Ray Gibbs, CEO at Haydale LON:HAYD, said: The Acquisition will immediately provide Haydale with an established base in the key North American market. We believe that the potential to grow ACM, not only in North America, but across our other territories is huge and we see significant cross-selling opportunities. ACM’s facility will allow us to expand to introduce our graphene capabilities and products into the US. ACM provides the Group with its important fourth strategic territory, complementing our existing presence in the UK, mainland Europe and the Far East.This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
Haydale Graphene Industries plc (AIM: HAYD), the Group focused on enabling technology for the commercialisation of graphene and other nanomaterials has told DirectorsTalk that it has entered into a conditional agreement to acquire the entire issued share capital of ACMC Holding, Inc. (“ACM”), a silicon carbide whisker manufacturer based in South Carolina, United States, for a total consideration of up to $7.0 million to be settled in cash and new ordinary shares of Haydale (the “Acquisition”).
To support the proposed Acquisition, the Company is carrying out a placing and subscription of new ordinary shares of 2 pence each (“Ordinary Shares”) (the “Placing”) (the “Subscription”) in Haydale at a price of 160 pence per share (the “Issue Price”) to raise gross proceeds of up to approximately GBP2.1 million.
In addition to the proposed placing and subscription, the Company is providing all Qualifying Shareholders with the opportunity to subscribe for an aggregate of up to 312,500 new Ordinary Shares (“Open Offer Shares”) at a price of 160 pence per share, to raise approximately GBP0.5 million (before expenses), on the basis of 1 New Share for every 49.324 Existing Ordinary Shares held on the Record Date (the “Open Offer”). Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through the Excess Application Facility.
The proposed Placing, Subscription and Open Offer (together the “Fundraising”) are within the Company’s existing allotment authorities. The proposed Placing and Open Offer are not being underwritten.
The Issue Price of 160 pence per share represents a discount of approximately 6.8 per cent. to the price of 171.7 pence per Existing Ordinary Share, being the average Closing Price for the preceding 20 business days prior to this announcement.
The Placing is being conducted by way of an accelerated bookbuild process (the “Bookbuild”) which will be launched immediately following this announcement, in accordance with the terms and conditions set out in the Appendix to this announcement. Cantor Fitzgerald Europe is acting as sole bookrunner in connection with the Placing.
The final number of Placing Shares will be agreed by Cantor Fitzgerald Europe and Haydale at the close of the Bookbuild, and the results of the Placing and Subscription will be announced as soon as practicable thereafter. The timing for the close of the Bookbuild and the allocation of Placing Shares shall be at the absolute discretion of Cantor Fitzgerald Europe. Haydale reserves the right to issue and sell a greater or lesser number of shares through the Placing.
Background to and reasons for the Acquisition and the Fundraising
Haydale, having evaluated the North American market, has concluded that the best way to secure a strategic territorial foothold is to acquire a complementary business offering significant growth potential and synergistic products, whilst also allowing for substantial cross selling opportunities.
The proposed Acquisition would provide the Group with an established base and market position in Silicon Carbide (“SiC”) fibre and whisker in North America which will be the first US “Centre of Excellence”, situated in the high growth technology region of South Carolina. The strategy is to take advantage of a fragmented and largely untapped graphene and nano technology market. This operation has quality technical and now commercial management following the recent appointment of Trevor Rudderham as CEO of HTI.
The North American market appears generally untapped and of equal importance to both Europe and the Far East. The decision to have a full time staff member and the new acquisition of ACM is a significant positive development for the Group’s US operation. HTI, having acquired ACM, will operate from Greenville, South Carolina, with the ACM facility being capable of housing the Company’s plasma reactors and it is expected to install one there in 2017.
The expectation is for the proposed Acquisition to open sales and collaboration opportunities in what is perceived as a fragmented market offering significant revenue opportunities. The Directors believe there are substantial cross selling opportunities to increase ACM’s existing profits through targeted sales of their SiC products and the Company has already introduced a client to ACM who requires an enhanced scratch resistant cookware coating that ACM has previously supplied another user. Pleasingly, following a rapid response by ACM to the inbound enquiry, the coating is now under evaluation with encouraging results. In addition to the Acquisition, discussions have commenced with two strategically important parties in the US regarding the acquisition of Haydale plasma reactors.
Details of the proposed Acquisition and Use of Proceeds from the proposed Fundraising
The Acquisition will establish the Group’s US base from which it can start to expand its graphene capabilities in the North American market and cross-sell ACM’s nanomaterials through the Group’s other territories.
The initial consideration for the proposed Acquisition is approximately $5.0 million in aggregate, to be settled in cash and shares, as set out below:
-- repayment of existing asset backed loan of approximately $2.9 million; -- repayment of existing working capital facility of approximately $0.5 million; -- cash consideration payable to the vendors of ACM of $0.6 million; and
— equity consideration of $1.0 million payable in Consideration Shares at the Consideration Price.
The Consideration Shares are expected to be admitted to trading on AIM on 3 January 2017.
In addition, an earn-out amount is payable upon the satisfaction of certain conditions in the Acquisition Agreement which shall be an amount of not more than $2.0 million and shall be payable at the option of HTI in cash or the equivalent amount in new ordinary shares of the Company based upon the mid-market share price of the Company’s shares on AIM on the close of business on the day before the announcement of the annual accounts for the relevant earn-out period.
The Fundraising has been undertaken to provide funding for the Acquisition. The net proceeds of the Fundraising of up to $3.3 million (GBP2.4 million) will be used to:
-- satisfy the initial vendors' cash consideration of $0.6 million;
— provide working capital to, supply new plasma reactor and settle other costs totalling $1.0 million; and
-- make net loan repayments of $1.7 million after agreeing a new secured loan of $1.7 million.
ACM’s existing management (who are also the vendors) and technical team are keen to stay and assist in growing the US business, where they have the opportunity to increase their consideration dependent on agreed sales growth over the period to 30 June 2020.
Subject to the Placing and Subscription being subscribed in full, the Company expects to publish a circular (the “Circular”) shortly in connection with the proposed Fundraising, which will be available on the Company’s website at www.haydale.com. Capitalised terms shall have the same meaning as in the Circular unless the context requires otherwise.
