H2O Innovation Enters Definitive Arrangement Agreement with Ember Infrastructure Management for $395 Million

H2O innovation announced Tuesday that it had entered into a definitive arrangement agreement with the New York company Ember Infrastructure Management for an amount of $4.25 per share in cash. This price represents a premium of 68% over the price of the stock at the close of the Toronto Stock Exchange yesterday.

The total transaction amount is $395 million after equity dilution.

The two main shareholders of H2O innovation, Investissement Québec (IQ) and the Caisse de dépôt et placement du Québec (CDPQ), as well as its main managers will transfer the majority of their shares. IQ will also make an additional investment of $20 million.

Following the acquisition, Ember Infrastructure Management will have control of the company and IQ, CDPQ and key senior management members of H2O Innovation will collectively own an approximate 21% stake, up from 24% previously. , issued and in circulation.

The title of H2O innovation (HEO) was trading at $4.18 one hour after the start of trading on the Toronto Stock Exchange, after closing the day before at $2.52.

Endri Leno, financial analyst at National Bank, considers the offer adequate, because it represents a multiple of approximately 15.5 times the value of the company divided by the company’s earnings before tax, interest and amortization (EBITDA). current fiscal year while the sector average is around 13.4 times.

The analyst also believes that the company will benefit from the expertise of Ember Infrastructure Management, which already has three companies present in the water treatment sector in its portfolio.

For Frederic Tremblay, analyst at Securities Desjardins, one of the positive aspects of the transaction is that Ember Infrastructure Management is committed to keeping the head office of H20 Innovation in Quebec, as well as to retaining the main members of the senior direction.

The Desjardins analyst also thinks that the chances of a higher offer being made are low. The offer is already above average and the Quebec aspect of the transaction could put off some buyers, especially those who focus on the aspect of cost synergies for head offices.

The board of directors encourages shareholders to vote in favor of the agreement. The transaction is subject to court approval and will require 66.6% of the vote of all shareholders, as well as 50% of the votes of minority shareholders.