Notice of GM & Proposed Return of Capital

RNS Number : 7876P

CML Microsystems PLC

22 February 2021

 

CML Microsystems Plc

(the "Group")

  Notice of General Meeting and Proposed Return of Capital to Shareholders of 50 pence per Ordinary Share

On 5 February 2021, the Group announced that it had completed the Disposal of Hyperstone, the Group's storage division, to Swissbit, a specialist producer of industrial-grade data-storage and embedded IoT solutions, for US$49 million in cash.

After giving due consideration to the ongoing needs of the Group, the Board is pleased to propose the return of approximately £8.28 million in aggregate to Shareholders and has chosen to implement this as a return of capital through a bonus issue of a new class of B shares, which the Company will redeem for cash in order to return 50 pence per Ordinary Share to Shareholders.

The Group has today posted a circular incorporating a notice of general meeting which sets out details of a proposed return of capital to Shareholders ("Return of Capital"), convening a general meeting of the Company to be held at Oval Park, Hatfield Road, Langford, Maldon, Essex, CM9 6WG at 10.00 a.m. on 18 March 2021 .

The Return of Capital involves the capitalisation of amounts standing to the credit of the Company's share premium account in order to pay up in full the B Shares with a nominal value of 50 pence each, which will be allotted to Shareholders as a bonus issue. To effect the Return of Capital:

· Shareholders will be issued one B Share for each Ordinary Share held by them at 6.00 p.m. on 18 March 2021 , being the Record Time; 

· the Company intends to redeem each B Share for 50 pence and then cancel each such B Share shortly following the issue of the B Shares; and

· payments in respect of the Return of Capital are expected to be made on or around 26 March 2021.

The Return of Capital (including the creation and issue of the B Shares) is subject to the approval of the Shareholders at the General Meeting.

A copy of the Circular, containing more information in relation to the Return of Capital, is available on the Company's website at  www.cmlmicroplc.com . The Circular should be read in its entirety, but an extract from the Circular is set out below.

Terms defined in the Circular have the same meaning when used in this announcement.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Latest time and date for receipt of Forms of Proxy and CREST proxy instructions	10.00 a.m. on 16 March 2021
General Meeting	10.00 a.m. on 18 March 2021
Record Time	6.00 p.m. on 18 March 2021
Ordinary Shares marked as ex-rights	Start of trading on 19 March 2021
B Shares issued based on Ordinary Shares held at the Record Time	8.00 a.m. on 19 March 2021
Expected Redemption Date	6.00 p.m. on 19 March 2021
Expected redemption and cancellation of B Shares	19 March 2021
Despatch of payments and CREST accounts credited in respect of proceeds, if B Shares redeemed on 19 March 2021	26 March 2021

___________________
Notes:

(1) If any of the above times or dates should change, the revised times and/or dates will be notified to Shareholders by an announcement through the Regulatory News Service of the London Stock Exchange.

(2) References to time are to London time.

(3) All events in the above timetable following the holding of the General Meeting are conditional on the passing of the Resolution at such meeting.

Coronavirus (COVID-19) Update

In light of the COVID-19 pandemic and the restrictions imposed by the UK government at the time of publication of the Notice of the General Meeting, the Company will convene the General Meeting with the minimum necessary quorum of two shareholders (members) (which the Company will facilitate), and further members will not be permitted to attend the General Meeting in person.

However, member participation remains important to us and we would strongly encourage members to participate in the General Meeting by voting by proxy. Further details are set out below and within the Proxy Form.

The Company will include all valid proxy votes (whether submitted electronically or in hard copy form) in its polls at the General Meeting and the Chairman will call for a poll on each resolution. The Company accordingly requests that members submit their proxy votes in respect of the Resolution as set out in the Notice of the General Meeting, electronically or by post in advance, in accordance with the instructions set out in the Notice of the General Meeting.

Members should submit their votes via proxy as early as possible (and by no later than 10.00 a.m. on 16 March 2021), and members are requested to appoint the Chairman as their proxy.  If a member appoints someone else as their proxy, that proxy will not be able to attend the General Meeting in person or cast the member's vote.

CML Microsystems Plc Chris Gurry, Group Managing Director Nigel Clark, Group Chairman & Financial Director	www.cmlmicroplc.com Tel: [phone]
Shore Capital Edward Mansfield James Thomas Fiona Conroy - Corporate Broking	Tel: [phone]
SP Angel Corporate Finance LLP Jeff Keating	Tel: [phone]
Alma PR Josh Royston Caroline Forde Robyn Fisher	Tel: [phone]

About CML Microsystems PLC

CML develops mixed-signal, RF and microwave semiconductors for global communications markets. The Group utilises a combination of outsourced manufacturing and in-house testing with trading operations in the UK, Asia and USA. CML targets sub-segments within Communication markets with strong growth profiles and high barriers to entry. It has secured a diverse, blue chip customer base, including some of the world's leading commercial and industrial product manufacturers.

