Ballard Power Systems signed a definitive agreement to acquire Protonex Technology Corporation, a designer and manufacturer of advanced power management products and portable fuel cell solutions, in a transaction valued at $30 million.
Ballard is assuming and paying Protonex’s debt obligations at closing, currently estimated at approximately $4.4 million, and paying the balance of approximately $25.6 million through the issuance of 11.2 million Ballard shares. The number of Ballard shares to be issued is subject to adjustment based on the final debt obligations at closing.
Founded in 2000, Protonex is a private company headquartered in Southborough, Massachusetts and currently has 53 employees and approximately 85 patents issued and pending in power management solutions, proton exchange membrane (PEM) fuel cells, solid oxide fuel cells (SOFC), and fuel reformer technology which generate clean energy from readily available fuels such as propane, natural gas or diesel. In its last fiscal year ending 30 September 2014 Protonex generated revenue of $13.8 million with 40% gross margin and positive Adjusted EBITDA.
Ballard said it expects the benefits of the transaction to include:
Diversification. The deal adds power management capabilities along with small-scale portable products to Ballard’s Power Products portfolio. Power management capability will enable Ballard to link fuel cell, solar and storage technologies to deliver clean energy simply and efficiently. The transaction also provides exposure to military applications for power management products, as well as the opportunity to penetrate this vertical with fuel cell products in the longer-term.
Growth. The deal will enhance Ballard’s overall growth profile as Protonex has enjoyed a compound annual growth rate in revenue of approximately 22% since 2011 and is forecasting further significant growth in 2015 and 2016.
Scale. Ballard's consolidated revenue will show a significant top line improvement following the transaction.
Profitability. Protonex generates high margin revenue that will positively impact not only Ballard’s top line but the bottom line as well, moving the company more rapidly toward positive earnings.
Ballard expects the Protonex employee base and leadership team to remain intact, including Dr. Paul Osenar, co-founder, President and CEO of Protonex, who is expected to continue in his current leadership role as President of Protonex.
The transaction is expected to close in the third quarter of 2015, subject to Protonex shareholder approval, regulatory approvals and customary closing conditions. The transaction requires approval of shareholders holding more than 50% of the Protonex shares. Ballard has entered into support and voting agreements with each of the directors and executive officers of Protonex, as well as certain major shareholders of Protonex, who collectively hold more than 50% of the currently outstanding shares of Protonex, under which those holders have irrevocably agreed to vote in favor of the transaction.
Cowen and Company is acting as financial advisor to Ballard. KPMG is acting as financial advisor to Protonex.