Acquisition offers opportunity to increase
SG Blocks’ margins, productivity and efficiency
SG Blocks, Inc. (NASDAQ: SGBX), a leading designer, innovator
and fabricator of container/modular-based structures, today
announced that it has entered into an agreement to acquire
substantially all of the assets of ECHO DCL, except for ECHO DCL’s
real estate holdings, for which SG Echo has obtained a right of
first refusal to acquire same, in a cash and stock transaction,
which is a significant vertical integration. ECHO DCL is a
container/modular manufacturer and current supplier to SG Blocks
based in Durant, Oklahoma specializing in the design and
construction of permanent modular and temporary modular
buildings.
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“ECHO has been a most reliable supply chain partner, and their
commitment to quality products is what first put them on our
radar," said Paul Galvin, Chairman and CEO of SG Blocks. “This
acquisition offers us an opportunity to vertically integrate a
large portion of our cost of goods sold, as well as increase
margins, productivity and efficiency in the areas of design,
estimating, manufacturing and delivery.”
ECHO current projects with SG Blocks include a $4 million
boutique, mixed-use hospitality development in the Everglades,
which was approved for fabrication in July 2020. SG Blocks’
acquisition of ECHO DCL will also service the D-Tec orders
addressing Covid-19, as well as the educational and medical suite
of offerings previously announced with Grimshaw Architects.
Since inception, ECHO DCL has catered to meet the space needs of
major markets, including military, education, administration
facilities, health care, government, commercial and residential
manufacturing. Some of the locations where ECHO DCL or its
predecessors have previously executed various modular and prefab
construction projects include Arizona, California, Florida, Hawaii,
Illinois, Texas, and Washington, D.C.
“We’ve enjoyed working closely with SG Blocks in the past and
look forward to an even stronger and more longstanding partnership
to come,” said Chris Jarrard, ECHO President. “Our missions
completely align as far as offering the customers we serve the best
possible quality of modular structures, be it in the hospitality
sector or other industries turning to container-based
solutions.”
The agreement to acquire substantially all the assets of ECHO
DCL, except for ECHO DCL’s real estate holdings, for which SG ECHO
obtained a right of first refusal to acquire same, is subject to
customary closing conditions and expected to close on or before
September 23, 2020. Terms of the acquisition provide for the
payment to Echo of $1,059,600 in cash at closing, subject to the
escrow of certain of the purchase price funds, and the payment of
certain of Echo’s indebtedness by SG Echo, including the obligation
to (i) satisfy a Guidance Line of Credit loan (“GLOC Loan”) in the
principal amount of approximately $616,000 ($316,432 of which
payoff proceeds was delivered by Echo to SG Echo at closing), (ii)
pay the debt service on certain of Echo’s indebtedness in the
approximate principal amount of $1.7 million for 12 months
following the closing, (iii) payoff at maturity a certain line of
credit of Echo with BTH Bank in the principal amount of $500,000,
and (iv) the payment of earn out payments equal to the net income
received from the acquired business during the 3-month period
beginning on the first day of the first full month that is 3 months
after the closing date, the 3-month period following the first earn
out period and the 3-month period following the second earn out
period, payable in 50% in cash and 50% in shares of the Company’s
common stock to be valued a $2.50 per share; provided, that up to approximately $300,000 of any
amounts paid in respect of the GLOC Loan, and any amounts paid in
respect of the debt service on Echo’s indebtedness and line of
credit with BTH Bank, as described in subparagraphs (i), (ii) or
(iii) above, shall be offset against and reduce the earnout
payments due to Echo. In no event may the number of shares of
common stock to be issued to Echo exceed 19.99% of the Company’s
outstanding shares on the date of the agreement.
About SG Blocks, Inc.
SG Blocks, Inc. is a premier innovator in advancing and
promoting the use of code-engineered cargo shipping containers for
safe and sustainable construction. The firm offers a product that
exceeds many standard building code requirements, and also supports
developers, architects, builders and owners in achieving greener
construction, faster execution, and stronger buildings of higher
value. Each project starts with GreenSteel™, the structural core
and shell of an SG Blocks building, and then customized to client
specifications. For more information, visit www.sgblocks.com.
Forward-Looking Statements
Certain statements in this press release constitute
"forward-looking statements" within the meaning of the federal
securities laws. Words such as "may," "might," "will," "should,"
"believe," "expect," "anticipate," "estimate," "continue,"
"predict," "forecast," "project," "plan," "intend" or similar
expressions, or statements regarding intent, belief, or current
expectations, are forward-looking statements. These forward-looking
statements are based upon current estimates and assumptions and
include statements regarding increasing our margins, productivity
and efficiency and the closing of the agreement to acquire the
assets of ECHO DCL. While SG Blocks believes these forward-looking
statements are reasonable, undue reliance should not be placed on
any such forward-looking statements, which are based on information
available to us on the date of this release. These forward-looking
statements are subject to various risks and uncertainties, many of
which are difficult to predict that could cause actual results to
differ materially from current expectations and assumptions from
those set forth or implied by any forward-looking statements.
Important factors that could cause actual results to differ
materially from current expectations include, among others, our
ability to consummate the acquisition of the assets of ECHO DCL and
close the transaction as planned, our ability to position SG Blocks
for future profitability, our ability to maintain compliance with
the NASDAQ listing requirements, and the other factors discussed in
our Annual Report on Form 10-K for the year ended December 31, 2019
and our subsequent filings with the SEC, including subsequent
periodic reports on Forms 10-Q and 8-K. The information in this
release is provided only as of the date of this release, and we
undertake no obligation to update any forward-looking statements
contained in this release on account of new information, future
events, or otherwise, except as required by law.
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version on businesswire.com: https://www.businesswire.com/news/home/20200922005260/en/
Media Rubenstein Public Relations
Christina Levin Account Director 212-805-3029
clevin@rubensteinpr.com
or
Investor Relations James Carbonara
Hayden IR (646) 755-7412 james@haydenir.com
Brett Maas Hayden IR (646) 536-7331 brett@haydenir.com
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