/NOT FOR DISTRIBUTION TO THE U.S. NEWS WIRE SERVICES OR
DISSEMINATION IN THE UNITED
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All amounts are in Canadian dollars unless otherwise stated.
TSX-V: HEO
Alternext: MNEMO: ALHEO
QUEBEC CITY,
Nov. 25, 2013 /CNW/ - (TSXV: HEO) -
H2O Innovation Inc.
("H2O Innovation" or the "Company") announces
the signature of an agreement to purchase all of the issued and
outstanding shares of Common Stock of Piedmont Pacific Corporation
("Piedmont"), a company located in Oakland, CA and one of the leading
manufacturers in the world of flexible pipe couplings and other
pipe fittings for highly corrosive environments, for a total
consideration of approximately $4.0 million (US$ 3.8
million) (the "Acquisition").
Piedmont,
created in 2002, provides a broad product line that spans a wide
range of industrial and municipal applications mostly using
membrane-related technologies and has been the first to introduce
to the market couplings made of duplex and super duplex stainless
steel. Piedmont counts on
numerous prestigious references in the desalination industry such
as the 263,000 m3/day water reclamation plant in
Orange County (USA), the 200,000 m3/day
desalination plant of Barcelona
(Spain) and the 250,000
m3/day desalination plant of Sydney (Australia). Its revenues mostly come from
seawater and brackish water desalination projects through a North
American and international sales network of OEMs, distributors,
municipal and industrial clients. Piedmont's activities will be integrated under
the umbrella of the consumables business line due to the recurring
nature of the sales and customers profile.
"The acquisition of Piedmont will allow H2O Innovation
to increase its presence in the membrane desalination industry
through a large international sales network that we intend to
maintain and support actively. Moreover, we envision multiplying
the number of cross selling opportunities coming from our existing
sales network of specialty chemicals which sells chemicals daily to
the same clients regularly buying couplings. From a financial
perspective, we expect the transaction to be immediately accretive
to our earnings. We believe it will allow H2O Innovation
to have 90% of its SG&A expenses covered from the gross margin
generated by our consumables sales (chemicals, spare parts, maple
products, services and now couplings). Piedmont will be integrated to our existing
ERP system, logistics & supply chain processes and will benefit
from the testing, warehousing, packing and shipping capabilities of
our existing facility in Vista,
CA, thus reducing operating costs. Our strong experience for
local and international shipments of speciality chemicals to our
clients will enable us to continue to provide the couplings'
clients with an outstanding customer care. Moreover, our
engineering experience and capabilities related to membrane systems
design will strengthen the product offering and customer support",
stated Frederic Dugré, President and Chief Executive Officer of
H2O Innovation.
The execution of a definitive stock purchase
agreement for the Acquisition and the completion of the Acquisition
are subject to certain conditions and closing is expected on or
around December 5, 2013.
Concurrent Private Placement
Financings
H2O Innovation has also entered into an agreement with
GMP Securities L.P. (the "Underwriter") to sell to the Underwriter,
on a bought deal basis and by way of private placement, 19,565,217
subscription receipts of the Company (the "Subscription Receipts")
at a price of $0.23 per Subscription
Receipt, for aggregate gross proceeds of approximately $4.5 million (the "Bought Deal"). The Company has
also granted the Underwriter an option to purchase up to an
additional 13,043,478 Subscription Receipts at the same price,
exercisable at any time prior to 48 hours before the completion of
the Bought Deal, for additional gross proceeds of up to
approximately $3,000,000 (the
"Option").
The Underwriter may elect to receive common
shares of the Company (the "Common Shares") instead of Subscription
Receipts for all or a portion of the Bought Deal. In addition, if
the closing of the Acquisition occurs concurrently with the closing
of the Bought Deal, the Company will deliver Common Shares instead
of Subscription Receipts to investors in the Bought Deal.
In addition, the Company intends to complete a
concurrent additional non-brokered private placement of
Subscription Receipts at a price of $0.23 per Subscription Receipt, for aggregate
gross proceeds of $500,000 with
certain of its directors and officers (the "Additional Placement"
and, together with the Bought Deal, the "Offerings"). It is
anticipated that Élaine Phénix, director, Pierre Coté, director,
Philippe Gervais, director and
Chairman of the Board, Richard A.
