American Electric Technologies, Inc. (NASDAQ:
AETI) (“
AETI” or the
“
Company”) has executed a definitive share
exchange agreement with privately-held Stabilis Energy, LLC
(“
Stabilis”) and its subsidiaries to create one of
the leading public small-scale liquefied natural gas
(“
LNG”) production and distribution companies in
North America. The combined business will include Stabilis’
small-scale LNG production and distribution businesses as well as
AETI’s existing international businesses (the “
Combined
Company”).
At the closing, Stabilis and its subsidiaries
will become wholly-owned subsidiaries of AETI and the existing AETI
shareholders will own 11% of the Combined Company. The former
owners of Stabilis will own 89% of the Combined Company. After
closing, James Reddinger, current President and Chief Executive
Officer of Stabilis, will serve as President and Chief Executive
Officer of the Combined Company. Casey Crenshaw, the controlling
shareholder of Stabilis, will serve as Executive Chairman.
“AETI is pleased to announce this combination
with Stabilis,” said Peter Menikoff, Chairman and Chief Executive
Officer of AETI. “We believe the transaction will give the Company
a substantial North American LNG business to complement its
international operations. Additionally, we believe the transaction
will benefit AETI by increasing the breadth of its operations to
more comfortably support its fixed overhead expenses, de-leveraging
its balance sheet, and facilitating access to capital."
Stabilis is a leader in the small-scale
production and distribution of LNG in North America. Demand for
natural gas for power generation and heating applications is
increasing across multiple end markets, but many of these customers
are not directly connected to a pipeline. Natural gas is liquefied
so it can be transported efficiently via truck to these
off-pipeline applications. LNG can be used to supplement existing
natural gas fuel sources or to displace other fuel sources,
including diesel fuel, fuel oil, and propane. North America’s
abundant supply of natural gas can provide LNG customers lower
costs and greater pricing stability when compared to other fuels.
Customers utilizing natural gas fuel can also realize significant
environmental benefits from reduced emissions of carbon dioxide,
particulate matter and sulfur emissions, among others. Stabilis
operates its LNG production business under the “Stabilis Energy”
brand name and its LNG distribution business under the “Prometheus
Energy” brand name, which we believe is one of the oldest and most
recognized brand names in the small-scale LNG business.
Stabilis had net revenue of $26.5 million and
Earnings before Interest, Taxes, Depreciation, and Amortization
(“EBITDA”) of $1.8 million during the nine months ending September
30, 2018. Stabilis delivered 26.5 million LNG gallons to its
customers over the same period, a 75% increase over comparable 2017
deliveries. Stabilis’ operating assets include a 120,000 LNG-gallon
per day production plant in George West, Texas, a 30,000 LNG-gallon
per day production plant that is being relocated to the West Texas
region, and a fleet of cryogenic rolling stock equipment that is
capable of servicing customers throughout North America.
“We believe the combination of Stabilis and AETI
will create a leading platform for growth and consolidation in the
North American small-scale LNG industry,” said James Reddinger,
President and Chief Executive Officer of Stabilis. “Stabilis plans
to continue to invest in the assets and capabilities required to
provide our customers with a low cost, reliable, and comprehensive
LNG solution across North America.”
Following the closing, the Combined Company will
continue to operate AETI’s existing Brazilian subsidiary and
Chinese joint venture. Art Dauber, former Chairman and CEO of AETI,
plans to join the Combined Company as President of International
Operations and a member of the Board of Directors. Mr. Dauber will
lead the development of Stabilis LNG operations in South America
and China. He will also help deliver AETI’s expertise in power
delivery and electrical systems to Stabilis’ power generation
projects.
Casey Crenshaw, Executive Chairman of Stabilis,
added, “We are pleased to combine our investments in AETI and
Stabilis to create a public company growth platform in the
small-scale LNG industry. We believe that small-scale LNG has
tremendous growth potential across multiple end markets in North
America, and this transaction gives us the opportunity to grow
Stabilis’ footprint aggressively in the near future.”
