Lygos, Inc. (“Lygos”), a vertically integrated biotechnology
provider of sustainable specialty ingredients, and Flexible
Solutions International, Inc. (“FSI”) (NYSE: FSI) a developer and
manufacturer of biodegradable products, today announced they have
entered into a definitive merger agreement providing for an
all-stock transaction. The companies plan to integrate the two
complementary technology platforms, expand the portfolio of
multi-functional organic acids, and scale production to meet the
increasing demand for sustainable products for agricultural,
industrial, and consumer applications. The merger agreement has
been unanimously approved by the boards of directors of both
companies, and the $160 million of growth capital was funded in
April 2022.
“In a world with increasing demand on resources,
there is a greater need for alternative chemical ingredients that
are reliable, scalable, and sustainable,” said Lygos CEO Eric
Steen, PhD. “This merger provides the opportunity to unlock new
high-growth opportunities for our business, our investors, and our
customers by connecting our ingredients to existing downstream
products. Together, we intend to use our collective resources to
expand domestic manufacturing and revive industrial innovation by
providing more environmentally friendly ingredients that enable
better supply chains for common, everyday downstream products.”
FSI is an environmental technology company
involved in research, development, and manufacturing of supplies
that are designed to increase crop yield, conserve energy, and
reduce environmental impact. Over the past four years, Lygos and
FSI have been leveraging Lygos’ proprietary fermentation technology
platform to improve the performance of FSI’s biodegradable,
water-soluble cleaning and water treatment solutions. The Lygos
platform utilizes the latest advances in bioengineering and data
science to convert sustainable sugars into multi-functional organic
acids. These bio-based ingredients feature performance, supply
chain and environmental advantages over traditional industrial
chemicals.
“This combination of Lygos’ sustainable organic
acid production capabilities and FSI’s polymer expertise will
enable more customers around the world to create sustainable and
biodegradable solutions,” said Dan O’Brien, CEO of FSI. “I’m very
excited about being part of this combined company for many years to
come. FSI has demonstrated successful growth and ability to attract
large and consistent customers for our products. We have adapted
our business over time with this focus on our customer needs, and
believe that as we enter this new phase, we can achieve even
greater applications for our combined solutions.”
Mr. O’Brien has agreed to vote in favor of the
transaction.
Investment Terms of
Lygos’ FinancingPrior to the transaction announced today,
Lygos secured $160 million in growth capital in support of the
prospective combination. Under the terms of the purchase agreement,
Lygos issued $160 million worth of convertible notes with a 5.5%
fixed annual interest rate and a five-year maturity. The conversion
price of the convertible note will be set 12 months to the date of
the note, and the pricing terms will be set upon the trading price
of the future equity but will be set within a market capitalization
range of no less than $250 million or no greater than $350
million.
Approvals and Timing of
Merger TransactionThe transaction is expected to close in
the third quarter of 2022, subject to the approval of FSI and Lygos
stockholders and the satisfaction or waiver of certain other
customary closing conditions. Mr. O’Brien, who beneficially owns
approximately 36.6% of the outstanding FSI shares, has signed an
agreement with Lygos agreeing to vote his shares in favor of the
transaction at a meeting of FSI shareholders and the election of
directors to the FSI board of directors to be designated by Lygos.
Additional information about the transaction will be provided in a
Current Report on Form 8-K to be filed by FSI with the Securities
and Exchange Commission and available at www.sec.gov.
Exchange RatioSubject to the
terms and conditions of the merger agreement, each outstanding
share of Lygos capital stock will be converted solely into the
right to receive a number of common shares of FSI equal to the
exchange ratio. The exchange ratio will equal the total number of
FSI capital shares on a fully diluted basis outstanding as of the
end of the last trading day of the FSI common shares on the NYSE
American before the effective time of the merger multiplied by two
and then divided by the total number of shares of Lygos capital
stock on fully diluted basis outstanding as of the same time.
Management Upon closing, Eric
Steen will serve as the CEO and a member of the Board of Directors
for the combined company. Dan O’Brien has entered into a five-year
employment agreement to continue overseeing FSI’s existing business
activities. Lygos’ current CFO, Bryce Dille, and CTO, Nick Ohler,
PhD, will retain these respective roles in the combined company.
Also, upon closing, all current directors of FSI will resign,
subject to the election of new directors designated by Lygos at the
FSI Meeting.
Webcast Discussing the Proposed
Transaction and FinancingManagement from both Lygos and
Flexible Solutions will make a webcast available as of 9:00 am EST
on April 18, 2022. To access the presentation, please go
to: Lygos and Flexible Solutions Merger Presentation
AdvisorsBTIG, LLC served as the
financial advisor and Hart & Hart LLP served as legal advisor
to FSI in connection with the merger and offering. Orrick
Herrington & Sutcliffe LLP served as legal advisor to
Lygos.
Company ContactsFlexible
SolutionsJason Bloom800-661-3560info@flexiblesolutions.com
Lygos, Inc.Kevin MurphyArgot
Partners617-947-2312lygos@argotpartners.com
About Lygos
Lygos has created a biological engineering platform focused on
sustainable production of organic acid bio-monomers. Lygos’
bio-based ingredients offer alternatives to traditional industrial
suppliers, enabling customers to create better, environmentally
safer products. For more information, visit www.lygos.com and
follow us @LygosBiotech.
About Flexible Solutions
International Flexible Solutions International, Inc.
