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Press release from CNW Group

WESA and Seprotech announce letter of intent for proposed merger

Wednesday, May 02, 2012

WESA and Seprotech announce letter of intent for proposed merger09:49 EDT Wednesday, May 02, 2012OTTAWA, May 2, 2012 /CNW/ - Seprotech Systems Incorporated (TSXV: SET) ("Seprotech") and WESA Group Inc. ("WESA") today announced that they have entered into a non-binding letter of intent under which Seprotech will acquire 100% of privately-held WESA in a reverse takeover (the "Transaction"). Upon completion of the Transaction, the combined entity (the "Resulting Issuer") is expected to be a leading provider of earth sciences, water resources and environmental engineering services, and wastewater/water treatment systems. The intent is to build an integrated Product and Service organization that provides intelligent solutions to complex environmental problems both in Canada and abroad.According to Seprotech's CEO, Harry Marshall, "this combination takes Seprotech immediately to a new level of capabilities - financial, technical and customer reach. WESA's size and revenue base will provide financial strength, their network of offices and extensive client base will provide a new platform for enhancing our visibility in the marketplace, and their team of some 125 engineering, professional and project staff will provide welcome support to our technical and project management team."WESA's CEO, Roger Woeller stated, "the synergy between the two companies is striking - each company has personnel who have previously worked at the other, we share similar customer sectors from mining to land developers to municipalities, our geographic reaches are similar and we are already collaborating on a number of projects together. Combined, we are able to provide our clients with a much broader spectrum of professional services and complete systems to solve their problems. We see Seprotech's public company status and their current base of business in the water industry as a platform for much more rapid growth than we otherwise could have achieved alone."CEO of the Resulting Issuer, William Touzel explained that: "our plan is to operate in two distinct divisions. We will combine the operations of our WESAtech subsidiary, which was previously run by Harry Marshall, who is now CEO of Seprotech, into Seprotech's operation to form a unified technology systems division, and WESA's environmental consulting division will continue to provide independent professional services to our clients."Information Concerning WESAWESA was founded in 1978 under the laws of Ontario. WESA is a professional services company focussed on environmental earth sciences, water resources, waste management, occupational health, safety and hygiene and renewable energy needs of industry and all levels of government. WESAtech, a wholly-owned subsidiary, supplies turn-key water treatment systems to industry, and in particular the mining sector. More information can be obtained at www.wesa.caSelected WESA Financial Information (000s - Unaudited) 201120102009Revenue$22,554$20,417$22,649Gross Margin$4,464$4,496$4,437Operating Income$1,108$1,359$1,260Net Income$157$230$566Total Assets$12,447$13,207$11,492Total Liabilities$6,829$7,883$6,445Shareholder Equity$5,480$5,199$4,969WESA InsidersNameCapacityResidenceRoger M. WoellerCEO, DirectorOntarioWilliam M. TouzelPresident, CFO & DirectorOntarioHarry J. MarshallDirectorOntarioWayne L. InghamDirectorOntarioFrancois A. RichardDirectorQuebecAndre Y. D'AstousDirectorQuebecC. Ronald DonaldsonDirectorOntarioNell van WalsumDirectorQuebecDavid W. HopperDirectorOntario10% ShareholdersRoger M. Woeller and spouse beneficially own approximately 20.9% of WESA; C. Ronald Donaldson and spouse beneficially own approximately 12.54% of WESA, and Nell van Walsum and Andre Y. D'Astous beneficially own approximately 12.54% of WESA.Existing RelationshipsWilliam B. Touzel, a Director of Seprotech, is also President of WESA, and is beneficial owner of 52,500 common shares of WESA, representing approximately 8.6% of the issued and outstanding common shares.Harry J. Marshall, a director and officer of Seprotech, is a director of WESA, but does not own any shares of WESA.Transaction SummaryThe Transaction is an arm's length transaction and will constitute a reverse-takeover pursuant to the policies of the TSX Venture Exchange ("TSX.V"). Completion of the Transaction ("Closing") is subject to the entering into by Seprotech and WESA of a definitive share exchange agreement, and to several conditions, including, but not limited to the approval of a simple majority of Seprotech shareholders. Seprotech intends to convene a special meeting of shareholders (the "Meeting") to seek such shareholder approval as soon as possible following the signing of a definitive share exchange agreement and receipt of all required TSX.V approvals. The other conditions are summarized below.Seprotech currently has issued and outstanding 62,921,926 common shares, and 6,230,000 options to purchase Seprotech common shares, at prices ranging between $0.10 and $0.26 per share.At the Meeting, Seprotech also intends to seek the approval of its shareholders to consolidate its common shares on a 1 for 10 basis (the "Consolidation"). Assuming completion of the Consolidation, Seprotech would have issued and outstanding, immediately prior to Closing (i) 6,292,193 post-consolidation Seprotech common shares and (ii) options to purchase 623,000 common shares, each exercisable at a price of from $1.00 - $2.60 per share.It is currently contemplated that the Transaction will be completed by way of a share exchange agreement pursuant to which Seprotech will acquire all of the issued and outstanding shares of WESA in consideration for the issuance to WESA of 14,157,433 post-consolidation shares of Seprotech, each at a deemed value of approx. $0.664 per share for aggregate consideration of $9,400,000. Upon Closing, WESA will become a wholly-owned subsidiary of Seprotech and WESA will control approximately 69.23 % of the Seprotech common shares of the Resulting Issuer.Pursuant to the LOI, WESA has agreed to provide