Upon completion of the transaction, the Combined
Company will be renamed “Stabilis Energy, Inc.” and will apply to
continue trading on the NASDAQ Stock Market under the symbol
SLNG.
Transaction Terms
Closing of the transaction is subject to certain
closing conditions, including approval of the issuance of AETI
common stock to acquire Stabilis and other transaction-related
matters by the holders of AETI’s outstanding common stock and
Series A Convertible Preferred Stock voting as a combined group.
Certain shareholders of AETI are entering into a voting agreement
concurrently with the definitive agreement pursuant to which they
are agreeing to vote their respective shares in favor of the
transaction at the special meeting. Each company has agreed to pay
the other company’s expenses if the share exchange agreement is
terminated under certain circumstances prior to the closing of the
transaction. The transaction is expected to close during the first
quarter of 2019, subject to customary closing conditions.
AETI’s Board of Directors has determined that
the share exchange agreement is fair to and in the best interests
of AETI and the holders of AETI’s common stock.
Stabilis is a privately-held company owned by
LNG Investment Company, LLC, an entity controlled by Casey
Crenshaw. Mr. Crenshaw is also President of The Modern Group, Ltd,
a privately owned diversified manufacturing, parts and
distribution, rental/leasing and finance business. Mr. Crenshaw,
through his investment vehicle JCH Crenshaw Holdings, LLC, is
currently an AETI common and Series A Convertible Preferred
shareholder. Mr. Crenshaw is also a member of the AETI Board of
Directors. As part of the transaction, Mr. Crenshaw will convert
all of his AETI Series A Convertible Preferred stock into AETI
common stock contemporaneously with the closing. Mr. Crenshaw will
also restructure his and his affiliates’ debt investments at
Stabilis to reduce leverage at the pro forma Combined Company.
Simmons Energy, a division of Piper Jaffray
& Co., acted as transaction advisor and Thompson & Knight
LLP acted as legal advisor to Stabilis. Oppenheimer acted as
transaction advisor and Locke Lord LLP acted as legal advisor to
AETI.
Investor Call
American Electric Technologies, Inc. (NASDAQ:
AETI) has scheduled an investor update call on Thursday December
20, 2018 at 10:00 a.m. Eastern Time to discuss this transaction.
Individuals who wish to participate in the conference call should
dial +1 855-490-5692; passcode 111345 in the United States and
Canada. International callers should dial +1 323-794-2442; passcode
111345.
About AETI
American Electric Technologies,
Inc. (AETI) is a leading provider of power delivery
solutions to the global energy industry. AETI is headquartered in
Houston and has global sales, support and manufacturing operations
in Rio de Janeiro, Macaé and Belo Horizonte, Brazil. In addition,
AETI has minority interest in a joint venture in Xian, China.
AETI's SEC filings, news and product/service information are
available at www.aeti.com.
Additional Information about the
Transaction and Where to Find it
The proposed transaction has been approved by
the board of directors of AETI and the owners of Stabilis, and will
be submitted to shareholders of AETI for approval of the issuance
of AETI common stock in connection with the transaction and other
transaction-related matters at a Special Meeting of shareholders.
In connection with that Special Meeting, AETI intends to file with
the SEC a proxy statement containing information about the proposed
transaction and the respective businesses of Stabilis and AETI.
AETI will mail a definitive proxy statement and other relevant
documents to its shareholders. AETI shareholders are urged to read
the preliminary proxy statement and any amendments thereto and the
definitive proxy statement in connection with AETI’s solicitation
of proxies for the Special Meeting to approve the
transaction-related matters, because these documents will contain
important information about Stabilis, AETI and the proposed
transaction. The definitive proxy statement will be mailed to
shareholders of AETI as of a record date to be established for
voting on the matters related to the proposed transaction.
Shareholders will also be able to obtain a free copy of the proxy
statement, as well as other filings containing information about
AETI, without charge, at the SEC's website (www.sec.gov). Copies of
the AETI proxy statement can also be obtained free of charge by
directing a request to Peter Menikoff, CEO of AETI, at (832)
241-6330 or by e-mail to investorrelations@aeti.com.
