Proposed Merger with Avalon Battery Corporation
Suspension of trading of Ordinary Shares on AIM
redT energy plc (AIM: RED), the energy storage company, is pleased to announce that it has agreed to outline terms for a proposed merger with Avalon Battery Corporation (“Avalon”) (the “Merger”). The parties have signed a non-binding Memorandum of Understanding (“MOU”) and have plans for the injection of significant new funding as outlined further below.
The Merger, if approved by shareholders and completed, will constitute a reverse takeover (“RTO”) under the AIM Rules for Companies (the “AIM Rules”). In accordance with Rule 14 of the AIM Rules, trading in redT’s ordinary shares (“Ordinary Shares”) on AIM will be suspended from 7.30 a.m. today, 25 July 2019 until either the publication of an admission document in relation to the Merger or confirmation is given that the Merger is no longer proceeding. Although the parties will seek to publish the admission document as soon as possible, the timing remains uncertain.
Both redT and Avalon are well-established technology-led companies in the Vanadium Redox Flow Battery sector. The combination of the businesses will create a leading player in the growing energy storage market with operations in North America, Europe and Asia, and a global sales footprint able to capitalise on the significant opportunities for energy storage presented by the worldwide shift to renewable energy.
In October last year, redT announced that it would seek strategic partners to support and finance the continued growth of the business. redT further announced on 14 March 2019 that it was in active discussions with a number of interested parties.
The agreement with Avalon is a significant step forward. The MOU sets out the basis upon which the two businesses, subject to a number of conditions, intended to form the leading global company in vanadium redox flow batteries. The Merger will take the form of a share-for-share acquisition of Avalon with redT shares valued at 1.65p per share, which values Avalon at $37.5m. The Company will seek re-admission to trading on the AIM market of the London Stock Exchange for its Ordinary Shares including those to be issued to Avalon shareholders.
To drive the growth and development of the Enlarged Group, provide working capital, and take advantage of the substantial opportunity presented by the Merger, the merged business intends to raise at least £24m ($30m) of new funds (the “Fundraising”) as part of the Merger. VSA Capital, redT’s financial adviser and broker, redT and Avalon have received substantial preliminary support for the Fundraising from a strong new strategic investor that intends to make a cornerstone investment in the merged business, as well as from existing institutional investors in redT and both existing and certain proposed new investors in Avalon. The Fundraising is expected to be at a price not exceeding 1.65p per share subject to finalising terms and may include some interim financing while the RTO process is underway. It is expected that the Merger and the Fundraising will be inter-conditional and complete at the same time.
redT’s Board is, therefore, able to express confidence that, subject to definitive agreements being reached with Avalon and a successful Fundraising, the merged business will be in a robust financial position and therefore able to implement an exciting development and growth strategy.
The Merger remains subject to inter alia further due diligence by each party, definitive legal agreements being reached, and a total of at least £24m ($30m) of new funds being raised to fund the enlarged business. The Fundraising and the Merger will be subject to the approval of redT’s shareholders and the Merger itself is also subject to the approval of the shareholders of Avalon.
In accordance with Rule 14 of the AIM Rules, trading in Ordinary Shares on AIM will be suspended from 7.30 a.m. today, 25 July 2019. The Merger, if approved by shareholders and completed, will constitute an RTO under the AIM Rules and in accordance with Rule 14 of the AIM Rules, will require the publication of an AIM admission document setting out, inter alia, the details of the Merger and the approval of shareholders of redT in a general meeting to be convened by redT.
Further announcements will be made in due course.
Information on Avalon and the combined business
Avalon Battery Corporation is a Delaware Corporation with offices in the San Francisco area, operations in Vancouver and low-cost manufacturing in China. Avalon’s technology is very similar to that of redT and the combination of the two businesses will enable the merged business to reduce costs and accelerate product development, combining the best features of each company’s products and reducing the costs of manufacture. Both companies already have a substantial sales opportunity pipeline, which the combined business will be well placed to supply with its world-leading products.
Neil O’Brien, Executive Chairman of redT commented:
“I am delighted by the agreement we have reached with Avalon. After an extensive search for strategic partners, getting to this stage is a major step forward. The combination of our two companies will create a major force in the rapidly growing energy storage sector. We will have global reach, a world-leading technology and an enhanced ability to drive down production costs and attract new capital. It is great news for our customers, our investors and our employees.”
Larry Zulch, Chief Executive of Avalon commented:
“The combination of redT and Avalon puts together two of the most experienced teams in flow batteries, creating a company with scale, resources, and products unprecedented in our segment. Vanadium redox flow batteries have long been the safe, dependable, and economical choice in energy storage. We can’t imagine a better opportunity than this Merger to translate those qualities into business results.”
All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned