would allow
an adjustment to be made to the exercise price and/or the number of Shares over
which such Outstanding Options have been granted to take into account the effect
of the Issue. If an adjustment was not made in relation to such Outstanding
Options to take into account the effect of the Issue the option holders
concerned would be prejudiced. In order to overcome this technical issue the
Directors are seeking Shareholders' authority pursuant to resolution number 5
set out in the notice of EGM to enable them to make such adjustments to the
Outstanding Options concerned. This would put the option holders in no better
position than would have been the case had the Issue not occurred.



CHANGE OF ACCOUNTING REFERENCE DATE



The Company is changing its accounting reference date from 31 October to 31
December. This will bring the Group's accounting period into line with Biotec's
accounting period. The Directors believe that the change of accounting reference
date is in the best interests of the Company as it will save on unnecessary
additional auditing costs. The next report and accounts of the Company will
therefore be in respect of the 14 month period to 31 December 2006.



DIVIDENDS



The current objective of the Company is to obtain sufficient working capital to
enable it to fund its goals as set out in the Prospectus.



The ability of the Company to pay any dividend in the future (and the amount) is
dependent on many factors including the outcome of its research and development,
its future capital and research and development requirements and the financial
position generally of the Company at the time. Many of the factors that affect
the ability of the Company to pay dividends, and the timing of such dividends,
will be outside the control of the Company. The Directors cannot give any
assurance regarding the payment of dividends in the future.



EXTRAORDINARY GENERAL MEETING



Set out at the end of the Prospectus will be a notice convening an Extraordinary
General Meeting of the Company to be held at the offices of Teather & Greenwood
Limited, Beaufort House, 15 St. Botolph Street, London, EC3A 7QR at 11.00 a.m.
on 6 November 2006 at which the resolutions set out in the notice of EGM will be
proposed:



(i)                       to increase the authorised share capital of the
Company from £1.3m divided into 1,300,000,000 Ordinary Shares to £4m divided
into 4,000,000,000 Ordinary Shares (an increase of approximately 208 per cent.
of the authorised share capital of the Company as at the date of this
announcement) by the creation of 2,700,000,000 Ordinary Shares.



(ii)                  to authorise the Directors, pursuant to section 80 of the
Companies Act, to allot relevant securities up to a maximum aggregate nominal
amount of £2,998,345.74, representing the following:



- £1,975,992.56, being the nominal amount of the issued share capital
required for the Issue;



- £296,165.78, being the nominal amount of the issued share capital
required for the commitments to share options and deferred consideration for the
Aquasol Agreement; and



- £726,187.40 being the balance between the authorised but unissued
share capital and the Enlarged Share Capital and commitments to share options
and deferred consideration for the Aquasol Agreement and which represents 24.38%
of the Enlarged Share Capital such authority to expire at the next annual
general meeting of the Company.



(iii)              subject to the resolutions at (i) and (ii) being passed, to
disapply the statutory pre-emption rights contained in section 89 of the
Companies Act in relation to the allotment of equity securities for cash, for
the purposes of the Issue and otherwise up to an aggregate nominal amount of
£148,882.34 (representing approximately 5 per cent. of the Enlarged Share
Capital and 14.86 per cent. of the Company's issued share capital on the date of
this announcement), such authority to expire at the conclusion of the next
annual general meeting of the Company;



(iv)                  to approve the Issue at the Issue Price which represents a
discount of approximately 16.67 per cent. to the middlemarket price of the
Existing Ordinary Shares as at the time of the release of this announcement);
and



(v)                       to authorise the Directors to make certain adjustments
to the Outstanding Options to take into account the effect of the Issue upon the
Outstanding Options.



The increase in share capital contemplated by the notice of EGM set out at the
end of the Prospectus will leave the Company, following completion of the Issue
and assuming full subscription under the Open Offer, with a balance of
authorised but unissued share capital of £1.02m (representing 25.6 per cent. of
the issued share capital as enlarged by the Issue). Your Directors believe this
is an appropriate level of

authorised but unissued share capital to maintain following the Issue in order
to meet commitments to issue further shares pursuant to the Share Schemes and
the Aquasol Agreement.



The authority under section 80 of the Companies Act is required to implement the
Issue and to provide an appropriate level of authorised but unissued share
capital following completion of the Issue in respect of which the Directors have
authority to allot, subject always to the statutory rights of pre-emption
contained in section 89 of the Companies Act. The authority under section 95 of
the Companies Act is also required to implement the Issue and to provide limited
authority to allot shares for cash thereafter otherwise than pro rata to
Shareholders.



