Update: Exro Technologies Reports Merger Transaction With SEA Electric; Details Concurrent Capital Raise Transactions; Down 7.7%
01:58 PM EST, 01/30/2024 (MT Newswires) -- Exro Technologies Inc. (EXRO.TO), which saw its shares lose near 6% yesterday, and SEA Electric Inc. entered Tuesday into an agreement providing for the acquisition of SEA by Exro.
The company's stock dropped 7.7% on last look on Tuesday.
The transaction values SEA Electric at about US$300 million (C$402 million). Exro will issue, based on Exro's weighted average common share price over the 10 trading days ending Jan. 26 of US$0.7680 per share, a combination of common shares and non-voting convertible preferred shares to SEA stockholders.
Under the agreement, SEA stockholders will receive about 153.8 million Exro common shares and 168.7 million Exro convertible shares, on a non-diluted basis, excluding existing SEA shares held by Exro, resulting in a total implied consideration issued to SEA stockholders of about US$248 million. In addition, Exro will assume about US$46 million in SEA net debt as part of the deal. The Exro convertible shares will be convertible into Exro common shares on a one-for-one basis without payment of any additional consideration and upon the satisfaction of certain conditions.
Immediately after the closing of the deal, Exro shareholders will own about 34.5% economic stake in the combined company, and SEA shareholders will own about 65.5% economic stake in the combined entity, on a fully diluted basis and before any impacts of the offering. Immediately after the closing of the transaction, and before any conversion of Exro convertible shares into Exro common shares, current Exro shareholders will hold about 52.5% of the voting shares in the combined company, and current SEA shareholders will hold about 47.5% of the voting shares in the combined company, on a fully diluted basis and before any impacts of the offering.
A termination fee of about US$11.4 million is payable by Exro to SEA if the merger agreement is terminated in certain circumstances, including if Exro enters into a superior proposal, and Exro is entitled to a reverse termination fee of about US$11.4 million from SEA if the merger agreement is terminated in certain circumstances. The deal is expected to close by the end of the first quarter.
According to a statement, this business combination is expected to "strengthen Exro's technology offerings while accelerating revenue growth and Exro's path to profitability". After the closing of the deal, the combined company will continue to operate under the name Exro Technologies Inc. and trade on the Toronto Stock Exchange under the ticker symbol "EXRO."
The combined company is expected to accelerate and modernize electrification with a patented, blue chip-validated technology platform, the companies said.
The companies plan to deliver more than 1,000 propulsion technology systems to these original equipment manufacturers in 2024, with aggregate revenues forecasted to be more than C$200 million for the calendar year 2024.
Upon completion of the deal, Sue Ozdemir will continue to serve as chief executive officer while Tony Fairweather will join Exro as chief product officer, and Darrell Bishop will serve as chief financial officer. The board of the combined company will consist of up to nine members with Rod Copes serving as chair and the remaining directors comprised of representatives from the current boards of both companies.
Also, Exro plans to raise about C$30 million via the issuance of subscription receipts, before any exercise of the underwriters' option. In connection with the transaction and contemporaneous with the issuance of subscription receipts, SEA has also entered into arrangements to receive about US$9 million of debt financing from a Canadian pension fund manager.
The underwriters have been granted an option to issue up to an additional 21.1 million subscription receipts for additional gross proceeds of up to C$20 million.
The offering is expected to close on Feb. 15.
The net proceeds will be held in escrow under the terms of the subscription receipt agreement and are intended to be used by Exro to support the business plan of the combined company.
Price: 1.03, Change: -0.09, Percent Change: -7.66