The spread of its customers and diversity of the product range largely protects the business from the cyclicality usually associated with the semiconductor industry. Growth in its end markets is being driven by factors such as the appetite for data to be transmitted faster and more securely, the upgrading of telecoms infrastructure around the world and the growing prevalence of private commercial wireless networks for voice and/or data communications linked to the industrial internet of things (IIoT).

The Group is cash-generative, has no debt and is dividend paying.

Key points from the Circular are set out below:

LETTER FROM THE CHAIRMAN OF CML

1.  Introduction

Introduction

On 5 February 2021, the Company announced that it had completed the Disposal of Hyperstone, the Group's storage division, to Swissbit, a specialist producer of industrial-grade data-storage and embedded IoT solutions, for US$49 million in cash.

The Disposal reflects a strategic decision to refocus the Group exclusively on the larger global Communications market which the Board believes represents a high growth sector. The Disposal enables CML to direct all its efforts on capturing the exciting opportunities that exist and leverage its standing as a key supplier to many of the world's tier one original equipment manufacturers.

The sale of Hyperstone has resulted in a net cash injection of circa. £33m into the Group which, when added to the net cash balance sheet position that existed prior to the Disposal, leaves the business strongly placed to achieve its future growth objectives.

After giving due consideration to the ongoing needs of the Group, including the legal obligations to its pension fund, organic investment needs and the retention of capital to execute future acquisitions  within the Communications sector, the Board believes it appropriate to arrange a return of capital to Shareholders.

From the proceeds of the Disposal, the Board proposes to return approximately £8.28 million in aggregate to Shareholders and has chosen to implement this as a return of capital through the issue of a new class of shares ("B Shares") which the Company will redeem for cash in order to return 50 pence per Ordinary Share to Shareholders (the "B Share Scheme"). 

The B Share Scheme is intended to enable all Shareholders to participate equally in the return and to provide capital treatment for most UK tax resident Shareholders.  Redemption is expected to occur on or around 19 March 2021.

The purpose of the Circular is to provide Shareholders with further information relating to the B Share Scheme and to give notice of the General Meeting at which a Resolution will be considered and, if thought fit, passed to allow the B Share Scheme to take place. The Circular also explains why the Board considers the Resolution to be proposed to be in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board recommends the Shareholders vote in favour of the Resolution to be proposed at the General Meeting in order that the B Share Scheme can proceed.

2.  The B Share Scheme

Under the terms of the B Share Scheme and assuming the Resolution is passed at the General Meeting, each Shareholder will receive one B Share for each Ordinary Share held at the Record Time. The return paid to Shareholders on the subsequent redemption of each B Share will be 50 pence, giving a cash return of 50 pence per Ordinary Share held at the Record Time.

The Company expects to redeem the B Shares on or around 19 March 2021 and for the proceeds to be paid to Shareholders approximately one week after the Redemption Date.

The B Shares will be a newly-created class of share and will not be transferable, save in the very limited circumstances set out in paragraph (G) of Part III of the Circular. The B Shares will not be admitted to the Official List, the London Stock Exchange's main market for listed securities or listed or admitted to trading on any other recognised investment exchange. The B Shares will be cancelled on redemption. Part II of the Circular sets out further details of the B Share Scheme and Part III of the Circular sets out the rights and restrictions attaching to the B Shares.

This structure should result in the majority of UK taxpayers receiving their cash proceeds on redemption of the B Shares as capital for taxation purposes. Part IV of the Circular sets out a summary of the potential tax consequences in the UK. Shareholders who are subject to taxation in a jurisdiction other than the UK or who are in any doubt as to their tax position should consult an appropriate independent and authorised professional adviser.

The return of capital under the B Share Scheme is separate from and will not affect the Company's dividend policy. Any future interim or final dividends declared by the Company will be in addition to the return of capital under the B Share Scheme. 

3.  Taxation

A guide to certain UK tax consequences of the B Share Scheme under current UK law and HM Revenue & Customs' practice is set out in Part IV of the Circular.

The tax consequences of the B Scheme may vary for Overseas Shareholders. Shareholders who are subject to taxation in a jurisdiction other than the UK or who are in any doubt as to their tax position should consult an appropriate independent and authorised professional adviser.

4.  General Meeting

The return of capital by way of the B Share Scheme requires the approval of Shareholders to the Resolution to be proposed at the General Meeting. Accordingly, there is set out at the end of the Circular a notice of the General Meeting to be held at 10.00 a.m. on 18 March 2021 at Oval Park, Hatfield Road, Langford, Maldon, Essex, CM9 6WG.

Further details of the Resolution to be proposed at the General Meeting can be found at paragraph 8 of Part II of the Circular.