The Board has no present intention to use the authorities referred to above to
issue any of the Company's share capital other than pursuant to the Issue or for
the issue of Ordinary Shares following the exercise of options pursuant to the
Share Schemes.



As the Issue Price represents a discount of more than 10 per cent. to the
middle-market price of the Existing Ordinary Shares at the time of the release
of this announcement, the discount requires the approval of Shareholders.



ACTION TO BE TAKEN



In respect of the Extraordinary General Meeting

You will find enclosed with the Prospectus a Form of Proxy for use at the EGM.
Whether or not you propose to attend the EGM in person, you are asked to
complete and return it to the Company's registrars, Capita Registrars, Proxy
Department, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU in
accordance with the instructions printed thereon so as to arrive as soon as
possible, but in any event so as to arrive not later than 11.00 a.m. on 4
November 2006. Completion and return of a Form of Proxy will not preclude a
Shareholder from attending and voting in person at the EGM.



In respect of the Placing and Open Offer

If you are a Qualifying non-CREST Shareholder you will find an Application Form
accompanying the Prospectus which gives details of your maximum entitlement
under the Open Offer (as shown by the number of Open Offer Entitlements
allocated to you). If you wish to apply for Open Offer Shares under the Open
Offer, you should complete the Application Form in accordance with the procedure
to be set out in Part II of the Prospectus and on the Application Form itself
and post it in the accompanying prepaid envelope, together with any payment in
full in respect of the number of Open Offer Shares applied for to Capita
Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent
BR3 4TU so as to arrive as soon as possible and in any event so as to be
received no later than 11.00 a.m. on 1 November 2006 having first read carefully
the letter from Teather and Greenwood in Part II of the Prospectus and the
contents of the Application Form.



If you are a Qualifying CREST Shareholder no Application Form will be enclosed
with the Prospectus and you will receive a credit to your appropriate stock
account in CREST in respect of the Open Offer Entitlements representing your
maximum entitlement under the Open Offer. You should refer to the procedure to
be set out in Part II of the Prospectus.



The latest time for applications under the Open Offer to be received is 11.00
a.m. on 1 November 2006. The procedure for application and payment depends on
whether, at the time at which application and payment is made, you have an
Application Form in respect of your entitlement under the Open Offer or have
Open Offer Entitlements credited to your stock account in CREST in respect of
such entitlement. The procedures for application and payment will be set out in
Part II of the Prospectus. Further details also appear on the Application Forms
which have been sent to Qualifying non-CREST Shareholders. Qualifying CREST
Shareholders who are CREST sponsored members should refer to their CREST
sponsors regarding the action to be taken in connection with the Prospectus and
the Open Offer.



IRREVOCABLE UNDERTAKINGS



Irrevocable undertakings to vote in favour of the Resolutions have currently
been received by Stanelco in respect of a total of 6,217,083 Ordinary Shares,
representing approximately 0.63 per cent. of Stanelco's issued share capital.



OVERSEAS SHAREHOLDERS



The attention of Shareholders who are citizens or residents of countries other
than the United Kingdom or have a registered address outside the United Kingdom
is drawn to the information set out in the Overseas Shareholders section of the
letter from Teather & Greenwood in Part II of the Prospectus. Such Shareholders
must satisfy themselves as to the laws applicable to them and ensure their
observance thereof.



ADDITIONAL INFORMATION



Shareholders should be aware that if the Resolutions to be proposed at the EGM
are not passed and Admission does not take place, the net proceeds of the Issue
will not be received by the Company. If Admission does not take place, the
Company's cash requirements would be likely to exceed the amount available under
its existing overdraft facility with Barclays Bank by the end of November 2006
and, in any event, this facility would be subject to immediate review and
potential withdrawal.



The Board considers that, in this scenario they would seek to agree new
facilities with an appropriate lender and/or seek alternative means of funding.
However, the Board believes that any such facilities or loans, on the assumption
that such facilities or loans could be agreed, would be on significantly
restrictive terms and may necessitate the Group undertaking to effect certain
actions and grant certain rights to the lenders. In these circumstances, the
Board believes that the Group would not be able to continue the development of
its intellectual property portfolio to commercialisation in a manner in which
would allow the Group to retain all of its key staff and intellectual property
rights. The Board consequently believes that any such arrangements would not be
in the best interests of the Shareholders.



