NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO AUSTRALIA, CANADA, HONG KONG, SINGAPORE, THE UNITED ARAB EMIRATES AND THE UNITED STATES AND ANY OTHER JURISDICTION TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND DOES NOT CONSTITUTE A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT. NOTHING HEREIN SHALL CONSTITUTE AN OFFERING OF ANY SECURITIES. NOTHING IN THIS ANNOUNCEMENT SHOULD BE INTERPRETED AS A TERM OR CONDITION OF THE RIGHTS ISSUE. ANY DECISION TO PURCHASE, SUBSCRIBE FOR, OTHERWISE ACQUIRE, SELL OR OTHERWISE DISPOSE OF ANY NIL PAID RIGHTS, FULLY PAID RIGHTS OR NEW ORDINARY SHARES MUST BE MADE ONLY ON THE BASIS OF THE INFORMATION CONTAINED IN THE PROSPECTUS ONCE PUBLISHED. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM THE REGISTERED OFFICE OF THE COMPANY AND ON ITS WEBSITE AT WWW.SYNTHOMER.COM/INVESTOR-RELATIONS/, SUBJECT TO APPLICABLE LAW AND REGULATIONS. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION. FOR IMMEDIATE RELEASE

7 September 2023

SYNTHOMER plc
stronger foundations to drive strategy delivery

Proposed 6 for 1 Rights Issue of 140,200,818 New Ordinary Shares at 197 pence per New Ordinary Share
and
Proposed Capital Reorganisation of 1 New Ordinary Share of 1 pence nominal value for every 20 Existing Ordinary Shares of 10 pence nominal value

Further to the announcement of its interim results for the for the six months ended 30 June 2023, Synthomer plc ("Synthomer" or the "Company", and together with its direct and indirect subsidiaries, the "Group"), a leading global producer of high-performance speciality chemical products, today announces that it proposes to raise gross proceeds of approximately £276 million by way of a rights issue (the "Rights Issue").

In conjunction with the Rights Issue, Synthomer is proposing to implement a capital reorganisation, comprising a sub-division and share consolidation, as described more fully below.

HIGHLIGHTS

·      The purpose of the Rights Issue is to support reduction in the Group's leverage and provide stronger foundations to focus on delivering its speciality solutions strategy

·      By increasing covenant headroom the Rights Issue will allow greater focus on strategic delivery and long-term value creation in addition to short term cash preservation, as well as a reduction of downside risks from near-term macroeconomic uncertainty for all stakeholders

·      At the Capital Markets Day in October 2022, Synthomer's new management team announced its "Focus, Strengthen, Grow" strategy to increase the speciality weighting of its portfolio and focus on higher growth end-markets

·      Over the last 18 months, however, Synthomer has navigated an extremely challenging market backdrop, during which time a temporary weakness in demand across most of its end-markets and geographies, exacerbated by supply chain disruptions and sustained higher raw material and energy costs, has affected financial performance

·      The Group's earnings have reduced temporarily but significantly, and combined with the debt taken on to finance the Eastman Acquisition announced in 2021 and completed in 2022 has resulted in the Group's leverage increasing significantly, to 5.5x covenant net debt, based on EBITDA as at 30 June 2023

·      Substantial and decisive management actions have been successfully executed to preserve cash and manage debt, including refinancing one debt facility and putting in place two other ones to strengthen its financial liquidity position, initiating a number of cash conservation measures, and identifying self-help cost-saving measures and disposals of non-core businesses, including the divestment of the Laminates, Films and Coated Fabrics Businesses which was completed in February 2023 and which generated total net proceeds of $269 million

·      The Board believes that the earnings power of the Group is more than double current levels (being LTM EBITDA of £158m) in the medium-term, based on a combination of executing its near-term management actions, end-market volume recovery, and delivery of the Group's strategy

·      Stronger foundations, supported by volume recovery, will underpin delivery of the Group's medium-term ambitions, including the medium-term targets set out last October: mid-single-digit growth in constant currency over the cycle, EBITDA margins above 15% and mid-teens return on invested capital

·      The net proceeds of the Rights Issue will initially be utilised to reduce borrowings under the Revolving Credit Facility and provide flexibility to deliver strategy and manage balance sheet leverage

o  The Rights Issue will result in a pro forma reduction in the covenant net debt based on EBITDA ratio from 5.5x to 3.8x as at 30 June 2023

·      On 5 September 2023, Synthomer entered into the RCF Amendment and Extension, which will extend the Revolving Credit Facility maturity date from 31 May 2025 to 31 July 2027 and amend total commitments to $400 million

·      Reducing leverage further towards the 1-2x target range by the end of 2024 remains a key priority, supported by further divestments and increased earnings power

·      The Company's largest shareholder, Kuala Lumpur Kepong Berhad Group (holding approximately 26.9% of the total voting rights in the Company as at 6 September 2023, being the latest practicable date prior to the date of this announcement), has irrevocably committed to take up its full entitlement pursuant to the Rights Issue and to vote in favour of the Resolutions

·      The Board believes the Rights Issue will allow the Company to focus its resources on strategic execution and long-term value creation for shareholders from its platforms of leading businesses in attractive growth segments

BACKGROUND TO AND REASONS FOR THE RIGHTS ISSUE

Synthomer's portfolio has evolved over a number of years through both organic growth and significant acquisitions, notably OMNOVA completed in 2020 and the Eastman Acquisition completed in 2022. Synthomer's new management team set out a refreshed strategy in October 2022 to deliver growth and substantial margin improvement. By increasing the speciality weighting of the Group's product portfolio, leveraging the Group's enhanced global footprint and reducing structural complexity within the Group, the Board believes that the Group will become a more focused, more resilient and higher quality speciality chemicals business in the medium-term. Management outlined plans to deploy a more focused capital and resource allocation framework. Portfolio rationalisation, which aims to increase the speciality weighting of the business, is already underway.

The Group today has many market-leading businesses in end-markets with attractive growth prospects, however, during the last 18 months, several factors have combined to increase significantly the Group's leverage. Market conditions have rapidly deteriorated, significantly, but temporarily, weakening recent Group performance. The COVID-19 pandemic initially boosted demand for NBR used in medical gloves but resulted in oversupply later. Ongoing Russian military action in Ukraine has caused economic volatility, impacting the Company's supply chain, costs, and energy prices. High inflation and interest rate rises slowed industrial activity and reduced demand in most of the Group's markets, worsened by competition from Asia. The Adhesive Solutions division faced raw material and reliability challenges, which are being addressed by the new divisional leadership team.

Deteriorating market conditions, which followed a major acquisition the Group announced in 2021 and completed in early 2022, predominantly financed from debt, significantly, but temporarily, weakened recent Group earnings performance.

To navigate the current challenging environment, the Group has taken substantial and decisive actions to preserve cash and manage debt. Financial liquidity has been improved by refinancing credit facilities and implementing cost-saving measures. As of 30 June 2023, Synthomer had over £400 million in available liquidity. A £150-200 million cash management programme has been initiated, which includes a reduction in capital expenditure, working capital optimisation and dividend suspension. Additionally, the Group identified £30 million in cost-saving measures, with £20 million to be realised in the second half of 2023. The strategic divestment of its non-core Laminates and Films and Coated Fabrics Businesses for $269 million completed in February 2023, which also lowered the Group's net debt.

Notwithstanding the successful execution of these mitigation actions, the Group's covenant leverage position remains elevated at 5.5x net debt, based on EBITDA as at 30 June 2023.

The Rights Issue will enable the Group to increase focus on strategic delivery and long-term value creation in addition to short-term cash preservation, as well as reducing the downside risks from near-term macroeconomic uncertainty for all stakeholders.

The Board believes that the medium-term earnings power of the Group is more than double current levels based on a combination of executing its near-term management actions, end-market volume recovery and strategic delivery. These will also drive Synthomer to become a more focused, more resilient and higher quality speciality chemicals platform in the medium-term, with the business continuing to target mid-single digit revenue growth, 15%+ EBITDA margin and mid-teens return on invested capital. The Group believes that with the stronger foundations achieved by the Rights Issue, supported by volume recovery, will underpin the delivery of the Group's strategy and medium-term ambitions, and thereby create long-term value.

KLK Intentions

The Company's largest shareholder, Kuala Lumpur Kepong Berhad Group ("KLK") (which holds approximately 26.9% of the total voting rights in the Company as at 6 September 2023, being the latest practicable date prior to the date of this announcement), has irrevocably committed to take up its full entitlement pursuant to the Rights Issue and to vote in favour of the Resolutions. This will result in KLK acquiring an aggregate of 37,676,850 New Ordinary Shares, representing approximately 26.9% of the New Ordinary Shares to be issued pursuant to the Rights Issue.

Directors' Intentions

Each Director who is able to participate in the Rights Issue and/or vote at the General Meeting has confirmed in writing their intention to take up their entitlement in full, or in part, to subscribe for New Ordinary Shares under the Rights Issue in respect of their respective holding of Existing Ordinary Shares and intends to vote in favour of the Resolutions.

Prospectus

A prospectus (the "Prospectus") setting out full details of the Rights Issue is expected to be published on Synthomer's website at www.synthomer.com/investor-relations/ later today.

The Prospectus will be submitted to the National Storage Mechanism and will be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism following publication.

The preceding summary should be read in conjunction with the full text of the following announcement, together with the Prospectus.

Unless the context otherwise requires, words and expressions defined in the Prospectus shall have the same meanings in this announcement.

Indicative summary timetable of principal events

The Rights Issue is fully underwritten (in respect of the Non-KLK Rights Issue Shares) by Goldman Sachs International, J.P. Morgan Securities plc and Morgan Stanley & Co. International plc acting as Joint Global Coordinators and Joint Bookrunners and Citi acting as Joint Bookrunner, and (in respect of the KLK Rights Issue Shares) by KLK. J.P. Morgan Cazenove is acting as sole sponsor to the Company.

The person responsible for making this announcement on behalf of Synthomer is Anant Prakash, Chief Counsel & Company Secretary.

For further information, please contact:

IMPORTANT NOTICES

This announcement has been issued by and is the sole responsibility of the Company. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may or should be placed by any person for any purpose whatsoever on the information contained in this announcement or on its accuracy, fairness or completeness. The information in this announcement is subject to change without notice.

This announcement is not a prospectus (or a prospectus equivalent document) but an advertisement for the purposes of the Prospectus Regulation Rules of the Financial Conduct Authority ("FCA"). Neither this announcement nor anything contained in it shall form the basis of, or be relied upon in conjunction with, any offer or commitment whatsoever in any jurisdiction. Investors should not acquire any Nil Paid Rights, Fully Paid Rights or New Ordinary Shares referred to in this announcement except on the basis of the information contained in the Prospectus to be published by the Company in connection with the Rights Issue.

A copy of the Prospectus will, following publication, be available from the registered office of the Company and on its website at www.synthomer.com/investor-relations/. Neither the content of the Company's website nor any website accessible by hyperlinks on the Company's website is incorporated in, or forms part of, this announcement. The Prospectus will provide further details of the New Ordinary Shares, the Nil Paid Rights and the Fully Paid Rights being offered pursuant to the Rights Issue.

This announcement (and the information contained herein) is not for release, publication or distribution, directly or indirectly, in whole or in part, in, into or within the United States of America, its territories and possessions, any State of the United States or the District of Columbia (collectively, the "United States"). This announcement is not an offer for sale or the solicitation of an offer to purchase securities in the United States. Securities may not be offered or sold in the United States absent registration under the US Securities Act of 1933, as amended (the "US Securities Act"), or an exemption therefrom. The Nil Paid Rights, the Fully Paid Rights and the New Ordinary Shares have not been and will not be registered under the US Securities Act or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, pledged, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, in or into the United States except pursuant to an applicable exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States or other jurisdiction. There will be no public offer of the Nil Paid Rights, the Fully Paid Rights or the New Ordinary Shares in the United States. Subject to certain limited exceptions, Provisional Allotment Letters have not been, and will not be, sent to, and Nil Paid Rights have not been, and will not be, credited to the CREST account of, any Qualifying Shareholder with a registered address in or that is known to be located in the United States, or to holders of the Synthomer's American depositary shares. None of the New Ordinary Shares, the Nil Paid Rights, the Fully Paid Rights or the Provisional Allotment Letters, this announcement or any other document connected with the Rights Issue has been or will be approved or disapproved by the United States Securities and Exchange Commission or by the securities commissions of any state or other jurisdiction of the United States or any other regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the offering of the New Ordinary Shares, the Nil Paid Rights or the Fully Paid Rights, or the accuracy or adequacy of the Provisional Allotment Letters, this announcement or any other document connected with the Rights Issue. Any representation to the contrary is a criminal offence in the United States.

This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, Nil Paid Rights, Fully Paid Rights or New Ordinary Shares or to take up any entitlements to Nil Paid Rights in any jurisdiction. No offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, Nil Paid Rights, Fully Paid Rights or New Ordinary Shares or to take up any entitlements to Nil Paid Rights will be made in any jurisdiction in which such an offer or solicitation is unlawful. The information contained in this announcement and the Prospectus is not for release, publication or distribution to persons in Australia, Canada, Hong Kong, Singapore, the United Arab Emirates and the United States, and any other jurisdiction where the extension or availability of the Rights Issue (and any other transaction contemplated thereby) would breach any applicable law or regulation, and, subject to certain exceptions, should not be distributed, forwarded to or transmitted in or into any jurisdiction, where to do so might constitute a violation of local securities laws or regulations.

The distribution of this announcement, the Prospectus, the Provisional Allotment Letter and the offering or transfer of Nil Paid Rights, Fully Paid Rights or New Ordinary Shares into jurisdictions other than the United Kingdom may be restricted by law, and, therefore, persons into whose possession this announcement, the Prospectus, the Provisional Allotment Letter and/or any accompanying documents comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdiction. In particular, subject to certain exceptions, this announcement, the Prospectus (once published) and the Provisional Allotment Letters (once printed) should not be distributed, forwarded to or transmitted in or into Australia, Canada, Hong Kong, Singapore, the United Arab Emirates and the United States, or any other jurisdiction where the extension or availability of the Rights Issue (and any other transaction contemplated thereby) would breach any applicable law or regulation.

