17 january 2020 for personal use only - asx · 17/01/2020 · placement share price as the rules...

Envirosuite Limited Suite 3, Level 11, 157 Walker StNorth Sydney NSW 2060

1 ACN: 122 919 948 www.envirosuite.com

(ASX: EVS)

Highlights• EVS to acquire EMS - a leading global environmental noise solutions provider

• The combination of Air Quality, Noise and Waste and Wastewater creates a comprehensive and world class environmental technology platform

• The acquisition provides scale and opens new industry and geographic distribution channels for the expanded solution offering

• The Transaction is expected to complete at the end of February 2020, and is subject to shareholder approval

• Acquisition funding secured after the successful completion of an underwritten institutional placement to new and existing investors

ASX AnnouncementEnvirosuite to acquire EMS Bruel & Kjaer Holdings Pty Ltd17 January 2020

Envirosuite Limited (“EVS” or “the Company”) (ASX: EVS) is pleased to announce that it has signed a binding agreement to acquire all of the share capital of EMS Bruel & Kjaer Holdings Pty Ltd (“EMS”) (“Transaction”). EMS is a leading global environmental technology group, headquartered in Melbourne, with over 400 customers in 40 countries and approximately 200 staff. EMS specialises in environmental noise and vibration monitoring and is the recognised market leader in addressing airport noise globally.

The underwritten institutional placement (“Placement”) to new and existing institutional and sophisticated investors will, on settlement, raise gross proceeds of A$70 million. Bell Potter Securities acted as sole Lead Manager and Underwriter for the Placement.

Transaction Details

EVS will purchase EMS, on a cash-free, debt free basis, from its shareholder group, comprising the majority shareholders Macquarie Corporate Holdings Pty Limited (“Macquarie”) and Spectris Group Holdings Limited (“Spectris”), as well as the EMS founders whose nominees hold a minority shareholding.

EVS has agreed to a total consideration pursuant to a share sale agreement of:

• $70m cash, to be paid net of EMS debt and subject to a working capital adjustment, to Macquarie as at 50% and Spectris as to 50%;

• 80m new EVS shares, with 25m shares to be issued to Macquarie, 10m shares to be issued to Spectris, and 45m shares to be issued to the minority shareholders; and

• 95m options over EVS shares, to be granted as follows:

− 75,000,000 options to Macquarie with an exercise price of $0.20 per share and an exercise period of three years from the date of grant; and

− 20,000,000 options to nominee entities of the EMS founders, with an exercise price of $0.25 per share and an exercise period of three years from the date of grant.

1 EMS is a party to a loan facility agreement, which will be repaid and discharged upon completion of the Transaction.

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2 (ASX: EVS) ACN: 122 919 948 www.envirosuite.com


In addition, EVS has agreed as part of the Transaction to issue to Macquarie 55m EVS shares as consideration pursuant to a referral agreement to be entered into subject to and on completion of the Transaction as set out below.

All consideration shares are subject to a twelve-month escrow period. Any shares issued pursuant to the exercise of consideration options will be escrowed for the balance of the twelve months from the date of option grant. The consideration shares and consideration options to be issued by EVS as part of the Transaction consideration are fixed in number and not subject to recalculation at completion of the Transaction.

Completion of the Transaction is subject to applicable EVS shareholder approvals, including for the issue of the consideration shares and options.

Funding arrangements, including Share Purchase Plan

The $70m cash component of the Transaction consideration will be funded via the Placement, pursuant to which 350m EVS shares will be issued to institutional and sophisticated investors at $0.20 per share and which is underwritten by Bell Potter Securities.

The Company will seek to raise an additional amount of approximately $5.5m via a placement of approximately 27.8m EVS shares at $0.20 per share to institutional and sophisticated investors including directors Hugh Robertson and Chairman David Johnstone (subject to shareholder approval), members of the EVS management team and their networks. This placement will be managed by EVS directly (not underwritten) and the proceeds will be used to fund costs associated with the Transaction.

The Company also today announces a Share Purchase Plan (“SPP”) providing each shareholder the opportunity to subscribe for up to $30,000 worth of EVS shares at a price of $0.205 per share. The price has been set as close to the Placement share price as the rules for SPPs allow, being a share price that is no less than 80% of the volume weighted average price of EVS shares in the 5 trading days leading up to the date of this announcement. The SPP funds will be provisioned for additional working capital to support the integration and growth of the combined group.

Further details in relation to the Transaction and the funding arrangements are contained in the accompanying Investor Presentation.