5.  Action to be taken

Enclosed with the Circular is a Form of Proxy for use by Shareholders in connection with the General Meeting. Shareholders should complete and return the Form of Proxy in accordance with the instructions printed on it as soon as possible and in any event so that it may be received by the Company's Registrars, Neville Registers Limited, Neville House, Steelpark Road, Halesowen, West Midlands B62 8HD, by no later than 10.00 a.m. on 16 March 2021. Alternatively, holders of Ordinary Shares may appoint a proxy electronically through the CREST electronic proxy appointment service, by using the procedures described in the CREST manual and logging on to the following website: www.euroclear.com/CREST . Electronic proxy appointments must be received by no later than 10.00 a.m. on 16 March 2021. Further details of the electronic appointment methods are found in the notes to the notice of the General Meeting set out at the end of the Circular.

In light of the COVID-19 pandemic and the restrictions imposed by the UK government at the time of publication of the Notice of the General Meeting, the Company will convene the General Meeting with the minimum necessary quorum of two shareholders (members) (which the Company will facilitate), and further members will not be permitted to attend the General Meeting in person.  However, member participation remains important to us and we would therefore strongly encourage members to participate in the General Meeting by voting by proxy. 

6.  Recommendation

The Board considers the B Share Scheme and the passing of the Resolution to be proposed at the General Meeting to be in the best interests of the Company and the Shareholders as a whole. Accordingly, the Board unanimously recommends that Shareholders vote in favour of the Resolution to be proposed at the General Meeting, as each director intends to do in respect of his own beneficial holdings.

Yours faithfully

Nigel Clark (Group Chairman and Finance Director)

PART II

DETAILS OF THE B SHARE SCHEME

1.  B Share Scheme

The B Share Scheme is the way in which the Company proposes to effect the return of capital to Shareholders. This will involve the allotment and issue of bonus B Shares to Shareholders and the subsequent redemption of the B Shares by the Company.

The exact aggregate amount to be returned under the B Share Scheme will depend on the number of Ordinary Shares in issue at the Record Time.  Based on the number of Ordinary Shares in issue as at close of business on 19 February 2021 (being the last practicable date prior to publication of the Circular), the aggregate amount to be returned under the B Share Scheme is approximately £8.28 million, or 50 pence per Ordinary Share.

2.  Conditions to the implementation of the B Share Scheme

The B Share Scheme is conditional on approval by Shareholders of the Resolution to be proposed at the General Meeting and if this condition is not satisfied the B Share Scheme will not take effect.

3.  Allotment, issue and redemption of B Shares

Each Shareholder will receive one B Share for each Ordinary Share held at the Record Time.

The Company will have the right to redeem each B Share for 50 pence without any further action from the holder of such B Share. The Company intends to redeem and then cancel each such B Share shortly following the issue of the B Shares.

The rights and restrictions attached to the B Shares are more fully set out in Part III of the Circular.

It is proposed that the Company will capitalise a sum of approximately £8.28 million standing to the credit of the Company's share premium account in order to pay up in full the B Shares with a nominal value of 50 pence each.

The exact number of B Shares to be issued will be equal to the number of Ordinary Shares in issue at the Record Time (excluding those held in treasury by the Company). As at close of business on 19 February 2021 (being the last practicable date prior to publication of the Circular) there were 17,190,152 Ordinary Shares in issue of which 638,467 were held in treasury by the Company, representing approximately 3.71 per cent of the Ordinary Share capital in issue as at 19 February 2021.

The B Shares will not be admitted to listing on the Official List or admitted to trading on the London Stock Exchange's main market for listed securities, nor will they be listed or admitted to trading on any other recognised investment exchange. The B Shares will not be transferable, save in the very limited circumstances set out in paragraph (G) of Part III of the Circular.

No share certificates will be issued in respect of the B Shares.

The return of capital under the B Share Scheme is separate from and will not affect the Company's dividend policy. Any future interim or final dividends declared by the Company will be in addition to the return of capital under the B Share Scheme.

4.  Overseas Shareholders

Shareholders who are not resident in the United Kingdom or who are citizens, residents or nationals of other countries should consult their professional advisers to ascertain whether the issue, holding, redemption or disposal of the B Shares will be subject to any restrictions or require compliance with any formalities imposed by the laws or regulations of, or any body or authority located in, the jurisdiction in which they are resident or to which they are subject. In particular, it is the responsibility of any Overseas Shareholder to satisfy itself as to full observance of the laws of each relevant jurisdiction in connection with the B Share Scheme, including the obtaining of any government, exchange control or other consents which may be required, or the compliance with other necessary formalities needing to be observed and the payment of any issue, transfer or other taxes or duties in such jurisdiction.

