01:49:02 EDT Fri 29 Mar 2024
Enter Symbol
or Name
USA
CA



Thermal Energy International Inc
Symbol TMG
Shares Issued 159,088,949
Close 2018-06-29 C$ 0.085
Market Cap C$ 13,522,561
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Thermal Energy acquires Boilerroom for $2.25M (U.S.)

2018-06-29 10:41 ET - News Release

Mr. William Crossland reports

THERMAL ENERGY ACQUIRES BOILERROOM EQUIPMENT INC.

Thermal Energy International Inc. has acquired all of the outstanding shares of privately held Boilerroom Equipment Inc. based just outside of Pittsburgh, Pa. This acquisition is part of the company's strategy to develop a broad portfolio of thermal energy efficiency solutions targeted at the industrial, institutional and commercial markets, and become a unique one-stop shop for all of its clients' thermal energy efficiency and heat recovery needs, whether they need heat recovery for thermal, electrical, drying, cooling or other process needs.

The purchase price is $2.25-million (U.S.), plus earn-out consideration of up to $350,000 (U.S.) if certain growth and performance targets are achieved over the next three years.

Thermal Energy has received a term loan in the principal amount of $2.25-million (U.S.) from BDC Capital Inc., a wholly owned subsidiary of the Business Development Bank of Canada to finance the transaction.

Based in Export, Pa., BEI engineers and manufactures the Heatsponge brand of best-in-class indirect contact heat recovery units for use in both commercial and industrial steam and hot water applications.

The acquisition of BEI is expected to provide Thermal Energy with the following immediate benefits:

  • Expanded complementary product offering to include indirect contact heat exchangers;
  • Increased distribution network, providing access for all Thermal Energy's current offerings to over 40 independent reps covering the United States as well as an established and direct boiler original equipment manufacturer sales channel;
  • Expansion into the much larger commercial buildings and hot water boilers markets;
  • Proprietary, scalable automated proposal development software, Bruce;
  • Sales, marketing, engineering, and project management expertise and efficiencies with scalable operating platform;
  • Vertical integration of an American Society of Mechanical Engineers code fabrication facility in the United States allowing for the potential future.

"The addition of BEI supports our growth strategy by expanding our team, distribution and product offering," said William Crossland, chief executive officer of Thermal Energy. "This makes Thermal Energy the only known global supplier of direct and indirect contact heat recovery systems. In the past, these two options have competed against each other, but now Thermal Energy has brought them together. As the global market moves more toward sustainability, the effective use of waste heat becomes paramount. Whether waste heat is used directly at the client site, or used to produce cooling or electricity at neighbouring sites, the market for waste energy is extensive. With this acquisition, we are uniquely positioned to take advantage of this existing trend. In this way, this transaction brings together two very complementary organizations and is expected to add shareholder value through increased sales and earnings. We also expect to benefit from BEI's strong United States distribution network and established boiler OEM relationships. Similarly, there is potential for further growth using Thermal Energy's global footprint to accelerate the deployment of BEI's technologies. We are already very familiar with, and impressed by, BEI's products, having integrated them into several of our projects over the years."

"I would also like to take this opportunity to welcome Vince Sands, PE, co-founder and current president of BEI, and his team to our company," added Mr. Crossland. "As a registered professional engineer with a bachelor of science in naval architecture and marine engineering from the United States Merchant Marine Academy, master's degree in business administration studies, and a former United States Navy and U.S. Coast Guard licenced engineering officer, Vince brings over 25 years of related industry experience and expertise to the combined business. In addition to being responsible for all sales, engineering and product development at BEI, Vince developed the heat transfer algorithms and computer code for their unmatched Bruce engineering software."

Mr. Sands commented: "We are extremely pleased to be a part of Thermal Energy International. While I am very proud of the company we founded and built, we recognized that for BEI to achieve everything it is capable of would require partnering with a larger organization that can provide the resources BEI needs. It is my strong opinion that our Heatsponge line of steam boiler economizers represents the most advanced technology available to the global heat recovery market. Our Sidekick and Rainmaker technologies have the potential to reshape the hydronic boiler market unlike any product since the development of the condensing boiler. We have invested over three years seeking the ideal acquisition partner and could not be more pleased in becoming a part of Thermal Energy. There is a real synergy between their direct contact and our indirect contact approach to heat recovery. Having supplied heat exchangers to Thermal Energy for years will make integration much smoother because of the established relationships. Most importantly, they share my passion to establish Heatsponge as the global leader in indirect heat recovery, which is going to make the next few years very exciting."

The acquisition expands Thermal Energy's complementary product offering to include BEI's indirect contact heat recovery products, which are scalable and customizable with minimal additional engineering. In addition to large industrial and institutional applications, these products are well suited for the commercial market as well as smaller industrial and institutional sites that are not currently cost-effective for Thermal Energy's FLU-ACE heat recovery systems.

The acquisition also provides Thermal Energy with access to an engineered products distribution network of independent manufacturers' representatives in the United States, Canada and parts of South America, as well as an established direct sales channel to boiler equipment manufacturers.

The $2.25-million (U.S.) purchase price is subject to a holdback of $250,000 (U.S.) to be held for a period of 18 months following the closing of the acquisition in respect of certain indemnification obligations. Upon release, the balance of the holdback amount can be paid in cash or by the issuance of Thermal Energy shares, at the option of the vendors. In the event that Thermal Energy opts to pay the earn-out consideration by the issuance of shares, those share will be issued at a price per share equal to the greater of the 52-week volume weighted average price of shares of the company on the exchange ending on the day prior to the day that the relevant earn-out payment is due to be paid and the discounted market price (as such term is defined in the exchange's Policy 1.1). In the event that the vendors opt to have the holdback amount satisfied by the issuance of shares, those share will be issued at a price per share equal to the greater of the five-day volume weighted average price of shares of the company on the exchange ending on the day prior to the closing of the acquisition and the discounted market price (as such term is defined in the exchange's Policy 1.1). BEI's annual sales in each of the last two years was approximately $1.8-million (U.S.) while net income after adjusting for non-recurring expenses was $248,000 last year and $201,000 the year before.

BDC Capital's growth and transition team provided a $2.25-million (U.S.) loan to Thermal Energy in support of the BEI acquisition. The debt is secured by Thermal Energy International and each of its material subsidiaries, has a term of 84 months and a floating interest rate. The initial interest rate is 9.1 per cent.

"We're proud to support Thermal Energy's continued growth in this key industry sector. By expanding its product suite and distribution network, we believe this acquisition will further solidify Thermal Energy as an energy efficiency and emissions reduction industry leader," says Sean Crouse, director of BDC growth and transition capital for the Ottawa/Outaouais regions.

About Boilerroom Equipment Inc.

Boilerroom Equipment was, prior to the acquisition, a privately held U.S. company based in Export, Pa., focused on the design, engineering and manufacturing of its proprietary Heatsponge indirect contact heat recovery systems. BEI was founded in 2005 by Mr. Alberts and Mr. Sands, PE, with the vision of producing the most advanced technology for the commercial and industrial boiler industries supported by a new generation of automated design software. Easily maintainable and available in various metallurgies best suited to each individual application, the Heatsponge represents the state-of-the-art in global indirect contact boiler design.

About Thermal Energy International Inc.

Thermal Energy International is an established global supplier of proprietary, proven energy efficiency and emissions reduction solutions to the industrial and institutional sectors. The company saves its customers money and improves their bottom line by reducing their fuel use and cutting their carbon emissions.

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