This announcement does not constitute a recommendation concerning any investor's options with respect to the Rights Issue. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each shareholder or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

NOTICE TO ALL INVESTORS

Each of Goldman Sachs International ("Goldman Sachs"), J.P. Morgan Securities plc (which conducts its UK investment banking business as J.P. Morgan Cazenove) ("J.P. Morgan Cazenove"), Morgan Stanley & Co. International plc ("Morgan Stanley") and Citigroup Global Markets Limited ("Citi") is authorised by the Prudential Regulation Authority and regulated by the FCA and the Prudential Regulation Authority in the United Kingdom. Each of Goldman Sachs, J.P. Morgan Cazenove, Morgan Stanley and Citi is acting exclusively for Synthomer plc and no one else in connection with this announcement and the Rights Issue will not be responsible to anyone other than Synthomer plc for providing the protections afforded to its clients nor for providing advice to any person in relation to the Rights Issue or any matters referred to in this announcement.

None of Goldman Sachs, J.P. Morgan Cazenove, Morgan Stanley or Citi, nor any of their respective subsidiaries, branches or affiliates, nor any of their respective directors, officers or employees owes or accepts any duty, liability or responsibility whatsoever (whether direct or indirect, whether in contract, in tort, under statute or otherwise) to any person who is not a client of Goldman Sachs, J.P. Morgan Cazenove, Morgan Stanley or Citi in connection with the Rights Issue, this announcement, any statement contained herein, or otherwise.

 INFORMATION TO DISTRIBUTORS

Solely for the purposes of the product governance requirements of Chapter 3 of the FCA Handbook Product Intervention and Product Governance Sourcebook (the "UK Product Governance Requirements"), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any "manufacturer" (for the purposes of the UK Product Governance Requirements) may otherwise have with respect thereto, the Nil Paid Rights, Fully Paid Rights and the New Ordinary Shares have been subject to a product approval process, which has determined that they each are: (a) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in Chapter 3 of the FCA Handbook Conduct of Business Sourcebook; and (b) eligible for distribution through all permitted distribution channels (the "Target Market Assessment"). Notwithstanding the Target Market Assessment, "distributors" (for the purposes of the UK Product Governance Requirements) should note that: the price of the Nil Paid Rights, Fully Paid Rights and the New Ordinary Shares may decline and investors could lose all or part of their investment; the Nil Paid Rights, Fully Paid Rights and the New Ordinary Shares offer no guaranteed income and no capital protection; and an investment in the Nil Paid Rights, Fully Paid Rights and the New Ordinary Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. The Target Market Assessment is without prejudice to any contractual, legal or regulatory selling restrictions in relation to the Rights Issue. Furthermore, it is noted that, notwithstanding the Target Market Assessment, the Underwriters will only procure investors who meet the criteria of professional clients and eligible counterparties.

For the avoidance of doubt, the Target Market Assessment does not constitute: (i) an assessment of suitability or appropriateness for the purposes of Chapters 9A or 10A, respectively, of the FCA Handbook Conduct of Business Sourcebook; or (ii) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to, the Nil Paid Rights, Fully Paid Rights and the New Ordinary Shares. Each distributor is responsible for undertaking its own target market assessment in respect of the Nil Paid Rights, Fully Paid Rights and the New Ordinary Shares and determining appropriate distribution channels.

FORWARD-LOOKING STATEMENTS

This announcement contains forward-looking statements, including with respect to financial information, that are based on current expectations or beliefs, as well as assumptions about future events. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. In some cases, forward-looking statements use words such as "anticipate", "target", "expect", "estimate", "intend", "plan", "goal", "believe", "will", "may", "should", "would", "could", "is confident", or other words of similar meaning.

None of the Company, its officers, advisers or any other person gives any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur, in part or in whole.

No undue reliance should be placed on any such statements because they speak only as at the date of this announcement and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other factors that could cause actual results, and the Company's plans and objectives, to differ materially from those expressed or implied in the forward-looking statements. No representation or warranty is made that any forward-looking statement will come to pass. You are advised to read the Prospectus when published and the information incorporated by reference therein in their entirety, and, in particular, the section of the Prospectus headed "Risk Factors", for a further discussion of the factors that could affect the Group's future performance and the industry in which it operates. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements, including statements regarding prospective financial information, in this announcement may not occur. In addition, even if the Group's actual results of operations, financial condition and the development of the business sectors in which it operates are consistent with the forward-looking statements contained in the Prospectus, those results or developments may not be indicative of results or developments in subsequent periods. These statements are not fact and should not be relied upon as being necessarily indicative of future results, and readers of this announcement are cautioned not to place undue reliance on the forward-looking statements, including those regarding prospective financial information.

No statement in this announcement is intended as a profit forecast or estimate for any period, and no statement in this announcement should be interpreted to mean that underlying operating profit for the current or future financial years would necessarily be above a minimum level, or match or exceed the historical published operating profit or set a minimum level of operating profit, nor that earnings or earnings per share or dividend per share for the Company for the current or future financial years would necessarily match or exceed the historical published earnings or earnings per share or dividend per share for the Company.

Neither the Company nor any of the Underwriters are under any obligation to update or revise publicly any forward-looking statement contained within this announcement, whether as a result of new information, future events or otherwise, other than in accordance with their legal or regulatory obligations (including, for the avoidance of doubt, the Prospectus Regulation Rules, the Listing Rules, MAR, FSMA and Disclosure Guidance and Transparency Rules). Additionally, statements of the intentions or beliefs of the board of directors of the Company reflect the present intentions and beliefs of the board of directors of the Company as at the date of this announcement and may be subject to change as the composition of the board of directors of the Company alters, or as circumstances require.

Synthomer PLC

6 FOR 1 FULLY UNDERWRITTEN RIGHTS ISSUE TO RAISE GROSS PROCEEDS OF APPROXIMATELY £276 MILLION

1.         INTRODUCTION TO THE RIGHTS ISSUE

Synthomer announces today that it proposes to raise gross proceeds of approximately £276 million through a Rights Issue.

Pursuant to the Rights Issue and taking into account the Capital Reorganisation, Synthomer is proposing to offer 6 New Ordinary Shares for every 1 Consolidated Ordinary Share held on the Record Date.

This is equivalent to 6 New Ordinary Shares for every 20 Existing Ordinary Shares, based on a Consolidation Ratio of 1 Consolidated Ordinary Share in substitution for every 20 Existing Ordinary Shares.

Taking into account the Capital Reorganisation, the Rights Issue Price represents a discount of (83.8%) to the Consolidated Closing Price on 6 September 2023 (the last Business Day prior to the date of this announcement), and a discount of (42.5%) to the theoretical ex-rights price of 343 pence per Existing Ordinary Share calculated by reference to the Consolidated Closing Price on the same basis.

The Rights Issue is fully underwritten (in respect of the Non-KLK Rights Issue Shares) by Goldman Sachs International, J.P. Morgan Securities plc, Morgan Stanley & Co. International plc and Citigroup Global Markets Limited, and (in respect of the KLK Rights Issue Shares) by KLK.

2.         BACKGROUND TO THE RIGHTS ISSUE

2.1       SYNTHOMER'S STRATEGY AND STRENGTHS

Strengths

The Directors believe that the following are among the Group's key competitive strengths:

(i) Global speciality chemicals company with leading positions in its markets

Synthomer is a global speciality chemicals company which is one of the world's leading suppliers of water-based polymers, with a number of its product types holding market-leading positions globally, as well as more specifically in Europe, the United States and the Middle East.

