Israeli wastewater treatment company Emefcy Group Limited (ASX: EMC) has signed a letter of intent to merge with RWL Water, controlled by US Jewish businessman Ron Lauder. The merger aims to create a global provider of innovative, distributed water and wastewater treatment solutions and to accelerate Emefcy's operations in China and other key markets.
The merger will also provide sales synergies between Emefcy and RWL Water products and systems for revenue growth, improving gross margins and increased recurring revenue streams. On a combined basis, the two groups would have achieved revenue of $62 million in 2016 and expected revenue of $90 million in 2017, 71% of which has already been achieved or is part of the orders backlog.
The new merged company Fluence Corp. Ltd. will provide a range of products and services for water treatment, wastewater treatment, desalination, waste-to-energy and water reuse and recovery. The combined group would focus on key growth markets including municipal, commercial, industrial, mining, oil & gas, power, food and beverage sectors. Fluence's wastewater treatment solution plans are centred around Emefcy's proprietary Membrane Aerated Biofilm Reactor (MABR) technology and associated new technology developments. It is anticipated that Fluence would substantially benefit from RWL Water's recognition as one of the fastest growing water solutions companies in the world. RWL Water has designed and built more than 7,000 successful installations together with strong customer references in more than 70 countries worldwide.
Under the terms of the non-binding Letter of Intent, Emefcy proposes to merge with RWL Water in an all-stock transaction, and issue 100.5 million new Emefcy shares to RWL Water's owner, controlled by Ron Lauder. Those shares would be subject to a 2-year lock-up agreement, under which Lauder would only be allowed to sell the shares under limited circumstances. The LOI sees Lauder subscribing for $20 million in additional Emefcy shares at an expected price of A$0.85 per share representing the 20-day VWAP share price for Emefcy's shares. That share subscription would be conditioned upon execution of a purchase agreement, the completion of the merger and Emefcy shareholder approval. Following these transactions, and on an undiluted basis, current Emefcy shareholders would own 66% of the merged group, and Lauder would own 34%. Upon closing of the transaction, Fluence stock would remain listed on the Australia Stock Exchange.
Published by Globes [online], Israel business news - www.globes-online.com - on May 7, 2017
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