Hydrogenics Corporation (NASDAQ: HYGS; TSX: HYG)
(the “
Company” or “
Hydrogenics”),
a leading developer and manufacturer of hydrogen fuel cell modules
and hydrogen generation equipment, announced today that it has
entered into an arrangement agreement (the “
Arrangement
Agreement”) with Cummins Inc. (“
Cummins”)
and Atlantis AcquisitionCo Canada Corporation (the
“
Purchaser”), pursuant to which the Purchaser, a
subsidiary of Cummins Inc., has agreed to acquire all of the
outstanding common shares of the Company (the
“
Shares”), other than Shares owned by The
Hydrogen Company, a wholly owned subsidiary of L’Air Liquide S.A.
(“Air Liquide”), for US$15.00 in cash per Share (the
“
Transaction”). The Hydrogen Company has agreed to
exchange its Shares for shares of the Purchaser pursuant to
the Transaction.
“Over the past 24 years, the Hydrogenics team
has worked to refine and improve transformative technology
solutions in Hydrogen. Today, our years of work are
recognized as two very major high-quality industrial leaders have
taken the baton to continue our legacy in bringing clean energy
solutions to the world. It is a great honour to be associated with
such distinguished companies as Cummins and Air Liquide. We look
forward with renewed vigor to work alongside them to accelerate the
transformative journey,” said Mr. Daryl Wilson, Chief Executive
Officer of the Company.
The consideration per Share to be received
by the Company’s shareholders (the
“Shareholders”) in connection with the Transaction
represents a premium of 21.6% over the 30-day volume-weighted
average price (“VWAP”) of the Shares on the NASDAQ
and 38.8% over the 90-day VWAP on the NASDAQ for the period ending
June 27, 2019.
Special Committee and Board of Directors
Recommendation
The Hydrogen Company is the Company’s
largest Shareholder, owning 3,537,931 Shares, which represents
approximately 18.6% of the issued and outstanding Shares.
Accordingly, the Transaction, if consummated, will constitute a
“business combination” for purposes of Multilateral Instrument
61-101 – Protection of Minority Security Holders in Special
Transactions (“MI 61-101”). A Special Committee of
the Board of Directors (the “Special Committee”)
comprised of Doug Alexander, Sara Elford, David Ferguson and Don
Lowry was formed to, among other things, review, evaluate and
negotiate the terms of the Transaction, make recommendations to the
Board of Directors in respect of the Transaction, and supervise the
preparation of a formal valuation of the fair market value of the
Shares in accordance with MI 61-101.
Origin Merchant Partners
(“Origin”) was retained by the Special Committee
as an independent financial advisor and to prepare, under the
Special Committee’s supervision, a formal valuation in accordance
with the requirements of MI 61-101. Houlihan Lokey Capital, Inc.
(“Houlihan Lokey”) was retained by the Company as
financial advisor to the Company.
Origin has provided its conclusion that, as of
June 26, 2019, the fair market value of the Shares was between
US$12.41 and US$16.36. Origin has also provided a fairness opinion
to the Special Committee and Houlihan Lokey has provided a fairness
opinion to the Board of Directors, stating in each case, that in
its opinion, as of June 28, 2019 and subject to the
assumptions, limitations, qualifications and other matters
considered in connection with the preparation of such opinion, the
consideration to be received by Shareholders (other than The
Hydrogen Company and its affiliates) pursuant to
the Transaction is fair, from a financial point of view, to
such Shareholders.
After consideration of, among other things, the
conclusions of Origin as to the fair market value of the Shares,
the fairness opinion of Origin, the advice of the Company’s legal
advisors, and the terms and conditions set forth in the Arrangement
Agreement, the Special Committee unanimously recommended that the
Board of Directors approve the Transaction and recommend to
Shareholders (other than The Hydrogen Company and its
affiliates) that they vote in favour of the Transaction.
The Board of Directors, after receiving
financial and legal advice and following receipt of the fairness
opinion of Houlihan Lokey and the unanimous recommendation of the
Special Committee, unanimously approved the Transaction and
recommended that Shareholders vote in favour of the Transaction.
Mr. Pierre-Etienne Franc, an officer of an affiliate of Air
Liquide and The Hydrogen Company’s nominee director, declared
a conflict and recused himself from consideration of and voting on
the Transaction.
Copies of the fairness opinions of Origin and
Houlihan Lokey and a copy of the formal valuation of the fair
market value of the Shares in accordance with MI 61-101 prepared by
Origin, and other relevant background information, will be included
in the management information circular (the
“Circular”) of the Company to be prepared in
connection with a special meeting of Shareholders expected to be
held in August 2019 to consider and vote on the Transaction. The
Company will send the Circular and certain related documents to
Shareholders and copies will be filed under the Company’s profile
on SEDAR at www.sedar.com and on EDGAR on the U.S. Securities
and Exchange Commission’s website at www.sec.gov.
Transaction Details
The Transaction is structured as a statutory
plan of arrangement under the Canada Business Corporations Act. The
Transaction requires approval of at least 662/3% of the votes cast
by Shareholders, as well as the approval by a simple majority of
votes cast by disinterested Shareholders, excluding Shares
held by The Hydrogen Company and its affiliates, and any other
Shareholders required to be excluded under MI 61-101. The Hydrogen
Company has entered into a voting and support agreement with
Cummins and the Purchaser to vote in favour of the
Transaction. The directors and senior officers of the
Company, who as of the date hereof collectively hold approximately
1% of the issued and outstanding Shares, have also entered into
voting and support agreements with Cummins and the Purchaser
to vote in favour of the Transaction. The Transaction is also
subject to the approval of the Ontario Superior Court of Justice
and the satisfaction of other customary closing conditions.
The Arrangement Agreement provides for, among
other things, customary representations, warranties and covenants,
including customary non-solicitation covenants from the Company and
a “fiduciary out” that allows the Board of Directors to accept a
superior proposal in certain circumstances subject to a “right to
match” in favour of the Purchaser and payment by the Company of a
US$8.9 million termination fee to the Purchaser.
The Transaction is expected to be completed in
Q3 2019.
The foregoing summary is qualified in its
entirety by the provisions of the Arrangement Agreement, a copy of
which will be filed under the Company’s profile on SEDAR at
www.sedar.com and on EDGAR on the U.S. Securities and Exchange
Commission’s website at www.sec.gov.
Advisors
Houlihan Lokey is serving as financial advisor and Torys LLP is
serving as legal counsel to the Company.
Origin is serving as independent financial advisor to the
Special Committee and formal valuator.
Morgan Stanley & Co. LLC is serving as financial
advisor, and Gowling WLG (Canada) LLP and Barnes &
Thornburg LLP are serving as legal counsel to Cummins.
Stikeman Elliott LLP and Dorsey & Whitney LLP are
serving as legal counsel to Air Liquide.
About Hydrogenics
Hydrogenics Corporation (www.hydrogenics.com) is
a world leader in engineering and building the technologies
required to enable the acceleration of a global power shift.
Headquartered in Mississauga, Ontario, Hydrogenics provides
hydrogen generation, energy storage and hydrogen power modules to
its customers and partners around the world. Hydrogenics has
manufacturing sites in Germany, Belgium and Canada and service
centers in Russia, Europe, the US and Canada.
Forward-looking Statements This
release contains forward-looking statements within the meaning of
the “safe harbor” provisions of the U.S. Private Securities
Litigation Reform Act of 1995, and under applicable Canadian
securities law. These statements are based on management’s current
expectations and actual results may differ from these
forward-looking statements due to numerous factors, including: our
inability to increase our revenues or raise additional funding to
continue operations, execute our business plan, or to grow our
business; inability to address a slow return to economic growth,
and its impact on our business, results of operations and
consolidated financial condition; our limited operating history;
inability to implement our business strategy; fluctuations in our
quarterly results; failure to maintain our customer base that
generates the majority of our revenues; currency fluctuations;
failure to maintain sufficient insurance coverage; changes in value
of our goodwill; failure of a significant market to develop for our
products; failure of hydrogen being readily available on a
cost-effective basis; changes in government policies and
regulations; failure of uniform codes and standards for hydrogen
fuelled vehicles and related infrastructure to develop; liability
for environmental damages resulting from our research, development
or manufacturing operations; failure to compete with other
developers and manufacturers of products in our industry; failure
to compete with developers and manufacturers of traditional and
alternative technologies; failure to develop partnerships with
original equipment manufacturers, governments, systems integrators
and other third parties; inability to obtain sufficient materials
and components for our products from suppliers; failure to manage
expansion of our operations; failure to manage foreign sales and
operations; failure to recruit, train and retain key management
personnel; inability to integrate acquisitions; failure to develop
adequate manufacturing processes and capabilities; failure to
complete the development of commercially viable products; failure
to produce cost-competitive products; failure or delay in field
testing of our products; failure to produce products free of
defects or errors; inability to adapt to technological advances or
new codes and standards; failure to protect our intellectual
property; our involvement in intellectual property litigation;
exposure to product liability claims; failure to meet rules
regarding passive foreign investment companies; actions of our
significant and principal shareholders; dilution as a result of
significant issuances of our common shares and preferred shares;
inability of US investors to enforce US civil liability judgments
against us; volatility of our common share price; and dilution as a
result of the exercise of options; and failure to meet continued
listing requirements of Nasdaq. Readers should not place undue
reliance on Hydrogenics’ forward-looking statements. Investors are
encouraged to review the section captioned “Risk Factors” in
Hydrogenics’ regulatory filings with the Canadian securities
regulatory authorities and the US Securities and Exchange
Commission for a more complete discussion of factors that could
affect Hydrogenics’ future performance. Furthermore, the
forward-looking statements contained herein are made as of the date
of this release, and Hydrogenics undertakes no obligations to
revise or update any forward-looking statements in order to reflect
events or circumstances that may arise after the date of this
release, unless otherwise required by law. The forward-looking
statements contained in this release are expressly qualified by
this paragraph.
For further information,
contact:
Daryl Wilson Chief Executive Officer (905)
361-3660investors@hydrogenics.com Marc Beisheim Chief Financial
Officer (905) 361-3660 investors@hydrogenics.com
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