to Seprotech a secured credit facility of up to $2,000,000 to be available at the sole discretion of WESA upon the approval of the TSX.V and completion of documentation.Management and Board of Directors of Resulting IssuerEffective upon Closing, the board of directors of the Resulting Issuer will consist of five members, comprising the CEO, one to be nominated by each of WESA and Seprotech, and two independent directors to be jointly nominated.The Chief Executive Officer of the Resulting Issuer will be William M. Touzel, who is presently President of WESA; the Chief Financial Officer will be Ian. W. Malone, presently Chief Financial Officer of Seprotech. The other senior management of both companies will continue to play active roles in the combined entity.Conditions to the TransactionThe proposed Transaction is subject to a number of terms and conditions including the parties entering into a definitive agreement with respect to the Transaction (such agreement to include representations, warranties, conditions and covenants typical for a transaction of this type), the completion of satisfactory due diligence investigations, the approval of the directors and shareholders of each of Seprotech and WESA,  the approval of the TSX.V and other relevant  regulatory authorities, and various other customary conditions that must be satisfied prior to closing, which is expected to take place no later than August 31, 2012.Seprotech also advises that its debenture in a principal amount of $705,000 matured on April 30, 2012. In light of the proposed Transaction, the Company will ask its debenture holders to agree to the conversion of 50% of the debenture to common shares of the Company at a deemed (pre-consolidation) price of $0.10 per share, subject to the approval of the TSX.V; and to the repayment over 12 months of the remaining 50% of the debenture in equal monthly payments commencing May 15, 2012. It is expected that this, or a comparable arrangement acceptable to both Seprotech and WESA, will be completed prior to completion of the proposed Transaction.Other InformationTrading in Seprotech common shares will remain halted pending the satisfaction of all applicable requirements of the TSX.V. There can be no assurance that trading in Seprotech common shares will resume prior to the completion of the Transaction. Further details concerning the Transaction, WESA (including additional financial information) and other matters will be announced when a definitive agreement is reached.Seprotech will engage a sponsor in connection with the Transaction if required in accordance with applicable TSX.V policies.About SeprotechSeprotech is a provider of engineered water and wastewater treatment solutions to the municipal/land development, resource sector and military market place, including Reverse Osmosis water purification systems, ROTORDISK® biological sewage treatment package plants and CrystalBlue™ membrane-based water recycling systems. More information can be obtained at www.seprotech.comForward-looking Statements This news release contains certain "forward looking statements" within the meaning of applicable securities laws. Seprotech has made numerous assumptions regarding, among other things, the ability of Seprotech and WESA to satisfy all the closing conditions to complete the Transaction. Readers are cautioned that the plans, intentions or expectations disclosed in any forward-looking statements and underlying assumptions may not be achieved and that they should not place undue reliance on any forward-looking statement, each of which is expressly qualified in its entirety by this cautionary statement.Although the Company believes that the expectations conveyed by the forward-looking information are reasonable based on information currently available to it, these statements are not guarantees and involve a number of risks, uncertainties and assumptions, both known and unknown. The results or events depicted in these forward-looking statements may differ materially from actual results or events. Many factors could cause results to differ materially from those stated including, but not limited to: the Transaction may not be completed upon the terms contemplated herein, or at all; the possibility of not satisfying all of the closing conditions to complete the Transaction; the possibility that Seprotech's shareholders do not approve the Transaction at the special meeting of shareholders; difficulties or delays in obtaining regulatory approvals; the ability of WESA or Seprotech to retain existing customer contracts; risks related to integration of acquisitions; and the ability to retain and obtain qualified staff as well as various other factors which are discussed in Seprotech's filings with applicable securities regulatory authorities at www.sedar.comAny forward-looking statement speaks only as of the date of this news release and, except as may be required by applicable securities laws, Seprotech disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise.All information contained in this press release relating to WESA was provided by WESA for inclusion herein. Seprotech has not independently verified such information and shall bear no liability for any misrepresentation contained herein.Completion of the Transaction is subject to a number of conditions, including, but not limited to, acceptance by the TSX.V and disinterested shareholder approval. The Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.Investors are cautioned that, except as disclosed in the management information circular or filing statement, as applicable, of Seprotech to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon. Trading in the securities of Seprotech should be considered to be highly speculative.The TSX.V has in no way passed upon the merits of the proposed Transaction, and neither TSX.V nor its Regulation Services Provider (as that term is defined in the policies of the TSX.V) accepts responsibility for the adequacy or accuracy of this release. The TSX.V has neither approved nor disapproved of the information contained herein.   For further information: Mr. Ian W. Malone, CFO Tel: (613) 523-1641 Fax: (613) 731-0851