NOT FOR DISSEMINATION IN THE UNITED
STATES OR TO UNITED STATES NEWSWIRE SERVICES
(TSXV: HEO) – H2O Innovation Inc. (“H2O Innovation” or
the “Corporation”) is pleased to report the completion of the
previously announced acquisition of all the issued and outstanding
shares of Hays Utility South Corporation (“Hays”), a
privately-owned provider of water and wastewater asset management
services (the “Acquisition”) for municipal utility districts in
Texas, United States, for a total consideration of US$6.7 M (CA$8.9
M)1.
Hays is providing operation and maintenance
(“O&M”) services to forty-one (41) clients, ranging in size
from commercial to large utilities, in addition to the billing and
collection services of over 34,000 customers each month. Founded in
1970, Hays has a staff of more than seventy (70) employees,
including plant operators, plumbers, electricians, construction and
repair crews, a customer service call center, field service
representatives, client relations managers and other support staff.
This acquisition should allow H2O Innovation to expand its business
activities in Texas, creating more synergies and cross-selling
opportunities between its different business lines. When adding the
contracts of Utility Partners, LLC, the Corporation’s O&M
business pillar will now have a total of 78 operation and
maintenance contracts throughout the United States and Canada.
Non-audited revenues of Hays for its fiscal year
ended on September 30, 2018 amounted to $19.0 M, compared to
$17.1 M for the previous fiscal year. The EBITDA, excluding
the non-recurring expenses related to the former owner2, reached
$1.7 M for the year ended September 30, 2018, compared to
$1.6 M for last year. The net income of Hays was at $1.2 M,
compared to $0.9 M for fiscal year ended on September 30, 2017.
Furthermore, the total value of Hays’ assets amounted to $4.2 M,
compared to $3.1 M in 2017. Total liabilities and equity
reached respectively $1.5 M and $2.7 M in 2018, compared to
$1.2 M and $1.9 M in previous fiscal year.3
“Thanks to the successful integration of Utility
Partners into our business model two years ago, our team is now
well-equipped and ready to repeat this success with Hays. Our
operation and maintenance business pillar is now well established,
which will facilitate Hays’ integration process. Its addition will
also allow the Corporation to further establish itself in Texas,
one of the fastest growing markets for water related
infrastructures in North America”, stated Frédéric Dugré,
President & CEO of H2O Innovation.
“When I first met H2O Innovation’s management
group, it became clear to me that H2O Innovation and Hays’ culture
and values regarding employees and customer retention were aligned.
My father started this company more than 40 years ago and he cared
deeply for his team. Our employees and their futures were my
greatest concern, and today, I feel that H2O Innovation will ensure
continuity and provide growth opportunities”, added Donald
J. Hays, President of Hays Utility South Corporation.
Offering Private Placement
FinancingThe acquisition consideration was financed
through the previously announced bought deal private placement of
subscription receipts (the “subscription receipts”) of the
Corporation (“the Offering”). Given the closing of the
Acquisition occurred concurrently with the closing of the Offering,
common shares of the Corporation (the “Common Shares”) were issued
directly to the subscribers instead of the subscription
receipts.
As a result of the partial exercise by the
Underwriters (as hereinafter defined) of the over-allotment option
under the Offering, a total of 15,745,775 Common Shares were issued
at a price of $0.83 per Common Share for total gross proceeds to
the Corporation of approximately $13,068,994.
The Offering was conducted by a syndicate of
underwriters led by Haywood Securities Inc. and including Beacon
Securities Limited and Canaccord Genuity Corp (collectively, the
“Underwriters”).
In connection with the Offering, the Corporation
paid to the Underwriters an aggregate cash commission of 5.0%
(reduced to 3.0% in the case of one subscriber) and issued an
aggregate of 642,710 non-transferable warrants to the Underwriters
(the “Broker Warrants”). Each Broker Warrant entitling its holder
to purchase one Common Share at a price of $0.83 until November 30,
2020.
The securities issued and issuable to the
Offering are subject to a statutory resale restriction until March
31, 2019.
BDC Capital Inc. (“BDC”) was a lead investor in
the private placement and acted as a true catalyst to make this
transaction possible. “BDC is pleased to partner with a team
of Quebec-based entrepreneurs that are competing head on with the
majors in the water treatment space on the global scene. H2O
Innovation has been expanding at double-digit growth for the last 8
years both organically and through acquisitions and as the bank
devoted exclusively to entrepreneurs, we’re committed to helping
build globally competitive cleantech firms at all stages of
development”, said Susan Rohac, Vice President, Cleantech
Practice at BDC.
Existing shareholders, Caisse de depot et
placement du Québec and Investissement Québec, along with certain
directors and officers of H2O Innovation have also participated in
the Offering.
The participation of insiders of the Corporation
in the Offering constitutes “related party transactions” as defined
under Regulation 61-101 respecting Protection of Minority Security
Holders in Special Transactions (“Regulation 61-101”). The issuance
of the Common Shares to insiders is exempt from the formal
valuation and minority shareholder approval requirements of
Regulation 61-101 as neither the fair market value of securities
issued to insiders nor the consideration paid by insiders exceeds
25% of the Corporation’s market capitalization. The Corporation did
not file a material change report twenty-one (21) days prior to the
closing of the Offering as the details of the participation of the
related parties of the Corporation had not been confirmed at that
time.
The Corporation intends to use the net proceeds
of the Offering to finance the Acquisition, to pay the costs
associated with the Acquisition and the Offering and allocate the
balance for working capital purposes.
The securities offered pursuant to the Offering
have not and will not be registered under the U.S. Securities Act
of 1933 (the “Act”), 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 securities nor shall there be any sale of the
securities in any jurisdiction in which such offer, solicitation or
sale would be unlawful.
Prospective disclosures
Certain statements set forth in this press
release regarding the Acquisition, the Corporation’s anticipated
use of proceeds under the Offering, the expected synergies and
benefits of the Acquisition and the operations and the activities
of H2O Innovation as well as other communications by the
Corporation 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. 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 Corporation to
be materially different than those indicated. Factors that could
cause or contribute to such differences include, but are not
limited to, those risk factors discussed in the Annual Information
Form of the Corporation dated September 25, 2018 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 for
municipal, industrial, energy and natural resources end-users. The
Corporation’s activities rely on three pillars which are i) water
and wastewater projects and aftermarket services; ii) specialty
products, which include a complete line of maple equipment and
products, specialty chemicals, consumables and specialized products
for the water treatment industry; and iii) operation and
maintenance services for water and wastewater treatment systems and
utilities. For more information, 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. www.h2oinnovation.com Contact: Marc
Blanchet+1 418-688-0170 marc.blanchet@h2oinnovation.com
____________________
1 The total consideration related to the
acquisition has been converted using the foreign exchange rate as
of the date hereof.2 Non-recurring expenses are related to the
former owner salaries and insurances, auto expenses, and
acquisition-related legal and professional fees.3 All financial
information of Hays is denominated in USD, converted in CAD. Income
statements items have been converted using the 12-month average
rate for the years ended September 30, 2018 and 2017, respectively
1.2835 and 1.2982. Balance sheet information has been converted
using the exchange rate as of September 30, 2018 and 2017,
respectively 1.2919 and 1.2480.
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