As a speciality chemicals producer, the Group channels its technical expertise, customer and end-market knowledge to help customers develop these and other end products. The Group's long-term customer partners benefit from the Group's knowledge and understanding of their technical needs, the Group's customer service and R&D, which has allowed the Group to develop innovative solutions which help its customers' businesses.

As of 1 January 2023, the Group reorganised its divisional structure along three new, market focused divisions, to better serve the Group's end-market customers, comprised of: (i) Coatings & Construction Solutions, (ii) Adhesive Solutions and (iii) Health & Protection and Performance Materials. The new divisions and the production areas and markets they focus on and serve will be described in greater detail in the Prospectus.

The Coatings & Construction Solutions and Adhesive Solutions divisions form the core strategic growth areas of the business. The Health & Protection and Performance Materials division includes the NBR base business as well as the business units which were identified as non-core as part of the strategic review in 2022.

The Group's new Coatings & Construction Solutions division brings together a range of the Group's businesses focused on the coatings and construction end-markets, reflecting the Group's strategy to strengthen its position in these markets and to improve its portfolio through sustainable innovation and customer value propositions. It is the Group's largest division in terms of both revenue and EBITDA contribution. The Group is one of the leading suppliers in Europe across each of the Group's key coatings and construction products.

The Group's Adhesive Solutions division has one of the broadest offerings of adhesive solutions products in the industry, with leading manufacturing positions in EMEA and the Americas across all tackifier product groups.

The Group's Health & Protection and Performance Materials division includes products that enhance protection and performance in a wide range of industries. Globally, the Group is the second largest producer of NBR latex by volume (which the Group's customers use in the manufacturing of medical gloves).  

(ii) Attractive end-markets with strong long-term growth outlook

The Group's portfolio of products serves a wide range of geographies and end-markets. Within its core strategic growth markets, served by its speciality businesses, there are significant R&D capabilities and a high level of technical expertise required to develop the chemical products the Group produces.

The Group's R&D is driven largely by its ability to apply technical know-how, rather than on pure research, hence making it difficult for new and less established entrants to compete in these markets and across these product types. Moreover, the Group believes that it tends to not only compete within these markets on product price but that it also competes because of the quality of technical services that the Group provides to customers alongside the products themselves. The Group's new product development, innovation, technical services provision and tailored solutions add value to customers' end products and help differentiate the Group from other competing companies. The Group also seeks to anticipate market trends and customer requirements as it believes this will continue to enable it to deliver improved products with better margins and product differentiation among customers. Overall, this allows the Group to maintain margins and protect against low-cost market entrants.

In its base businesses, principally comprising the NBR business, the Group believes it is able to leverage its market leading position and will, by strengthening cost competitiveness and driving customer intimacy, be able to harness the long-term demand growth expected in this market.

The Group believes its presence in the end-markets for each of the Group's divisions is supported by favourable market dynamics. For example, the Group's speciality businesses within the Coatings & Construction Solutions and Adhesive Solutions divisions were successful in passing through substantial increases in raw material and energy costs in 2022 in most of their markets, demonstrating the resilience of these speciality businesses over base businesses. Both divisions sustained EBITDA margins of 12% for the year ended 31 December 2022, despite unit material costs reaching record levels in some cases. The Group's focus on more differentiated products and robust pricing management contributed to solid performance in most of the Group's major businesses in 2022, particularly in the US.

The Group's continuing revenue by division for the 12 months ending 30 June 2023 were: Coatings & Construction Solutions (40.3%), Adhesive Solutions (29.5%), Health & Protection and Performance Materials (30.2%).

The Group's diversified and customer focused approach enables the Group to address changing conditions in the end-markets of each of the Group's divisions:

Coatings & Construction Solutions

Both coatings and construction end-markets have historically been driven by GDP+ growth, and require specialised, highly differentiated products with sustainability benefits. The global market for coatings and construction is estimated to grow at a CAGR of approximately 4% per annum from 2020 to 2025.

·       Coatings: Increasing regulatory requirements and the Group's customers' ambitions to use more sustainable products continues to deliver growth opportunities for water-based coatings technology, in which the Group is a leader amongst its peers.

·       Construction: The demand for the Group's portfolio of construction products has been driven by favourable megatrends including accelerated urbanisation and increased chemical usage due to the increased professionalism of the construction business. The Group's capabilities in innovation give the Group the potential to grow its presence in these markets and the Group has a strong innovation pipeline across the construction end-market.

·       Energy Solutions: As a supplier of speciality wellbore chemicals, the Group offers a wide range of solutions including fluid loss control and sealing, emulsifiers, lubricants and rheological modifiers for drilling fluids. The Group also offers flow control and properties enhancement in cementing operations, gel additives for hydraulic fracturing fluids and strengthening agents. The Group designs polymers that meet conventional and unconventional drilling and completion requirements.

·       Consumer Materials: This part of the Group's business comprises fibre bonding and SBR latex for foam applications.

Adhesive Solutions

The Group's Adhesive Solutions division serves growth end-markets such as tapes and labels, packaging, and tyres which are underpinned by sustainability trends and with strong revenue synergies with the Group's other divisions. The overall market demand for adhesive solutions is estimated to grow at a CAGR of approximately 3-4% per annum from 2022 to 2025.

Across the Adhesive Solutions division, the Group has more than 300 customers and sells products in more than 600 locations around the world. The Group has strong relationships with many of its customers and certain end-users, with an average customer relationship length of approximately 15 years and in many cases much longer than that. This helps the Group understand the needs of customers and develop a uniquely market focused innovation pipeline. Within Adhesive Solutions, the Group is continuing to focus on improving asset and supply chain reliability, broadening the Group's raw material supply and reducing working capital and cost levels. The Group is also exploring investment opportunities, such as through the recently committed expansion in its capacity to deliver speciality APOs.

Health & Protection and Performance Materials

Long-term demand for health and protection products is an important megatrend underpinning the Group's strategy in Health & Protection. The Group is a world leader in NBR, which the Group's customers use for glove-dipping, and the leading NBR producer, by volume, in Europe, which the Group's customers use in a wide range of end-markets. The Group's NBR products serve a fast-growing market which is expected to grow at a rate of 6%+ during the coming years The Group has responded to these market trends through significant R&D investment to drive innovation of market leading products with strong intellectual property protection, investment in new low-cost capacity and efficient capacity utilisation.

In the Health & Protection and Performance Materials division, the Group continues to work towards strengthening the overall cost competitiveness of the Group's Malaysian supply chain and to enhancing customer intimacy and the Group's share of demand globally.

The price of NBR has been volatile over the past three years. Initially, increased demand for medical gloves drove high prices during the COVID-19 pandemic, which were then followed more recently by historical lows, as a result of destocking by the Group's end-users and their customers. However, underlying end customer demand for medical gloves remains similar to pre-COVID-19 pandemic levels and the market is expected to continue to grow in the medium-term (including as a result of urbanisation and healthcare in emerging markets), while the impact of destocking is expected to abate as end-users and customers make use of their existing inventories at pre-COVID-19 rates.

(iii) Global footprint with balanced geographic exposure and strong customer relationships

As at 30 June 2023, Synthomer has 36 sites (taking account of announced closures) across 17 countries in the Americas, EMEA and Asia. It has a balanced geographic exposure with 48% of revenues for the year ended 31 December 2022 generated in Europe, 19% in Asia, 27% in North America, and 6% in the rest of the world.

