H2O Innovation Inc. ("H2O Innovation" or the "Company") (TSX
VENTURE: HEO)(ALTERNEXT: MNEMO:ALHEO) announces the execution of an
asset purchase agreement between Membrane Systems, Inc., an
indirectly wholly owned U.S. subsidiary of H2O Innovation, and
Professional Water Technologies, Inc. ("Professional Water
Technologies" or "PWT") pertaining to the acquisition of
substantially all of the assets of Professional Water Technologies
in an arms' length transaction. Professional Water Technologies is
a Vista, California-based company that develops, manufactures and
sells specialty membrane pre-treatment and maintenance solutions
for industrial, municipal and commercial applications (the
"Business"). The purchase price of US$3.7 million is payable in
cash at closing and may be increased up to US$ 5.7 million, whereby
entitling PWT to receive earn-outs payments of up to US$2 million
if PWT's sales reach $13.1 million within the 24 months period
following the closing of the transaction. The completion of the
transaction is subject to the satisfaction of customary closing
conditions as more fully described below.
H2O Innovation also announces today that it has entered into an
agency agreement with Loewen, Ondaatje, McCutcheon Limited in
connection with a proposed equity financing of up to CAD$$2.75
million as well as of a letter of intent with Le Fonds
d'investissement REA II Natcan Inc. providing for a proposed
private placement of CAD$$1.5 million. The proceeds of both these
financings are to be used for the payment of the purchase price for
the proposed acquisition of assets of Professional Water
Technologies and ancillary transaction costs.
H2O Innovation is also contemplating an additional debt
financing of up to CAD$$2.5 million to be used to assist in the
growth of its business.
Transaction highlights
- Significantly grows H2O Innovation's sales of services and
consumables-which are generally recurring in nature-in line with
the Company's stated growth strategy
- Professional Water Technologies in numbers:
- Sales of US$2.6 million based on the unaudited financial
statements of Professional Water Technologies for the year ended
December 31, 2008
- EBITDA of US$0.53 million based on the unaudited financial
statements of Professional Water Technologies for the year ended
December 31, 2008-acquisition is immediately accretive
- Net book value of US$400,000 for the assets based on the
unaudited financial statements of Professional Water Technologies
for the year ended December 31, 2008.
- Sustained revenue and profitability growth over the last 4
years
- Professional Water Technologies is presently profitable.
- Improves H2O Innovation's average consolidated gross operating
margin
- Expands H2O Innovation's knowledge and brings with it a
proprietary line of specialty patent-pending sustainable membrane
pre-treatment and maintenance products-a growth vehicle for the
Company
- Expands H2O Innovation into new geographical markets where the
Company is not active in the equipment business-60% of Professional
Water Technologies' sales are recorded outside the United States
and Canada through a network of distributors in Australia, China,
Europe, India, Israel, Mexico, Taiwan, and Thailand
- Addition of a 12,000 sq. ft. manufacturing facility and office
space in Vista, California
- Additional synergies to be obtained through consolidation of
administrative functions and internal sales
Professional Water Technologies
Founded in 1995 and headquartered in Vista, California,
Professional Water Technologies develops leading products for
maintaining and operating municipal, industrial, and commercial
membrane filtration systems, in particular for reverse osmosis
systems. Professional Water Technologies synthesizes and
manufactures a unique line of sustainable specialty solutions for
membrane pre-treatment applications, and develops specific blends
for maintenance, preservation, and cleaning of membrane systems
that maximizes the operating efficiency, economy, and longevity of
reverse osmosis systems. In complement to its product line,
Professional Water Technologies also offers comprehensive analytic
and technical capabilities aimed at maximizing the efficiency and
cost-effectiveness of reverse osmosis systems. Professional Water
Technologies' patent-pending product line is sold worldwide through
a network of distributors and sales agents. Based on unaudited
financial statements for the year ended December 31, 2008,
Professional Water Technologies had revenues of US$2.6 million and
an EBITDA of US$0.53 million.
"This is an important and strategic addition to our operations.
Since its founding in 1995, Professional Water Technologies has
steadily developed an enviable reputation as a membrane filtration
maintenance and operations specialist. We are very pleased to
welcome them to H2O Innovation's team. Professional Water
Technologies will play a pivotal role in growing our sales of
services and consumables and maintaining close relationships with
our clients-a key component of our growth strategy," said Frederic
Dugre, President and Chief Executive Officer, H2O Innovation Inc.
"Most importantly, this acquisition positions H2O Innovation as a
complete membrane filtration expert providing everything from
customized system design to manufacturing, maintenance and
operational efficiency consulting. PWT also significantly enhances
our international reach through its network of distributors. Its
strong track record, combined with our solid experience in
designing and manufacturing custom-built membrane filtration
systems, will undoubtedly make a positive contribution to H2O
Innovation's future successes in North America and elsewhere"
continued Frederic Dugre.
Professional Water Technologies acquisition highlights
H2O Innovation has committed to acquire, subject to the
satisfaction of the closing conditions listed below, substantially
all of the assets of Professional Water Technologies for a price of
US$3.7 million. The purchase price of US$3.7 million is payable in
cash at closing and may be increased up to US$ 5.7 million, whereby
entitling PWT to receive earn-outs payments of up to US$2 million
if PWT's sales reach $13.1 million within the 24 months period
following the closing of the transaction. As of the closing of the
transaction H2O Innovation will also assume liabilities accrued,
prior to closing, in the normal course of business of PWT of
approximately US$150,000.
"This acquisition continues our growth strategy and brings an
added level of predictability to the Company's business model, as
sales of services and consumables are generally recurring in
nature. It will have a positive effect on H2O Innovation's gross
margin, cash flows, and results, which along with the Company's
sustained track record in selling custom-designed membrane
filtration water treatment systems, will help create additional
shareholder value," concluded Frederic Dugre.
