H2O Innovation acquisition to add $34.5M in topline revenues
H2O Innovation Inc (TSXV: HEO | OTCQX: HEOFF) reported on July 13 the $17 M acquisition of Utility Partners LLC, a US-base company specializing in the operation and maintenance of water and wastewater treatment plants.
The news was well received by investors. The company closed up significantly last week rallying $0.19 or 13.8% to $1.67 and setting a new high. Shares have gained 51.82% year to date well in excess of the 3.06% of the S&P TSX.
With a market capitalization of $35 M, we reported previously that H2O Innovation Inc is the biggest little company in the water filtration space. Perhaps no longer.
The acquisition of Utility Partners LLC is expected to add $34.5M in topline revenues and add $2.9 M in EBITDA.
But more importantly the deal will add a third complementary business pillar with an enhanced presence is the thirsty US market.
H2O Innovation Inc plans to finance the acquisition of Utility Partners LLC through equity financing involving a $18.4 M bought deal private placement. Currently H2O Innovation Inc is in the process of completing a non-brokered private placement with certain company insiders in the amount of $ 1.6 M and an additional $10 M long-term secured credit facility.
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The Globe and Mail wrote about H2O Innovation: “Based on its net profit margin of 1.16%, H2O Innovation Inc is among the more effective companies in its industry at turning revenues into bottom line profit.”
Last year the company posted increased revenues by 40% and the international community is also taking notice. In April 2016, H2O Innovation Inc (TSX-V:HEO) received the Water Technology Company of the Year Award at the 2016 Global Water Awards, which took place in Abu Dhabi, United Arab Emirates. Former president of Mexico (2006-2012) chaired the event as the Chairman of the Global Commission on the Economy and Climate.
With 168 employees in offices and/or facilities in Quebec City, Toronto, Minnesota, Calgary and San Diego this company’s potential for growth is worth watching because of its position in the water purification space.
Water filtration using membrane technology is a growth sector. The global demand for membrane filtration modules was estimated at approximately 15.6 billion USD in 2012. Driven by new developments and innovations in material science and process technologies, global increasing demands, new applications, and others, the market is expected to grow around 8% annually in the next years. It is predicted to increase to 21.22 billion USD in 2016 and reach 25 billion in 2018.
Potable water is the elephant in the room that investors with a long view should consider.
There are two issues of concern about potable water: its quality and its quantity. In developed countries water quality is a technological issue in a well-established industry. A bigger concern is how climate change is affecting our current food production.
In 2006, there was 1.15 acres of arable land per person, worldwide (i.e. 7.68 billion acres / 6.68 billion people). By 2039, there may be only 0.59 acres of arable land per person, worldwide (i.e. 7.68 billion acres / 13 billion people). Food shortage equals conflict.
Dr. Luc C. Duchesne is a Speaker and Author with a PhD in Biochemistry. With three decades of scientific and business experience, he has published ... <Read more about Dr. Luc Duchesne>