The Group served approximately 6,000 customers across the world in the year ended 31 December 2022, including many global blue-chip companies. The Group believes it has strong and long-term customer relationships. The Group's customer base is widespread and well balanced across geographies and end-markets. For the year ended 31 December 2022, the Group's largest customer represented approximately 2% of total revenues while revenues from the Group's twenty largest customers represented approximately 22% of total revenues. Some examples of key customers include: 1) with respect to Coatings & Construction Solutions - PPG Industries, Inc., Sherwin Williams Company, Akzo Nobel N.V., Sika AG, Proctor & Gamble Company and Haliburton Company; 2) with respect to Adhesive Solutions - Henkel Ltd, HB Fuller Company, Shurtape Technologies, LLC, Pirelli & C. S.p.A. and Continental AG; and 3) with respect to Health & Protection and Performance Materials - Top Glove Corporation Bhd, Sappi Limited, Honeywell International, Inc., Lanxess AG and BASF SE.

(iv) Impressive track record and pipeline of new product development through customer focused R&D

The Group has an impressive track record and pipeline of new product development through customer focused R&D which supports the Group's growth potential. The Group maintains four Centres of Excellence as part of an innovation network comprising sites across the world. The Group's four Centres of Excellence include sites in Germany and the US, as well as the new industry leading Asia Innovation Centre established in 2019. For the year ended 31 December 2022, the Group invested £33.7 million in R&D and launched 18 new products. These investments in R&D continue to have a significant effect on the Group's revenues, with 20% of the Group's sales volume for the year ended 31 December 2022 derived from products that the Group developed in the previous five years or with patent protection. Since 2019, the Group has filed patent applications on 39 new inventions and registered 16 new patents. The Group is committed to quantifying, improving and communicating the sustainability of all the Group's activities through Global Reporting Initiative reporting.

(v) Sustainability embedded in products and a tailwind for future growth

Sustainability is a key trend that will drive demand from Synthomer's customers. Regulation is driving the requirement for cleaner, more environmentally friendly solutions, and for renewable raw materials. The Group's portfolio is positioned to help drive circular solutions (for example, recyclable packaging) and the Group's high-performance water-based polymers can displace solvent-borne polymers, leading to further demand for the Group's products. As a market leader in water-based and emission reducing polymers, this creates a huge opportunity for Synthomer. The Group is targeting 60% of its new products to have sustainability benefits by 2030.

Synthomer has a long track record of helping customers towards their own sustainability goals. The Group's emission-reducing solutions and lower-carbon intensity operations all make a positive contribution towards customers' Scope 3 carbon footprints. Synthomer's capabilities and products can help customers in multiple areas, whether that is replacing solvent-based coatings with water-based alternatives, developing water-based polymers and re-dispersible powders for construction customers, or innovating bio-based, low-carbon footprint and circular solutions for adhesives.

(vi) Deliverable medium-term targets supporting shareholder value creation

At Synthomer's Capital Markets Day in October 2022, the Group laid out financial targets which will drive sustained value for shareholders. These include:

·       Organic revenue growth: Mid-single-digit through the cycle, supported by innovation, sustainability and end-market focus;

·       EBITDA margins: 15%+ over the medium-term, delivery of this will be underpinned by a combination of innovation, a higher mix of speciality products, cost leadership and operational excellence; and

·    Return on invested capital: Mid-teens over the medium-term, supported by stronger organic growth, higher margins and the Company's more focused capital allocation policy.

Strategy

The Group's growth strategy is driven by global megatrends and the Group is focused on driving sustainable growth through business efficiency, R&D and capital investment projects.

The Group's strategy is composed of the following key pillars:

(i) Organic growth in attractive end-markets

The Group's core strategic growth markets, comprising coatings, construction, adhesives, and health and protection, each benefit from robust GDP+ growth dynamics. These markets are driven by accelerating global megatrends including accelerating urbanisation, demographic and social change, climate change and sustainability and shifting economic power. In October 2022, as part of its new strategy, the Group announced a new divisional organisational structure aligning the Group's organisation with its core markets. This alignment of operational segments and end-markets is expected to assist the Group in anticipating and meeting customers' needs at pace and deliver better products with improved margin and product differentiation.

Innovation and sustainable products, such as water-based solutions displacing solvents in the construction, coatings and adhesives markets, are key drivers of growth across the Group's core markets and developing products through focused customer-centric R&D is a key component of the Group's strategy. For the year ended 31 December 2022, 20% of the Group's sales volumes derived from products that the Group launched in the previous five years. In the year ended 31 December 2022, the Group launched 18 new products across multiple application areas.

(ii) Rigorous and consistent portfolio management to build focused, leading positions

As part of focusing the business, the Group intends to increase the weighting of speciality chemicals versus base chemicals in the Group's portfolio, create a more balanced geographic exposure, streamline operational footprint and apply more rigorous capital allocation across the Group's businesses.

The Group's strategic review in 2022 identified its core markets, which combine the most attractive growth prospects and where the Group is most differentiated. The Group will focus its resources on these segments and the new divisional structure enables differentiated steering in the allocation of financial and operational resources.

In addition, the Group identified a number of non-core businesses which have limited synergies with the rest of the Group's identified growth platforms and which are less attractive areas for the Group to deploy its capital. In line with its strategy, on 28 February 2023, the Group announced that it completed the disposal of its Laminates, Films and Coated Fabrics Businesses, which were identified as non-core businesses through the strategic review. Moving forward, the Group will continue to assess its strategic position in terms of disposing of non-core businesses to rationalise the Group's portfolio, reduce complexity and increase the Group's focus on attractive end-markets and speciality products.

Over the medium-term, the Group's strategic plan will involve targeted M&A to grow the business once leverage is restored to the guided range. The Group will continue to review speciality chemicals acquisition opportunities through both bolt-on acquisitions and more transformational step-change strategic transactions in adjacent chemistries and geographies, if the Group identifies appropriate acquisition targets and believes that the Group has sufficient balance sheet flexibility to do so at that time.

(iii) Operational and commercial excellence in how the Group runs the business

The Group is focused on continuous improvement across its operations to advance production efficiency, sales effectiveness and functional excellence while remaining committed to the Group's sustainability standards. To achieve these aims, the Group seeks to identify good practice in all areas of the business and ensure that relevant learnings are disseminated across the business.

The Group aims to drive profitability through maximising the utilisation of the Group's assets. To achieve this, the Group focuses on identifying the root causes of production bottlenecks and finding innovative solutions. For example, at the Sant Albano site in Italy, the Group has reduced water extraction by 30% by reconfiguring the borehole management process.

For decades, the Group has been a world leading supplier of sustainable water-based polymers that avoid the use of solvents and keep harmful volatile organic compounds out of the atmosphere. The Group has also become a global innovator in driving the use of water-based technology. Over the last few years, the Group has worked hard to improve its ESG credentials while remaining committed to driving efficiency. This can be seen with the launch of the Group's 2030 Vision, which sets ESG targets for the Group and a roadmap to achieve them, as well as the creation of the Group's Executive Sustainability Steering Committee last year.

(iv) Differentiated steering to address the differentiated positions across the Group's portfolio

The Group's new divisional structure enables differentiated steering of the allocation of financial and operational resources, including capital allocation. The Group intends to allocate approximately 75% of capital to the Coatings & Construction Solutions and Adhesive Solutions divisions and approximately 25% to the Health & Protection and Performance Materials division over the medium-term.