In addition, under the terms of the current funding granted to the Company,
certain lenders have the right to demand immediate repayment of outstanding
amounts of £0.9m due by the end of November 2006, which the Company would not be
in a position to repay. Unless funds are received pursuant to the Issue or
unless the Company obtains further funding, there is a material risk that the
Company will not be able to meet its debts as they fall due and will become
insolvent.



RECOMMENDATION



Your Board, which has been so advised by Teather & Greenwood, considers the
Issue and approval of the Resolutions to be in the best interests of the Company
and its Shareholders as a whole. In providing advice to the Board, Teather &
Greenwood has relied on the Directors' commercial assessment of the Issue.



Accordingly, your Board recommends that Shareholders vote in favour of the
Resolutions as they intend to do in respect of their own respective beneficial
holdings which in aggregate amount to 6,217,083 Ordinary Shares (representing
0.63 per cent. of the existing issued ordinary share capital of the Company).




EXPECTED TIMETABLE


                                                                      2006

Record Date for the Open Offer                                        close of dealings on 6 October


Prospectus and Application Forms despatched                           11 October


Open Offer Entitlements credited to CREST stock accounts of           12 October
Qualifying CREST Shareholders


Recommended latest time for requesting withdrawal of Open Offer       4.30 p.m. on 25 October
Entitlements from CREST


Latest time for depositing Open Offer Entitlements into CREST         3.00 p.m. on 27 October


Latest time and date for splitting Application Forms (to satisfy bona 3.00 p.m. on 30 October
fide market claims)



Latest time and date for receipt of completed Application Forms and   11.00am on 1 November
payment in full under the Open Offer or settlement of relevant CREST
Instruction (as appropriate)


Latest time and date for receipt of completed Forms of Proxy          11.00am on 4 November


Extraordinary General Meeting                                         11.00am on 6 November


Admission and commencement of dealings in the New Ordinary Shares     7 November



Expected date for crediting of New Ordinary Shares to CREST stock     7 November
accounts in uncertificated form



Expected date of despatch of definitive certificates for New Ordinary by 21 November
Shares in certificated form




DEFINITIONS



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


'Adept'                                 Adept Polymers Limited, a company registered in England and Wales
                                        under number 04590414 and a wholly owned subsidiary of the
                                        Company


'Admission'                             admission to listing together with admission to trading


'Admission Standards'                   the Admission and Disclosure Standards issued by the London Stock
                                        Exchange


'admission to listing'                  the admission of the New Ordinary Shares to the Official List
                                        becoming effective in accordance with the Listing Rules


'admission to trading'                  the admission of the New Ordinary Shares to trading on the London
                                        Stock Exchange's market for listed securities becoming effective
                                        in accordance with the Admission Standards


'Application Form'                      the application form issued to Qualifying non-CREST Shareholders
                                        in connection with the Open Offer


'Aquasol'                               Aquasol Limited, a company registered in England and Wales under
                                        number 02765778, and a wholly owned subsidiary of the Company


'Aquasol Agreement'                     the sale and purchase agreement dated 3 June 2004 whereby the
                                        Company agreed to purchase the entire issued share capital of
                                        Aquasol


'ASDA'                                  ASDA Stores Limited


'Biotec'                                Biotec Holding GmbH


'Biotec Acquisition'                    the acquisition of Biotec pursuant to the acquisition agreement
                                        dated 4 June 2005


'Board' or 'Directors'                  the board of directors of the Company whose names are to be set
                                        out in Part I of the Prospectus


'Capita Registrars'                     a trading division of Capita IRG Plc


'Cardinal Health'                       Cardinal Health 409, Inc.


'certificated' or 'in certificated form an Ordinary Share which is not in uncertificated form (that is,
'                                       not in CREST)


'Companies Act'                         the Companies Act 1985, as amended


'Company' or 'Stanelco'                 Stanelco plc, a public limited company registered in England and
                                        Wales with Company number 01873702


'CREST'                                 the relevant system (as defined in the CREST Regulations) to
                                        facilitate the transfer of title to shares in uncertificated form
                                        in respect of which CRESTCo Limited is the Operator (as defined
                                        in the CREST Regulations)


'CRESTCo Limited'                       CRESTCo Limited, the operator of CREST


'CREST Regulations'                     the Uncertificated Securities Regulations 2001(SI 2001/3755) as
                                        amended from time to time
or 'Regulations'