A notice convening a general meeting of EVS will also be released today seeking the approval of EVS shareholders to resolutions pertaining to the Transaction and the funding arrangements.

New Shareholders

On completion of the Transaction, Macquarie will hold approximately 8% of EVS shares on an undiluted basis which will make Macquarie the largest single EVS shareholder. This percentage would increase to approximately 14% if all options on issue (including those to be granted to Macquarie) are exercised. Macquarie has a right to a nominee on the EVS board (“Board”), subject to completion of the Transaction.

On completion of the Transaction, Macquarie and EVS will enter into a two-year Referral Agreement under which Macquarie will procure certain introductions and/or referrals from the Macquarie Capital Business Group (being that part of the business carried out within Macquarie Group Limited, its holding companies and its and their subsidiary companies known as “Macquarie Capital”). The Board believes that gaining such a strategic shareholder will help accelerate EVS’s global expansion significantly.

Spectris will hold approximately 1% of EVS shares on an undiluted basis (approximately 0.9% of EVS shares on a fully diluted basis).

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Transaction analysis

Current EVS Capital Structure

Capital Raising and Acquisition Consideration

Post-Acquisition Capital Structure

Share price $0.20 $0.204 $0.20

Ordinary Shares 464,452,780 512,750,0005 977,202,780

Market Capitalisation at Offer Price ~$92.9 million N.A. ~$195,440,556

Indicative Enterprise Value ~$77.9 million1 N.A. ~$180.4 million8

Revenue $7.7 million2 ~$47.5 million6 ~$55.2 million

Indicative EV / Revenue Multiple ~10.1x N.A. ~3.3x

Options on Issue 54,333,3333 95,000,0007 149,333,333

* Notes:1 Estimated net cash position of $15.0 million.

2 EVS Revenue FY19.

3 Various exercise prices and expiry dates.

4 Includes the Placement Shares only and excludes any additional shares to be issued under the Share Purchase Plan.

5 Includes the Placement and Consideration Shares only and excludes any additional shares to be issued under the Share Purchase Plan.

6 CY2019 financial information is an estimation. This balance includes financial data from Jan-Oct management accounts (unaudited) plus an estimate of November and December financial information.

7 Consideration Options.

8 Estimated net cash position of $15.0 million after taking into consideration indicative transaction costs.

All share price calculations are set at the Placement Offer Price for illustrative purposes.

Estimated pro forma FY19 – Combined group

* Notes:1 EVS FY19 audited numbers.

2 Pro forma FY19 management financials – noting EMS currently reports on a Calendar Year basis.

A$ Million Envirosuite1 EMS2 Pro forma Combined group

EBITDA (4.9) 2.7 (2.2)

EBIT (6.1) 1.1 (5.0)For

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Transaction Logic

We believe that the Transaction, if it proceeds to completion, is the most significant and formative transaction to be undertaken by EVS to date. It brings forward EVS’s medium-term aspirational plans into 2020 by delivering a new level of scale and commercial and geographic reach.

EVS sees significant opportunity for short term cross-sell and up-sell across the respective industry sectors of EVS and EMS including mining, Smart Cities, airports, waste and wastewater, construction and heavy industry sectors and geographies in which the two businesses are currently active.

The combined group will have a highly complementary geographic fit, as outside of Australia EVS has established offices in Canada, Chile, Colombia, Spain and China, while EMS has offices in USA, Denmark, Spain and Taiwan.

Based on its management accounts, EMS is expected to record over $47m in top-line revenue for the 2019 calendar year, including over $35m in annuity or ongoing revenues. EMS has deployments in over 220 airports providing noise and vibration monitoring solutions where its solution tracks the noise envelopes down to individual planes and their impact on surrounding communities, at a granular level.

Regulatory-driven demand and proven operational capability in one of the most difficult to penetrate industry sectors has given EMS a sustainable competitive edge. It positions EMS to leverage its commercial relationships, domain knowledge and an evolving technical roadmap to deliver greater value through extending its client offering. EMS has a growing presence in infrastructure across both the construction and operational phases.

EVS believes that IoT technology is driving the next generation of operational management systems for industry. ‘Going digital’ is a global theme as industry participants realise that ‘management requires measurement’, and thus the data must be collected, analysed and incorporated into real-time decision making across their operations.

The Company’s vision is to become the leading global environmental technology platform for real-time decision making across the three major environmental domains – Air, Noise, and Water. With this acquisition the combined group will provide leading solutions across Air Quality (including Odour and Dust), Noise and Vibration Monitoring, and Waste and Wastewater. This will significantly build out the current platform offering.