(v) Diversity, equity and inclusion and holistic people development

Across all businesses in the Group, the Group's employees drive strategy and deliver for all stakeholders and the Group continues to develop them to be prepared for the opportunities and challenges that lie ahead. To support this, the Group is implementing four strategic employee priorities: (i) promoting holistic people development; (ii) strengthening its leadership capability; (iii) embracing Synthomer excellence; and (iv) establishing an innovative workplace culture.

2.2       CHALLENGING MARKET BACKDROP AND OTHER FACTORS HAVE SIGNIFICANTLY, BUT ONLY TEMPORARILY, WEAKENED RECENT PERFORMANCE

Over the last 18 months, Synthomer has navigated an extremely challenging market backdrop, during which time a temporary weakness in demand across most of its end-markets and geographies have significantly affected financial performance. In 2020 and 2021, the COVID-19 pandemic created exceptional demand for NBR, used in the manufacture of medical gloves. Since then, as a result of the elevated inventory levels of medical gloves and new capacity added during the COVID-19 pandemic, there has been a prolonged and unprecedented period of oversupply, resulting in far weaker levels of demand for NBR. The Russian military action in Ukraine contributed further to economic volatility, with the Company impacted by supply chain disruptions, sustained higher raw material costs and sharp rises in the cost of energy. More recently, the high inflation environment and resultant interest rate rises have slowed industrial activity and led to subdued levels of demand across most of the Group's end-markets, exacerbated by destocking and increased competition, including from Asia, in some of Synthomer's base chemical product ranges. Volumes have also been adversely impacted in the Adhesive Solutions division by constrained access to raw materials and site reliability challenges, which the Company is in the process of resolving under a new divisional leadership team.

As a result of these factors, the Group's earnings have reduced temporarily but significantly, and combined with the debt taken on to finance the Eastman Acquisition has resulted in the Group's leverage increasing significantly, to 5.5x covenant net debt, based on EBITDA as at 30 June 2023.

2.3       SUBSTANTIAL AND DECISIVE MANAGEMENT ACTIONS SUCCESSFULLY EXECUTED TO PRESERVE CASH AND MANAGE DEBT IN RESPONSE

The management team and the Board have taken substantial and decisive actions to strengthen the business and the balance sheet to manage through this challenging period. Synthomer strengthened its financial liquidity position, refinancing the Revolving Credit Facility and putting in place the UKEF Facilities and the Factoring Facilities. The Group extended covenant headroom in October 2022 and also as part of the Revolving Credit Facility refinancing in March 2023. As at 30 June 2023, Synthomer had committed and available liquidity of more than £400 million. The Company also initiated a £150-200 million cash management programme, which included a reduction and re-prioritisation of capital expenditure, including the downsizing or deferral of a number of growth opportunities, working capital optimisation and a suspension of the dividend. The Group also identified approximately £30 million in 'self-help' cost-saving measures on a run-rate basis in 2022, with approximately £20 million remaining to be delivered during the second half of 2023, including actions within the Adhesive Solutions division. In line with its portfolio rationalisation strategy, the Company also completed the disposal of the Laminates, Films and Coated Fabrics Businesses in February 2023, generating total net proceeds of $269 million.

On 5 September 2023, Synthomer entered into the RCF Amendment and Extension to the Revolving Credit Facility with the RCF Lenders, which is subject to and conditional upon, among other things, the Company's receipt of the proceeds from the Rights Issue. If effective, the RCF Amendment and Extension will, amongst other matters, reduce the total commitments under the Revolving Credit Facility from $480 million to $400 million, and extend the maturity date from 31 May 2025 to 31 July 2027.

2.4       EARNINGS POWER OF THE GROUP IS MORE THAN DOUBLE CURRENT LEVELS IN THE MEDIUM-TERM

The Group generated £158 million of EBITDA in the 12 months to June 2023 from continuing operations. This reflects reduced industrial demand, destocking, medical glove oversupply and the reliability issues relating to the Adhesive Resins Business. The Board believes that the earnings power of the Group is more than double current levels based on a combination of executing its near-term management actions, end-market volume recovery, and delivery of the Group's strategy. Near-term actions include approximately £20 million in self-help cost savings, whilst end-market recovery has the potential to generate more than £100 million in additional EBITDA across the business, as outlined below.

While Coatings & Construction Solutions has seen encouraging progress in the first half of 2023, led by the speciality products within its portfolio, the Group expects further recovery potential. The division generated average EBITDA of approximately £110 million per annum in 2021 and 2022. This compares to LTM EBITDA of £96 million for the period ending 30 June 2023. The Group anticipates a full recovery as demand in the division's end-markets recovers and the destocking cycle abates.

The Adhesive Resins Business acquired from Eastman, which makes up the majority of the Adhesive Solutions division, generated EBITDA of approximately £71 million in the 12 months to June 2021. Factoring in a further approximately £24 million of EBITDA from legacy Synthomer businesses that now form part of the division, the Adhesive Solutions division generated EBITDA of approximately £95 million in LTM June 2021, before the identified run-rate acquisition costs synergies of approximately £23 million per annum (approximately £118 million in total). This compares to LTM EBITDA of £48 million for the period ending 30 June 2023. Synthomer is highly confident that the performance of the acquired Eastman business will improve towards these levels, as demand recovers and destocking ends, supported by the Group's performance improvement plan and other self-help actions (including the executed synergy actions). The Group also continues to make investments in capacity and other growth opportunities in certain key speciality products, such as the recently announced expansion of speciality amorphous polyolefins in North America, which are also expected to drive growth.

Synthomer's NBR business, which is part of the Health & Protection and Performance Materials division, operates in a market where underlying end-use volume growth rates are consistent with pre-COVID-19 pandemic levels, supported by rising hygiene standards and increasing access to healthcare in emerging markets where the current medical glove consumption base is low. However, production levels have been exceptionally low due to elevated stock built up during the COVID-19 pandemic, as well oversupply in the market as a result of new capacity introduced in response to unprecedented demand. Prior to the COVID-19 pandemic, the NBR business in 2018 and 2019 generated average EBITDA of approximately £70 million per annum compared to LTM EBITDA of £5 million for the period ending 30 June 2023. The Group has announced plans to reduce its own NBR capacity (by approximately 20%) by consolidating production and closing a legacy plant and notes that other participants in the market have also begun to adjust capacity in response to current market conditions, with the current oversupply situation therefore expected to resolve over time. Synthomer is confident in recovery over time towards levels achieved pre-COVID-19 pandemic as the medical glove oversupply normalises, demand growth continues supported by the hygiene megatrend and the supply side adjust to post-COVID-19 pandemic conditions.

While visibility remains low, the Board believes Group volumes reached a cyclical trough in the first half of 2023, and the Board does not expect further demand deterioration in key end-markets in the second half of the year.