'EBT'                                   the Stanelco plc Employee Benefit Trust


'EKI'                                   E. Kashoggi Industries LLC


'EMI'                                   the Stanelco plc Enterprise Management Incentive Scheme and all
                                        outstanding options granted by the Company under stand alone
                                        enterprise management incentive option agreements entered into
                                        either before, on or after the adoption by the Company of the
                                        Stanelco plc Enterprise Management Incentive Scheme


'Enlarged Share Capital'                the issued share capital of the Company, as enlarged by the
                                        allotment and issue of the New Ordinary Shares (assuming full
                                        subscription under the Open Offer)


'EU'                                    the European Union


'Existing Ordinary Shares'              the 1,001,654,265 Ordinary Shares in issue at the date of the
                                        Prospectus


'Extraordinary General Meeting' or 'EGM the extraordinary general meeting of the Company (or any
'                                       adjournment thereof) to be held at 11.00 a.m. on 6 November 2006,
                                        notice of which will be set out at the end of the Prospectus


'Firm Placing'                          the conditional placing by Teather & Greenwood of the Firm
                                        Placing Shares on behalf of the Company pursuant to the Placing
                                        and Open Offer Agreement


'Firm Placing Shares'                   the 1,375,000,000 New Ordinary Shares which have been
                                        conditionally subscribed for by institutions and certain other
                                        investors which are not subject to any clawback to satisfy valid
                                        applications from Qualifying Shareholders under the Open Offer


'Form of Proxy'                         the form of proxy to accompany the Prospectus for use by
                                        Shareholders at the EGM


'FSA'                                   Financial Services Authority of the United Kingdom


'FSMA'                                  the Financial Services and Markets Act 2000, as amended,
                                        including any regulations made pursuant thereto


'Group' or the 'Stanelco Group'         the Company and its subsidiaries from time to time


'Issue'                                 the Firm Placing, Placing and Open Offer


'Issue Price'                           0.8 pence per New Ordinary Share


'Joint Venture Agreement'               the joint venture agreement dated 1 September 2005 between SP
                                        Metal S.A. (now SPhere) and the Company, relating to Biotec


'Listing Rules'                         the rules for listing issued by the UKLA


'London Stock Exchange'                 London Stock Exchange plc


'Management Committee'                  the Group's management committee comprising of Martin Wagner,
                                        Clive Warner, Ian Balchin, Howard White, Graham Whitchurch,
                                        Robert Duggan, Mike Feast, Bruce Drew and Harald Schmidt


'New Ordinary Shares'                   up to 1,975,992,559 Ordinary Shares to be issued pursuant to the
                                        Issue


'Official List'                         the Official List of the UKLA


'Open Offer'                            the conditional invitation to Qualifying Shareholders, on the
                                        terms and subject to the conditions to be set out in Part II of
                                        the Prospectus and, where relevant, in the Application Form, to
                                        subscribe for Open Offer Shares at the Issue Price


'Open Offer Entitlements'               an entitlement to subscribe for Open Offer Shares, allocated to a
                                        Qualifying Shareholder pursuant to the Open Offer


'Open Offer Shares'                     the 600,992,559 New Ordinary Shares which are the subject of the
                                        Open Offer


'Ordinary Shares'                       ordinary shares of 0.1 pence each in the capital of the Company


'Outstanding Options'                   any option to acquire ordinary shares in the capital of the
                                        Company which subsists and was granted pursuant to the Share
                                        Schemes


'Overseas Shareholders'                 the holders of Ordinary Shares who are resident in, or citizens
                                        of, or which are corporations, partnerships or other entities
                                        created or organised under laws of  countries outside the United
                                        Kingdom


'Placees'                               the various institutions which have conditionally agreed to
                                        subscribe for Open Offer Shares at the Issue Price subject to the
                                        rights of Qualifying Shareholders pursuant to the Open Offer


'Placing'                               the conditional placing by Teather & Greenwood at the Issue Price
                                        of the Placing Shares pursuant to the terms and conditions of the
                                        Placing and Open Offer Agreement subject to clawback to satisfy
                                        valid applications from Qualifying Shareholders under the Open
                                        Offer


'Placing and Open Offer Agreement'      the conditional agreement dated 6 October 2006 between (1) the
                                        Company (2) Teather & Greenwood and (3) the Directors relating to
                                        the Issue, details of which are to be set out in Part V of the
                                        Prospectus