Hoel, director and a holder of more than 10% of the common
shares of the Company, Frédéric Dugré, director and President and
Chief Executive Officer, Guillaume
Clairet, Executive Vive-President, Josée Riverin,
Vice-President Finance and Marc
Blanchet, Vice-President Corporate Affairs will participate
in the Additional Placement. The anticipated participation of
insiders of the Company in the Additional Placement is expected to
constitute a "related party transaction" as defined under
Regulation 61-101 respecting Protection of Minority Security
Holders in Special Transactions ("Regulation 61-101"). The
Additional Placement will be exempt from the formal valuation and
minority shareholder approval requirements of Regulation 61-101 as
neither the fair market value of securities being issued to
insiders nor the consideration being paid by insiders will exceed
25% of the Company's market capitalization.
The gross proceeds of the Offerings less 50% of
the commission payable to the Underwriter (the "Escrowed
Proceeds") will be held in escrow pending confirmation from the
Company (the "Release Notice") that the Company is ready and
received confirmation from the vendors that they are ready to sign
the stock purchase agreement and complete of the Acquisition and
that all closing conditions have been satisfied (and not waived by
any party), except for the payment of the purchase price by the
Company. Upon delivery of the Release Notice, the Subscription
Receipts will be automatically exchanged for Common Shares. If the
Release Notice is not provided on or before December 31, 2013 ("Termination Time"), or the
Company, prior to the Termination Time, advises the Underwriter or
the public that it does not intend to proceed with the Acquisition,
the Escrowed Proceeds will be reimbursed pro rata to each holder of
Subscription Receipts at the original subscription price, plus such
holder's pro rata portion of the interest earned thereon.
The Company intends to use a portion of the net
proceeds of the Offerings to finance the Acquisition. The remaining
portion of the net proceeds of the Offerings will be used for
working capital purposes, as necessary to support the up-coming
growth in the Company's systems sales backlog.
The Offerings are expected to close on or about
December 5, 2013 and are subject to
certain closing conditions, including approval of the TSX Venture
Exchange Inc.
The Offerings will be sold on a private
placement basis pursuant to "accredited investor" exemptions under
National Instrument 45-106 and, with respect to the Additional
Placement, pursuant to certain other available and agreed upon
exemptions. The Subscription Receipts and the underlying Common
Shares issued under the Offerings will be subject to a four-month
hold period following closing.
If the Option is exercised in full, the total
gross proceeds to H2O Innovation from the sale of
Subscription Receipts will be $8
million. The Company has agreed to pay a commission equal to
6.25% of the gross proceeds of the Bought Deal.
H2O Innovation has received an
advance income tax ruling from the Ministère du Revenu du Québec
confirming that H2O Innovation meets the criteria of a
"qualified issuing corporation" in accordance with the Québec Stock
Savings Plan II. The Common Shares to be issued under the
Offerings, if any and if subscribed by a qualified mutual fund, are
"qualifying shares" as per such plan.
The Subscription Receipts and the underlying
Common Shares have not and will not be registered under the U.S.
Securities Act of 1933, as amended, and may not be offered or sold
in the United States absent
registration or an applicable exemption from the registration
requirements under the Act. This news release shall not constitute
an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of the securities in any jurisdiction in which
such offer, solicitation or sale would be unlawful.
Forward-looking statements
Certain statements set forth in this press release regarding the
operations and the activities of H2O Innovation as
well as other communications by the Company to the public that
describe more generally management objectives, projections,
estimates, expectations or forecasts may constitute forward-looking
statements within the meaning of securities legislation.
Forward-looking statements concern analysis and other information
based on forecast future results, performance and achievements and
the estimate of amounts that cannot yet be determined.
Forward-looking statements include the use of words such as
"anticipate", "if", "believe", "continue", "could", "estimate",
"expect", "intend", "may", "plan", "potential", "predict",
"project", "should" or "will", and other similar expressions, as
well as those usually used in the future and the conditional,
notably regarding certain assumptions as to the success of a
venture. Those forward-looking statements, based on the current
expectations of management, involve a number of risks and
uncertainties, known and unknown, which may result in actual and
future results, performance and achievements of the Company to be
materially different than those indicated. Information about the
risk factors to which the Company is exposed is provided in the
Annual Information Form dated September 24,
2013 available on SEDAR (www.sedar.com). Unless required to
do so pursuant to applicable securities legislation,
H2O Innovation assumes no obligation to update or
revise forward-looking statements contained in this press release
or in other communications as a result of new information, future
events and other changes.
About
H2O Innovation
H2O Innovation designs and provides state-of-the-art,
custom-built, and integrated water treatment solutions based on
membrane filtration technology to municipal, energy & natural
resources end-users. H2O Innovation also provides a
complete line of specialty chemicals and consumables for membrane
filtration and reverse osmosis systems. For more, visit
www.h2oinnovation.com.
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.
SOURCE H2O Innovation Inc.