3.         STRONGER FOUNDATIONS, SUPPORTED BY VOLUME RECOVERY, WILL UNDERPIN DELIVERY OF THE GROUP'S MEDIUM-TERM AMBITIONS

The Board believes that a reduction in Synthomer's current elevated leverage position will enable the Group to increase focus on strategic execution and long-term value creation in addition to short-term cash preservation as well as reducing the downside risks from near-term macroeconomic uncertainty for all stakeholders. This will also ensure that the Company is well-positioned to deliver its strategy and medium-term ambitions for profitable growth as demand recovers. It is accordingly announcing a fully underwritten rights issue to raise total proceeds of £276 million, with an irrevocable commitment received from KLK to subscribe for their pro-rata entitlements in full. This will increase covenant headroom and strategic and financial flexibility, resulting in a pro forma reduction in the covenant net debt based on EBITDA ratio from 5.5x to 3.8x as at 30 June 2023. Reducing leverage further towards the 1-2x target range by the end of 2024 remains a key priority. This will be supported by further divestment proceeds and earnings power more than doubling over the medium-term through continued cost control, volume recovery and strategic delivery.

In summary, the Board believes the Rights Issue will allow the Company to focus its resources on strategic execution and long-term value creation for shareholders from its platforms of leading businesses in attractive growth segments.

4.         USE OF PROCEEDS

The Rights Issue is expected to raise approximately £276 million in gross proceeds and approximately £261 million in net proceeds (after deduction of estimated commissions, fees and expenses). The net proceeds will initially be utilised to reduce borrowings under the Revolving Credit Facility and provide flexibility to deliver the Group's strategy and manage balance sheet leverage. The Rights Issue will result in a pro forma reduction in the covenant net debt based on EBITDA ratio from 5.5x to 3.8x as at 30 June 2023.

5.         CURRENT TRADING AND OUTLOOK

Trading in July and August was similar to the 2023 Half Year Results, with limited visibility and subdued volumes given challenging macro conditions. The Group's outlook for the remainder of 2023 provided in July is reiterated: the Board does not anticipate a material recovery in customer demand before the end of the current year. However, the Board anticipates approximately £20 million in self-help measures to be delivered mainly in the second half of 2023. Overall, the Group remains confident of making sequential progress in the second half relative to the first.

The Group continues to take decisive action to strengthen its business so that it is positioned for profitable growth when demand does begin to recover. As stated elsewhere, through the Group's near-term actions, end market volume recovery (which alone has the potential to improve Group EBITDA by more than £100 million over time) and execution of the strategy, the Board believes the Group's medium-term earnings power is more than double the £158 million of continuing EBITDA generated over the year to the end of June 2023. Reducing leverage further toward the 1-2x target range remains a key priority. Overall, the Board remains confident in the Group's ability to deliver the medium-term targets set out last October, which were mid-single-digit growth in constant currency over the cycle, EBITDA margins above 15% and mid-teens return on invested capital.

6.         RISK FACTORS AND FURTHER INFORMATION

Shareholders should consider fully and carefully the risk factors associated with Synthomer, as set out in the Prospectus.

Shareholders should read the whole of the Prospectus and not rely solely on the information set out in this announcement.

7.         DIVIDENDS AND DIVIDEND POLICY

In October 2022, as part of a covenant amendment process with the Group's banking syndicates to give the Group increased headroom, Synthomer suspended dividend payments, including the interim dividend of 4p announced on 12 October 2022 that was due to be paid in November 2022.

Whilst the Company will continue to prioritise reducing leverage towards its 1-2x target range by the end of 2024 and execution of strategy, including sustainability commitments and predominantly organic-led growth in the near-term, it recognises the importance of dividends for Shareholders and therefore will look to reinstate a dividend when appropriate to do so.

8.         CAPITAL REORGANISATION

The Capital Reorganisation, comprised of the Sub-division and the Share Consolidation, is proposed in order to achieve a higher market price for the Consolidated Ordinary Shares and, accordingly, a more appropriate Rights Issue Price.

Under the Capital Reorganisation:

·      each Existing Ordinary Share of 10 pence nominal value will be subdivided and converted into one Intermediate Share of 0.05 pence nominal value and 1 Deferred Share of 9.95 pence nominal value; and

·      immediately thereafter, every 20 Intermediate Shares of 0.05 pence nominal value will be consolidated into 1 Consolidated Ordinary Share of 1 pence nominal value.

The Existing Ordinary Shares will be consolidated such that Shareholders will receive Consolidated Ordinary Shares on the Consolidation Ratio of 1 Consolidated Ordinary Share in substitution for every 20 Existing Ordinary Shares. Following Consolidation, the Consolidated Ordinary Shares will have the same rights as the Existing Ordinary Shares, including voting, dividend and other rights.

The purpose of the Deferred Shares is solely to facilitate the reduction in the nominal value of the Shares to 1 pence. The Deferred Shares will be effectively valueless as they will carry very limited rights, including no voting or dividend rights. The Company has the right to acquire and then cancel the Deferred Shares for an aggregate price of £0.01 and intends to exercise this right immediately following the creation of the Deferred Shares. Further information on the Deferred Shares will be set out in the Prospectus.

Immediately following the implementation of the Capital Reorganisation, the market price of a Consolidated Ordinary Share should be approximately equal to a multiple of 20 times the market price of an Existing Ordinary Share immediately beforehand. The Consolidation Ratio used for the Share Consolidation has been set by the Directors after consultation with the Underwriters. Existing Shareholders will own the same proportion of the Company as they did immediately prior to the implementation of the Share Consolidation, subject only to fractional rounding.

The Closing Price of each Existing Ordinary Share on 6 September 2023 (being the last Business Day prior to the date of the Prospectus) was 60.8 pence (as derived from the Daily Official List of London Stock Exchange plc). In accordance with the Consolidation Ratio, the Consolidated Closing Price of each Consolidated Ordinary Share would have been 1,216 pence on that date.

The Capital Reorganisation, if approved by Shareholders, will be made by reference to holdings of Existing Ordinary Shares on the Company's register of members as at 6.00 p.m. on 25 September 2023 (or such other time or date as the Directors may determine). Holdings of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue. Fractions of New Ordinary Shares will not be allotted to Qualifying Shareholders and fractional entitlements will be rounded down to the nearest whole number of New Ordinary Shares.

Any fractional entitlements to Consolidated Ordinary Shares which arise will be aggregated into whole Consolidated Ordinary Shares and sold in the market on behalf of the relevant Shareholders. The total proceeds of the sale (net of related expenses (including any applicable brokerage fees and commissions and amounts in respect of related irrecoverable VAT)) will be paid in due proportion to each of the relevant Shareholders. Any proceeds of sale (net of related expenses (including any applicable brokerage fees and commissions and amounts in respect of related irrecoverable VAT)) to each of the relevant Shareholder(s) of less than £5.00 will be aggregated and will accrue for the benefit of the Company.

It is expected that dealings in the Existing Ordinary Shares will continue until close of business on 25 September 2023 and admission of the Consolidated Ordinary Shares to the premium listing segment of the Official List and to trading on the London Stock Exchange's main market for listed securities will become effective at 8.00 a.m. on 26 September 2023.

If you hold Existing Ordinary Shares in certificated form, you will be issued with a new share certificate in respect of your Consolidated Ordinary Shares following the issue of Consolidated Ordinary Shares.

With effect from Admission, share certificates in respect of Existing Ordinary Shares will cease to be valid. Share certificates in respect of Consolidated Ordinary Shares will only be issued following the Share Consolidation. It is therefore important that, if you hold certificate(s) in respect of your Existing Ordinary Shares, you retain them for the time being until share certificates in respect of Consolidated Ordinary Shares are despatched, which is expected to be within 10 Business Days of Admission. On receipt of share certificates in respect of Consolidated Ordinary Shares, certificates in respect of Existing Ordinary Shares can be destroyed.

