PLEXUS Holdings, the oil and gas well technology, firm has won £8 million investment from a giant Chinese corporation in a deal that is expected to pave the way for rapid sales growth in Asia.
Aberdeen-based Plexus has completed an agreement with Yantai Jereh Oilfield Services under which the oil services firm will be licensed to manufacture and sell Plexus's wellheads in key overseas markets including China and India.
Jereh, which has a stock market value of around $7bn (5bn), will put its muscle behind the drive to win sales of Plexus equipment in markets where investment is growing strongly in spite of crude price plunge.
State-owned oil companies in areas like the Middle East are investing heavily in developing fields.
Plexus's housebroker Cenkos said the deal would help the firm make a quantum leap, by moving into high volume sales markets from the niches it focuses on.
With a stock market value of around £190m Plexus is a minnow by comparison with Jereh.
The agreement should help Plexus win business in areas where it can be hard for UK firms to make progress and to reduce its reliance on the North Sea market.
"Jereh is strongly established in China and Asia and is further poised to pursue opportunities for our technology in the Middle East, at a time where this region presents major challenges for Western companies," said Plexus's chief executive Ben van Bilderbeek.
With Plexus in line to get royalties on sales made by Jereh, the deal is expected to provide a big boost to revenues.
"We believe this Licence Agreement can over time generate substantial revenues from the partnership with Jereh, who have an exceptional proven track record as licensees for major partners around the world," said Mr van Bilderbeek.
The deal provides an example of how firms in Scotland can draw on the vast wealth accumulated by Chinese firms and the commercial clout they wield to boost growth. It will be studied with interest by other technology firms.
The licensing deal formalises an agreement made in March, under which Jereh will acquire a five per cent holding in the enlarged share capital of Plexus.
Chaired by billionaire Sun Weijie, Jereh will subscribe for shares at 180p each.
Shares in Plexus jumped around 20 per cent, to 241.75p, from 202p the day the framework agreement was announced in March.
The deal represents a notable endorsement of technology developed by Plexus in Scotland.
Jereh has the right to increase its holding to ten per cent within 12 months, by subscribing for additional shares.
A veteran of the oil services business, Mr van Bilderbeek founded Plexus in 1986. The company reckons the POS-GRIP technology it developed provides a more effective way of joining sections of piping that carry oil and gas than alternatives.
Plexus says the technology is well suited to work in challenging areas such as high pressure high temperature developments, in which firms are increasing investment as conventional alternatives are exhausted.
Mr van Bilderbeek, 66, said: "I would like to thank Chairman Sun and his excellent team at Jereh, who have worked closely with the Plexus team to ensure a smooth completion process following the signing of the Framework Agreement."
Numis Securities reiterated its buy recommendation on Numis shares following news of the deal yesterday.
Plexus made £2m profit after tax on sales of £13.5m in the six months to December.
Shares in Aim-listed Plexus Holdings closed up 8p at 234p.
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