The distribution of the Circular in certain jurisdictions may be restricted by law. Persons into whose possession the Circular comes should inform themselves about and observe any such restrictions. Neither the Circular nor any other document issued or to be issued by or on behalf of the Company in connection with the B Share Scheme constitutes an invitation, offer or other action on the part of the Company in any jurisdiction in which such invitation, offer or other action is unlawful.

5.  CML Microsystems Plc Employee Share Schemes

Under the Group Employee Share Schemes, the Company has granted options over Ordinary Shares at varying exercise prices and with varying vesting dates. Participants under the Group Employee Share Schemes are not the beneficial owners of Ordinary Shares under those schemes (save where options are exercised before the Record Time) and so will not participate in the B Share Scheme, other than in their separate capacity as Shareholders (if applicable). Where a participant under the Group Employee Share Scheme has exercised an option before the Record Time, the participant will receive the B Shares in the same way as other Shareholders.

As at close of business on 19 February 2021 (being the last practicable date prior to publication of the Circular), the total number of unvested options under the Group Employee Share Schemes was 556,457. In aggregate, these outstanding options represented approximately 3.23 per cent of the issued Ordinary Shares of the Company.

6.  Dealings and despatch of documents

The B Share Scheme will be carried out by reference to holdings of Ordinary Shares on the Company's register of members as at the Record Time.

No share certificates will be issued by the Company in respect of B Shares.

All cheques will be sent by post, at the risk of the Shareholder(s) entitled thereto, to the registered address of the relevant Shareholder (or, in the case of joint Shareholders, to the address of the joint Shareholder whose name stands first in the register of members in respect of such joint shareholding).

7.  General Meeting

The General Meeting will be held at Oval Park, Hatfield Road, Langford, Maldon, Essex, CM9 6WG at 10.00 a.m. on 18 March 2021. A notice convening the General Meeting is set out at the end of the Circular.

Shareholders will find enclosed with the Circular a Form of Proxy for use at the General Meeting.  Shareholders holding shares in CREST may appoint a proxy through a CREST Proxy Instruction.

Further details on proxy appointments and the action to be taken are set out in the Notice of General Meeting at the end of the Circular.

8.  Summary of the Resolution to be proposed at the General Meeting

The Resolution will be proposed at the General Meeting as a special resolution, the passing of which requires at least 75 per cent of the votes cast (whether in person or by proxy) to be in favour.

A summary of the Resolution is set out below:

(a)  To adopt new Articles of Association 

The Resolution proposes the adoption of new Articles of Association in order to implement the B Share Scheme.  The only changes made by the new Articles of Association will be:

· To remove the Company's memorandum of association.

Under the Act, with effect from 1 October 2009, the objects clause and all other provisions which are contained in a company's memorandum are deemed to be contained in the company's articles of association.  The Companies Act 2006 also states that, unless a company's articles provide otherwise, the company's objects are unrestricted. This removes the need for companies to have objects clauses.  For this reason, the Company is proposing to remove its objects clause, together with all other provisions of its memorandum which, by virtue of the Companies Act 2006, would otherwise be treated as forming part of the Articles of Association.  One of the effects of this will be to remove the statement currently in the Company's memorandum regarding limited liability, so the new Articles of Association therefore also contain an express statement regarding the limited liability of Shareholders.

The Act also abolished the requirement for a company to have an authorised share capital, and the Articles of Association reflect this. Directors will still be limited as to the number of shares they can at any time allot because allotment authority continues to be required under the Act, save in respect of employees' share schemes or shares issued for non-cash consideration.

· To delete certain historic provisions that refer to the old Companies Act 1985:

o  The Act abolished the requirement for a company to have an authorised share capital and the new Articles of Association reflect this, by deleting Article 3.  Directors will still be limited as to the number of shares they can at any time allot because allotment authority continues to be required under the Companies Act 2006, save in respect of employee share schemes.

o  Article 6 of the existing Articles of Association refers to provisions of the Companies Act 1985 that have since been superseded by the Act.  Article 6 merely states the law as set out in the Act and it will therefore be deleted in the new Articles of Association.

· To insert into the Articles of Association the rights and restrictions attaching to the B Shares, as a new Article 7, as set out in Part III of the Circular.

The proposed new Articles of Association are available on the Company's website at www.cmlmicroplc.com .

(b)  To approve the B Share Scheme

The Resolution proposes to authorise the Board to:

(i)  capitalise a sum not exceeding £8.6 million, standing to the credit of the Company's share premium account, to pay up in full the B Shares; and

(ii)  allot and issue B Shares up to an aggregate nominal amount of £8.6 million, on the basis of one B Share for each Ordinary Share (excluding Ordinary Shares held by the Company in treasury) held at the Record Time. This authority granted to the Directors will expire at the end of the next annual general meeting of the Company.

 

END

 

 

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