(www.flexiblesolutions.com), or FSI, based in Taber, Alberta, is an
environmental technology company. FSI provides biodegradable,
water-soluble products utilizing thermal polyaspartate (TPA)
biopolymers. TPA beta-proteins are manufactured from the common
biological amino acid, L-aspartic acid, and can be used in
applications including scale inhibition, detergent formulation,
water treatment and crop enhancement. FSI is the developer and
manufacturer of WaterSavrTM, a commercially viable water
evaporation retardant. WaterSavrTM reduces evaporation on
reservoirs, lakes, aqueducts, irrigation canals, ponds and slow
moving rivers. HeatsavrTM, a “liquid blanket” evaporation retardant
for the commercial swimming pool and spa markets, reduces energy
costs and can result in reduced indoor pool humidity.
Additional Information about the
Proposed Merger and Where to Find ItIn connection with the
proposed merger, FSI and Lygos intend to file relevant materials
with the Securities and Exchange Commission (the “SEC”), including
a registration statement on Form S-4 that will contain a prospectus
and a proxy statement. Investors and security holders of FSI and
Lygos are urged to read these materials when they become available
because they will contain important information about FSI, Lygos
and the proposed merger. The proxy statement, prospectus and other
relevant materials (when they become available), and any other
documents filed by FSI with the SEC, may be obtained free of charge
at the SEC website at www.sec.gov. In addition, investors and
security holders may obtain free copies of the documents filed with
the SEC by FSI by directing a written request to: FSI at 6001 54th
Ave., Taber AB, Canada T1G 1X. Investors and security holders are
urged to read the proxy statement, prospectus and the other
relevant materials when they become available before making any
voting or investment decision with respect to the proposed
merger.
This communication shall not constitute an offer
to sell or the solicitation of an offer to sell or the solicitation
of an offer to buy any securities, nor shall there be any sale of
securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful prior to registration or qualification under
the securities laws of any such jurisdiction. No offering of
securities in connection with the proposed merger shall be made
except by means of a prospectus meeting the requirements of Section
10 of the Securities Act of 1933, as amended.
Participants in the
SolicitationFSI and its directors and executive officers
and Lygos and its directors and executive officers may be deemed to
be participants in the solicitation of proxies from the
shareholders of FSI in connection with the proposed transaction.
Information regarding the special interests of these directors and
executive officers in the proposed merger will be included in the
joint proxy statement/prospectus referred to above. Additional
information regarding the directors and executive officers of FSI
is also included in FSI’ Annual Report on Form 10-K for the year
ended December 31, 2021. These documents are available free of
charge at the SEC web site (www.sec.gov) and from the CEO of FSI at
the address described above.
Forward-Looking StatementsThis
press release contains forward-looking statements based upon FSI’
and Lygos’ current expectations. Forward-looking statements involve
risks and uncertainties, and include, but are not limited to,
statements about the structure, timing and completion of the
proposed merger; the combined company’s listing on the NYSE
American after closing of the proposed merger; expectations
regarding the ownership structure of the combined company; the
expected executive officers and directors of the combined company;
the combined company’s expected cash position at the closing of the
proposed merger; the future operations and success of the combined
company; the nature, strategy and focus of the combined company;
the success, cost and timing of the combined company’s product
development activities, studies and clinical trials, the success of
competing products that are or become available, the combined
company’s ability to obtain approval for and commercialize its
product candidates; the executive and board structure of the
combined company; the location of the combined company’s corporate
headquarters; the expected charges and related cash expenditures
that FSI expects to incur; and other statements that are not
historical fact. Actual results and the timing of events could
differ materially from those anticipated in such forward-looking
statements as a result of these risks and uncertainties, which
include, without limitation: (i) the risk that the conditions to
the closing of the proposed merger are not satisfied, including the
failure to timely obtain stockholder and shareholder approval for
the transaction, if at all; (ii) uncertainties as to the timing of
the consummation of the proposed merger and the ability of each of
FSI and Lygos to consummate the proposed merger; (iii) risks
related to FSI’s ability to manage its operating expenses and its
expenses associated with the proposed merger pending closing; (iv)
risks related to the failure or delay in obtaining required
approvals from any governmental or quasi-governmental entity
necessary to consummate the proposed merger; (v) the risk that as a
result of adjustments to the exchange ratio, FSI shareholders and
Lygos stockholders could own more or less of the combined company
than is currently anticipated; (vi) risks related to the market
price of FSI common shares relative to the exchange ratio; (vii)
unexpected costs, charges or expenses resulting from the
transaction; (viii) potential adverse reactions or changes to
business relationships resulting from the announcement or
completion of the proposed merger; and (ix) risks associated with
the possible failure to realize certain anticipated benefits of the
proposed merger, including with respect to future financial and
operating results. Actual results and the timing of events could
differ materially from those anticipated in such forward-looking
statements as a result of these risks and uncertainties. These and
other risks and uncertainties are more fully described in periodic
filings with the SEC, including the factors described in the
section entitled “Risk Factors” in FSI’ Annual Report on Form 10-K
for the year ended December 31, 2021, which is on file with the
SEC, and in other filings that FSI makes and will make with the SEC
in connection with the proposed merger, including the proxy
statement/prospectus/information statement described above under
“Additional Information about the Proposed Merger and Where to Find
It.” You should not place undue reliance on these forward-looking
statements, which are made only as of the date hereof or as of the
dates indicated in the forward-looking statements. FSI expressly
disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained
herein to reflect any change in its expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statements are based.
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