For some time, the Board has harboured a longer-term internal aspiration to achieve $100m in annual revenues with a strong annuity base, and it is the Board’s view that this Transaction brings that aspiration into the medium term.

The Board would like to thank the EVS team for working extremely hard to put the Company in the position to make this acquisition and the support of the EMS team and their stakeholders to complete the Transaction that the Board believes will produce a world-leading environmental technology solutions group.

EVS has been a successful post-acquisition integrator in the past. Assuming the Transaction proceeds to completion, EVS is already planning the integration of EMS, and the Board and management will be focused on retaining and growing the value brought together in the combined group.

Shareholders are encouraged to closely review all the information in today’s releases that set out the material terms of, rationale for and risks associated with the Transaction, as well as the shareholder approvals sought in relation to the Transaction.

David Johnstone

Chairman

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About Envirosuite

Envirosuite Limited is an environmental management technology company that has developed a leading Solution-as-a-Service offering which translates data into action in real-time.

Using proprietary algorithms built on more than 30 years of environmental consulting experience, the Envirosuite platform provides a range of environmental monitoring, management and investigative capabilities.

The Envirosuite platform is used worldwide by a range of clients in the mining, water and waste management, heavy industry, ports and agricultural industry sectors and as well by governments looking to regulate industry in accordance with community well-being.

To learn more, please visit: www.envirosuite.com

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1. The Macquarie Referral Agreement is subject to and will come into effect at the completion of the acquisition. 2. Total Group Revenues may include future acquisitions of which there are none currently planned

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1. On 6 September 2019 EVS announced a transaction with the personal company of Mr Zhigang Zhang, ZZL. Mr Zhigang Zhang is the General Manager of Beijing BHZQ Environmental Engineering Technologies Co., Ltd (BHZQ), and is also a director of EVS. The transaction with ZZL involved, amongst other things, the grant by EVS of up to in aggregate 40,000,000 options over EVS shares to ZZL and its nominated entities, and under a China employee share scheme. These options are subject to a vesting condition, and will only vest on $10,000,000 in revenue (audited in accordance with international financial reporting standards) being received into the wholly owned China subsidiaries of EVS by 31 December 2021 (“Revenue Condition”) (for further information see the 2019 Notice of Annual General Meeting and update released by EVS to ASX on 28 October 2019). The revenue of EMS entities or the EMS business will not be taken into account by EVS in calculating and determining whether the Revenue Condition has been satisfied.

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1 .The Referral Agreement is subject to and will come into effect at the completion of the acquisition2. As part of the Company Managed - Director and Management network Placement offer, Mr. David Johnstone and Mr. Hugh, W. Robertson in their capacity as Directors of EVS intends to subscribe for shares under the offer, subject to shareholder approval

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$-

$10,000,000

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$50,000,000

29.7

7.4

6.7

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• Duplication of countries.

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• Considerable diversity by sector and by geography, including first Oil and Gas opportunities in USA• Over $11 mil ARR in qualified bids in funnel (ex China)• China has approx. 30 bids with total gross project value over $20 mil• High interest and demand in China for Industrial City and also Sewex solutions

1. Forecast for 31 December 2019

$5.90

$12.00

$0.90 $0.45

$1.10

$2.90 $0.75

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$4.00

$6.00

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31-Dec-19 APAC SouthAmerica

NorthAmerica

China EMEA 30-Jun-20

AU

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ARR by Region

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1 The Referral Agreement is subject to and will come into effect at the completion of the acquisition

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1 . As part of the Company Managed - Director and Management network Placement offer, Mr. David Johnstone and Mr. Hugh, W. Robertson in their capacity as a Directors of EVS intends to subscribe for shares under the offer, subject to shareholder approval

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The above timetable may be subject to change without consultation to investors or shareholders

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Notes:(1) Estimated net cash position of $15.0 million.(2) EVS Revenue FY19.(3) Various exercise prices and expiry dates.(4) Includes the Placement Shares only and excludes any additional shares to be issued under the Share Purchase Plan(5) Includes the Placement and Consideration Shares only and excludes any additional shares to be issued under the Share Purchase Plan.(6) CY2019 financial information is an estimation. This balance includes financial data from Jan-Oct management accounts (unaudited) plus an estimate of November and December financial

information.(7) Consideration Options.(8) Estimated net cash position of $15.0 million after taking into consideration indicative transaction costs.All share price calculations are set at the Placement Offer Price for illustrative purposes

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17 january 2020 for personal use only - asx · 17/01/2020 · placement share price as the rules...

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