The closing of the transaction is scheduled to take place on or
around June 30, 2009 and is subject to the satisfaction of
customary closing conditions including, among others, the
following:
- Obtaining by Professional Water Technologies of all approvals,
waivers, consents or releases as are required under applicable laws
or agreements to allow the execution and delivery of the asset
purchase agreement and the transfer and assignment of the acquired
assets to H2O Innovation;
- Issuance of all the required permits and licenses to allow the
activities of PWT to be continued post-closing by H2O
Innovation;
- Execution of employment and non-competition agreements;
and
- Approval of all applicable regulatory authorities.
Equity financings
H2O Innovation has entered into an agency agreement with Loewen,
Ondaatje, McCutcheon Limited (the "Agent") in connection with the
private placement, on an agency basis, of 5,000,000 subscription
receipts, for aggregate gross proceeds of up to CAD$2.75 million at
a price of CAD$0.55 per subscription receipt.
H2O Innovation has also granted to the Agent an option,
exercisable, in full or in part prior to the closing of the
offering, to arrange for the purchase from H2O Innovation of up to
an additional 1,000,000 subscription receipts for additional gross
proceeds of CAD$550,000. Each subscription receipt will entitle its
holder to receive, for no additional consideration, upon the
closing of the acquisition by H2O Innovation of substantially all
of the assets of PWT, one common share and one common share
purchase warrant. Each whole warrant will entitle its holder to
purchase one additional common share of the Company at a price of
CAD$0.85 at any time prior to the date that is 30 months following
the closing date of the offering. The Agent will receive a fee
comprised of a cash payment of 6% of the gross proceeds from the
offering and a number of broker warrants equal to 6% of the
aggregate number of subscription receipts sold by H2O Innovation.
Each broker warrant will entitle its holder to acquire, for an
exercise price of CAD$0.55, one unit, having the same terms and
conditions as the units forming part of the offering, for a period
of 30 months following the closing of the offering. In respect of
certain pre-identified purchasers, the Agent will only receive a
fee equal to a cash payment of 1% and broker warrants equal to 1%
of the aggregate number of subscription receipts sold by the
Company to those specified investors.
The closing of this private placement of subscription receipts
is subject to, among other things, the approval of the TSX Venture
Exchange Inc. and is expected to take place on or around June 4,
2009.
The Company has also entered into a letter of intent with Le
Fonds d'investissement REA II Natcan Inc. ("Fonds REA II") whereby
Fonds REA II has indicated its interest to acquire from the Company
2,727,273 units at a price of CAD$0.55 per unit for a total
consideration of CAD$1.5 million. Each unit will be comprised of
one common share and one common share purchase warrant and each
warrant will entitle Fonds REA II to purchase one additional common
share of the Company at a price of CAD$0.85 at any time prior to
the date that is 30 months following the closing of this private
placement. Closing is subject to customary closing conditions
including, among other things, the obtention by the Company of an
advanced income tax ruling from Revenu Quebec confirming that the
common shares forming part of the units to be issued to Fonds REA
II qualify under the Quebec Stock Savings Plan II as well as the
approval of TSX Venture Exchange Inc.
The closing of this private placement with Fonds REA II is
expected to take place on or around June 30, 2009.
Conference call and webcast
H2O Innovation will hold a conference call today Thursday May
28, 2009, at 10:30 A.M. EDT to review the transaction highlights.
The call will begin with a presentation by Frederic Dugre,
President and Chief Executive Officer of H2O Innovation and Jim
Peterson, Chief Operating Officer of H2O Innovation. A
question-and-answer period will follow. Shareholders, analysts, and
institutional investors are invited to participate. To access the
call, dial 514-392-9196 in the Montreal area or 1-866-300-7687 toll
free in North America. Overseas callers can dial 001-514-392-9196
for access. Media representatives and other interested parties can
participate in listen-only mode or listen to the live webcast of
the call via H2O Innovation's website at www.h2oinnovation.com. The
webcast will remain available for replay on the Company's website
for 90 days in the Investors section.
Prospective disclosures
This press release may contain prospective disclosures
representing current expectations of H2O Innovation and are subject
to certain risks and uncertainties. For details of these risks and
uncertainties please refer to the Company's Annual Information Form
dated September 26, 2008 available on SEDAR (www.sedar.com). H2O
Innovation is under no obligation to revise or update the
prospective disclosures contained in this press release.
About H2O Innovation
Exclusively dedicated to water treatment, H2O Innovation is
establishing itself as a key player in sustainable development and
the field of clean technologies. H2O Innovation designs, develops,
produces, and integrates state-of-the-art water treatment systems
for the production of drinking water, the reclamation of water, the
treatment of wastewater and industrial processed water in the
municipal, commercial, pharmaceutical, industrial, mining, and
energy markets. H2O Innovation has approximately 100 employees and
eight offices including two manufacturing and assembly plants in
Canada and the United States. Shares of H2O Innovation are listed
on the TSX Venture Exchange (HEO) as well as on the NYSE Euronext
Alternext Exchange (MNEMO: ALHEO).
Neither TSX Venture Exchange nor its Regulation Services
Provider (as that term is defined in the policies of the TSX
Venture Exchange) nor the Alternext Exchange accepts responsibility
for the adequacy or accuracy of this release.
Contacts: Source: H2O Innovation Inc. www.h2oinnovation.com
Contact: H2O Innovation Inc. Guillaume Ducharme 418-688-0170 ext.
329 guillaume.ducharme@h2oinnovation.com
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