'Placing Shares'                        the 148,278,000 New Ordinary Shares which are subject to clawback
                                        to satisfy valid applications from Qualifying Shareholders under
                                        the Open Offer


'Prospectus'                            the document to be published by the Company to be dated on or
                                        around 11 October 2006, and to be posted to Shareholders as soon
                                        as practicable thereafter


'Prospectus Rules'                      the Prospectus Rules issued by the FSA


'Qualifying CREST Shareholders'         Qualifying Shareholders whose Existing Ordinary Shares on the
                                        register of members of the Company on the Record Date are in
                                        uncertificated form


'Qualifying non-CREST Shareholders'     Qualifying Shareholders whose Existing Ordinary Shares on the
                                        register of members of the Company on the Record Date are in
                                        certificated form


'Qualifying Shareholders'               holders of Existing Ordinary Shares on the register of members of
                                        the Company on the Record Date (other than Overseas Shareholders)


'Receiving Agents'                      Capita Registrars, Corporate Actions, The Registry, 34 Beckenham
                                        Road, Beckenham, Kent BR3 4TU


'Record Date'                           the record date for the Open Offer, being the close of business
                                        on 6 October 2006


'Registrars'                            Capita Registrars


'Reiser'                                Robert Reiser & Co., Inc.


'Resolutions'                           the resolutions to be proposed at the EGM, as set out in the
                                        notice of EGM to be included at the end of the Prospectus


'RF Traditional'                        the traditional RF equipment such as mobile welders for sealing
                                        contaminated waste and RF furnaces for the production of optical
                                        fibre


'Shareholders'                          holders of Ordinary Shares


'Share Option Plan'                     the Stanelco plc 2005 Unapproved Share Option Plan


'Share Schemes'                         the EMI, the Share Option Plan, the EBT and the Stand Alone
                                        Unapproved Share Option Schemes


'SPhere'                                SPhere S.A., formerly known as S.P. Metal S.A., a company with
                                        which Stanelco jointly owns Biotec in equal share under the Joint
                                        Venture Agreement, whose registered office is 3 Rue Scheffer,
                                        Paris, France


'Stand Alone Unapproved Share Option    the share option agreements between the Company and each of
Schemes'                                Graham Whitchurch, Terry Robins, Barrie Hozier and Audrey
                                        Shepherd


'Teather & Greenwood'                   Teather & Greenwood Limited which is authorised and regulated by
                                        the FSA


'UKLA'                                  the FSA acting in its capacity as the competent authority for the
                                        purposes of Part VI of FSMA


'uncertificated' or                     recorded on the Company's register as an Ordinary Share being
                                        held in uncertificated form in CREST and title to which, by
'in uncertificated form'                virtue of the CREST Regulations, may be transferred by means of
                                        CREST


'United Kingdom' or 'UK'                the United Kingdom of Great Britain and Northern Ireland


'United States' or 'US' or 'USA'        the United States of America, its territories and possessions,
                                        any state of the United States and the District of Columbia


'US Securities Act'                     US Securities Act of 1933, as amended





GLOSSARY



The following glossary terms apply throughout this announcement unless the
context requires otherwise:


'biodegradable'                         a material that will degrade without additives


'compostable'                           a material that meets regulatory requirements to degrade within
                                        180 days in an industrial compost environment


'converters'                            operators in the supply chain who convert resin into products,
                                        such as food trays, wraps, cups etc.


'FDA'                                   the Food and Drug Administration, a US agency responsible for
                                        regulation of biotechnology food products


'MAP'                                   modified atmosphere packaging, which enables a product's
                                        shelf-life to be extended


'OEM'                                   original equipment manufacturer


'plasticiser'                           any of various substances added to plastics or other materials to
                                        make or keep them soft or pliable


'PVC'                                   poly vinyl chloride, a plastic material


'RF'                                    radio frequency, the application of a rapidly fluctuating
                                        electric field, which can be applied to the heating of materials
                                        by agitating the molecules


'sustainable'                           a material which has been made using only renewable resources


'thermoforming'                         the formation of containers by means of heat and vacuum


'thermoplastic'                         a type of plastic that will repeatedly soften when heated and
                                        harden when cooled. The plastic can be moulded and shaped when
                                        heated, and will then keep its shape when cooled


'tray lidding'                          the sealing of a film lid on food containers


'VFFS'                                  vertical form fill and seal, the process of forming bags, filling
                                        them with produce and sealing them (e.g. bags of salad)






                      This information is provided by RNS
            The company news service from the London Stock Exchange