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Emefcy Group (EMC-ASX) merges with RWL Water to create Fluence Corp in transaction valued at $112m

Emefcy Group Limited (EMC-ASX) and RWL Water LLC have completed their merger. The company have been renamed Fluence Corporation Limited (FLC-ASX). Cadmon Advisory acted as corporate advisor to Emefcy.

The merger is intended to create a global provider of innovative, decentralized water and wastewater treatment solutions for both municipal and industrial applications. On a pro-forma basis, the combined company has been growing at an annual compounded rate of revenue growth in excess of 20% for several years and anticipates revenues of over US$90M (A$120M) in CY2017, 71% of which is committed as of April 30 2017. The combined company also anticipates increasing gross margin and recurring revenue by adding Emefcy’s disruptive technological innovations to RWL Water’s standardized solution suite.

Emefcy issued 100.5 million new ordinary shares as the purchase consideration for all of RWL Water’s equity interests and pay US$10,000 in cash. Those shares will be subject to a voluntary escrow for 2 years following closing. RWL Water’s current sole member, an entity owned by Mr Ronald S. Lauder, has also acquired an additional US$20M of Emefcy’s ordinary shares in a private placement at an issue price of A$0.85 per share, which is an additional 31.4 million Emefcy shares.

Mr Ronald S. Lauder, Chairman, Founder and sole owner of RWL Water, stated:

“We set out in 2010 to create one of the leading water and wastewater treatment companies in the world. Seven years later, I am incredibly proud to have achieved more than we could have imagined. By creating Fluence, we are now taking RWL Water and Emefcy to the next level through the unique combination of breakthrough innovations and rapid deployment of standardized solutions by proven teams. I look forward to remaining a significant shareholder of Fluence and seeing the fulfillment of the legacy I set out to create in the water space by originally establishing RWL Water.”

The merged company Fluence is expected to quickly capitalize on several key opportunities, including:

– Fluence’s broad set of water and wastewater solutions would be focused on the rapidly growing market for decentralized treatment, projected to grow from $13billion (A$17 billion) in 2016 to $22 billion (A$29 billion) in 2021;

– The companies believe that Fluence can become a key player in this market, which today is served mainly by regional providers that cannot offer full, turn-key solutions;

– Fluence would combine Emefcy’s disruptive pipeline of innovation with RWL Water’s proven global and rapid deployment of standardized solutions. It is anticipated that the combined company would accelerate penetration of the massive China rural wastewater treatment market, projected to be worth US$15 billion (A$20 billion) over the next five years;

– Fluence would be positioned to capture numerous opportunities in other key markets such as water stressed regions (particularly the United States, the Middle East and Latin America), and segments including commercial and industrial sites and tropical island resorts;

– It is expected that Fluence would create substantial sales synergies between Emefcy and RWL Water products and systems; and

– It is anticipated that Fluence’s strong market position will result in even faster revenue growth, improving gross margins and growing recurring revenue streams.

UBS acted as financial advisor to Emefcy and Hall & Wilcox served as legal counsel. Mr Ronald S. Lauder and RWL Water are being advised by Spencer D. Smith, RWL Water’s General Counsel, Debevoise & Plimpton LLP and Clifford Chance.

For any merger and acquisition assistance please get in touch with Cadmon Advisory.