If you currently hold Existing Ordinary Shares in uncertificated form, it is currently expected that the Existing Ordinary Shares under ISIN GB0009887422 will be disabled by 6.00 p.m. on the day before Admission (which such date is currently expected to be 25 September 2023) and on or soon after 8.00 a.m. on Admission (which is currently expected to be 26 September 2023) your CREST account will be credited with Consolidated Ordinary Shares under ISIN GB00BNTVWJ75. Your CREST account will also be credited with the New Ordinary Shares (nil paid) under the Rights Issue. The ISIN for the New Ordinary Shares will be that of the Consolidated Ordinary Shares.

Temporary documents of title will not be issued in respect of Consolidated Ordinary Shares and, pending despatch of definitive share certificates, transfers of Consolidated Ordinary Shares held in certificated form will be certified against the register of members.

All share certificates will be sent by first class 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).

9.         PRINCIPAL TERMS AND CONDITIONS OF THE RIGHTS ISSUE

9.1       OVERVIEW

Synthomer proposes to raise gross proceeds of approximately £276 million (approximately £261 million after deduction of estimated commissions, fees and expenses) by way of the Rights Issue.  

(A)        PRICING

Taking into account the Capital Reorganisation, the Rights Issue Price represents a discount of 83.8% to the Consolidated Closing Price on 6 September 2023 (being the latest practicable date prior to the date of this announcement), and a discount of 42.5% to the theoretical ex-rights price of 343 pence per Existing Ordinary Share calculated by reference to the Consolidated Closing Price on the same basis. Upon completion of the Capital Reorganisation and the Rights Issue, the New Ordinary Shares will represent approximately 600% of the Company's Consolidated Ordinary Shares that will be in issue immediately following the Share Consolidation and approximately 85.7% of the Company's enlarged issued share capital following the Capital Reorganisation and the Rights Issue.

The Rights Issue Price has been set, following discussions with major Shareholders, at the level which the Board considers necessary to ensure the success of the Rights Issue, taking into account the aggregate proceeds to be raised. The Board believes that the Rights Issue Price, and the discount which it represents, is appropriate.

(B)        DILUTION

The Rights Issue will result in 140,200,818 New Ordinary Shares being issued and, taking into account the Capital Reorganisation, the number of Ordinary Shares being increased by approximately 600%.

If a Qualifying Shareholder does not (or is not permitted to) take up any New Ordinary Shares under the Rights Issue, such Qualifying Shareholder's shareholding in Synthomer will be diluted by 85.7% as a result of the Rights Issue.

For the purposes of calculating: (i) the number of New Ordinary Shares to be issued pursuant to the Rights Issue; (ii) the specified increases to the Company's issued share capital resulting from the Rights Issue; and (iii) the specified dilutive effect of the Rights Issue, the issuance of any Ordinary Shares in respect of the vesting or exercise of any awards under the Share Plans which may occur between the Latest Practicable Date and the Record Date has been disregarded.

9.2       KEY TERMS

On and subject to, among other things, the terms and conditions described in the Prospectus, and taking into account the Capital Reorganisation, 140,200,818 New Ordinary Shares will be offered by way of rights at the Rights Issue Price of 197 pence per New Ordinary Share to Qualifying Shareholders on the basis of:

6 New Ordinary Shares for every 1 Consolidated Ordinary Share
this is equivalent to
6 New Ordinary Shares at 197 pence each for every 20 Existing Ordinary Shares

held and registered in their name on the Record Date (and so in proportion for the number of Existing Ordinary Shares then held, subject to fractional entitlements).

Qualifying Non-CREST Shareholders with registered addresses in the United States or in any of the other Excluded Territories will not be sent Provisional Allotment Letters and will not have their CREST stock accounts credited with Nil Paid Rights, except where the Company and the Underwriters are satisfied that such action would not result in the contravention of any registration or other legal or regulatory requirement in such jurisdiction.

Entitlements to New Ordinary Shares under the Rights Issue will be rounded down to the nearest whole number and fractions of New Ordinary Shares will not be provisionally allotted to Qualifying Shareholders. Holdings of Existing Ordinary Shares in certificated and uncertificated form will be treated as separate holdings for the purpose of calculating entitlements under the Rights Issue.

Any fractional entitlements to New Ordinary Shares which arise will be aggregated into whole New Ordinary Shares and sold in the market on behalf of the relevant Shareholders. The total proceeds of the sale (net of related expenses (including any applicable brokerage fees and commissions and amounts in respect of related irrecoverable VAT)) will be paid in due proportion to each of the relevant Shareholders. Any proceeds of sale (net of related expenses (including any applicable brokerage fees and commissions and amounts in respect of related irrecoverable VAT)) to each of the relevant Shareholder(s) of less than £5.00 will be aggregated and will accrue for the benefit of the Company.

The Rights Issue has been fully underwritten by (in respect of the Non-KLK Rights Issue Shares) the Underwriters and (in respect of the KLK Rights Issue Shares) KLK. The underwriting from the Underwriters is in accordance with the terms and subject to the conditions of the Underwriting Agreement, and the underwriting from KLK is in accordance with the terms and subject to the conditions of the KLK Undertakings.

The Rights Issue is conditional upon (among other things): (i) the passing of the Resolutions at the General Meeting without material amendment; (ii) the Underwriting Agreement having become unconditional in all respects (save for the condition relating to Admission of the Nil Paid Rights); and (iii) Admission of the Nil Paid Rights becoming effective by not later than 8.00 a.m. on 28 September 2023 (or such later date as the Company and the Underwriters may agree).

Application will be made to the FCA for the New Ordinary Shares (nil and fully paid) to be admitted to listing on the premium listing segment of the Official List and to the London Stock Exchange for the New Ordinary Shares (nil and fully paid) to be admitted to trading on its main market for listed securities. It is expected that Admission of the Nil Paid Rights will become effective, and that dealings in the New Ordinary Shares, nil paid, on the London Stock Exchange's main market for listed securities will commence, at 8:00 a.m. on 28 September 2023. It is also expected that Admission of the New Ordinary Shares (fully paid) will become effective, and dealings in New Ordinary Shares, fully paid, on the London Stock Exchange's main market for listed securities will commence, at 8:00 a.m. on 13 October 2023.

The New Ordinary Shares will, when issued and fully paid, rank pari passu in all respects with, and will carry the same voting and dividend rights as, the Consolidated Ordinary Shares.

Overseas Shareholders, including Shareholders resident in the United States should refer to the Prospectus for further information regarding their ability to participate in the Rights Issue.

10.       RELATED PARTY TRANSACTIONS

KLK is a related party of the Company for the purposes of the Listing Rules as it is a substantial shareholder of the Company which is entitled to exercise, or control the exercise of, 10% or more of the votes that are able to be cast at general meetings of the Company.

Pursuant to the KLK Undertakings and the Rights Issue, KLK has irrevocably committed to take up its entitlement pursuant to the Rights Issue in full and to vote in favour of the Resolutions. This will result in KLK acquiring an aggregate of 37,676,850 New Ordinary Shares, representing approximately 26.9% of the New Ordinary Shares to be issued pursuant to the Rights Issue. This transaction is classified as a smaller related party transaction under LR11.1.10R(1) and is therefore disclosed in accordance with LR11.1.10R(2)(C).