Participants in the
Solicitation
AETI and its directors and executive officers
and other persons may be deemed to be participants in the
solicitation of proxies from AETI’s shareholders with respect to
the proposed transaction. Information regarding AETI's directors
and executive officers is available in its annual report on Form
10-K for the fiscal year ended December 31, 2017, filed with the
SEC on March 29, 2018. Additional information regarding the
participants in the proxy solicitation relating to the proposed
transaction and a description of their direct and indirect
interests will be contained in the proxy statement when it becomes
available.
Stabilis and its managers, directors and
executive officers may also be deemed to be participants in the
solicitation of proxies from the shareholders of AETI in connection
with the proposed transaction. A list of the names of such
managers, directors and executive officers and information
regarding their interests in the proposed transaction will be
included in the proxy statement for the AETI Special Meeting of
shareholders related to the proposed transaction when
available.
Disclaimer
This press release is not a proxy statement or a
solicitation of a proxy, consent or authorization with respect to
any securities or in respect of the proposed transaction. This
press release shall also not constitute an offer to sell or the
solicitation of an offer to buy any securities.
Forward-Looking Statements
This press release includes "forward-looking
statements" within the meaning of the safe harbor provisions of the
U.S. Private Securities Litigation Reform Act of 1995 and within
the meaning of Section 27a of the Securities Act of 1933, as
amended, and Section 21e of the Securities Exchange Act of 1934, as
amended. Any actual results may differ from expectations, estimates
and projections presented or implied and, consequently, you should
not rely on these forward-looking statements as predictions of
future events. Words such as "believe," "projected," "believe,"
"will," "expect," "plan," "may," "will," "could," "should,"
"predicts," "potential," "continue," and similar expressions are
intended to identify such forward-looking statements. These
forward-looking statements include, without limitation, AETI's
expectations with respect to future performance of Stabilis,
anticipated financial impacts of the proposed business combination,
approval of the transaction-related matters by AETI’s shareholders,
the satisfaction of the closing conditions to the transaction and
the completion of the transaction.
Such forward-looking statements relate to future
events or future performance, but reflect the parties' current
beliefs, based on information currently available. Most of these
factors are outside the parties' control and are difficult to
predict. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and
results discussed in the forward-looking statements. Factors that
may cause such differences include, among other things: the
possibility that the business combination does not close or that
the closing may be delayed because conditions to the closing may
not be satisfied, including the receipt of requisite AETI
shareholder and other approvals, the performance of Stabilis and
AETI, and the ability of AETI or, after the closing of the
transaction, the Combined Company, to continue to meet The Nasdaq
Capital Market's listing standards; future demand for and price of
LNG, availability and price of natural gas, unexpected costs,
liabilities or delays in the business combination transaction, the
outcome of any legal proceedings related to the transaction; the
occurrence of any event, change or other circumstances that could
give rise to the termination of the share exchange agreement; and
general economic conditions.
The foregoing list of factors is not exclusive.
Additional information concerning these and other risk factors are
contained in AETI's most recent filings with the SEC, including its
Annual Report on Form 10-K for the fiscal year ended December 31,
2017, filed with the SEC on March 29, 2018 and its Quarterly Report
on Form 10-Q for the quarter ended September 30, 2018, filed with
the SEC on November 14, 2018. All subsequent written and oral
forward-looking statements concerning AETI and Stabilis, the
business combination transactions described herein or other matters
and attributable to AETI, Stabilis, or any person acting on behalf
of any of them are expressly qualified in their entirety by the
cautionary statements above. Readers are cautioned not to place
undue reliance upon any forward-looking statements, which speak
only as of the date made. Neither AETI nor Stabilis undertake or
accept any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statement to reflect
any change in their expectations or any change in events,
conditions or circumstances on which any such statement is
based.
Investor Contact
American Electric Technologies, Inc. Peter MenikoffChief
Executive Officer(832) 241-6330investorrelations@aeti.com
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