CINCINNATI and DALLAS,
May 4, 2015 /PRNewswire/
-- CECO Environmental Corp. ("CECO") (NasdaqGM: CECE) and
PMFG, Inc. ("PMFG") (NasdaqGM: PMFG), today jointly announced
that the companies have entered into a definitive merger agreement
in which CECO will acquire PMFG. CECO is a leading global
environmental, energy and fluid handling technology company. PMFG
is a global provider of engineered equipment for the abatement of
air pollution, the separation and filtration of contaminants from
gases and liquids, and industrial noise control equipment. The
transaction is expected to close in the third quarter of 2015. CECO
expects the transaction to be accretive in 2016.
Pursuant to the merger agreement, CECO will acquire all of the
outstanding shares of PMFG common stock for cash and stock valued
at $6.85 per share (approximately
$150 million equity value or
$130 million enterprise value),
representing a 48% premium to PMFG's closing share price on
May 1, 2015. PMFG's shareholders may
elect to exchange each share of PMFG common stock for either
$6.85 in cash or shares of CECO
common stock having an equivalent value based on the volume
weighted average trading price of CECO common stock for the
15-trading day period ending on the trading day immediately
preceding the closing of the merger, subject to a collar. Elections
are subject to proration such that PMFG's outstanding shares will
be exchanged for approximately 55% of CECO common stock and 45%
cash.
The completion of the merger is subject to customary closing
conditions including the approval of the stockholders of both CECO
and PMFG and antitrust approval. CECO has received a financing
commitment from Bank of America Merrill Lynch, as Lead Arranger and
Administrative Agent, to increase and amend its existing senior
credit facility in connection with the merger. The board of
directors of each of CECO and PMFG has unanimously approved the
transaction. CECO stockholders who combined own approximately 15%
of the voting power of CECO have signed voting agreements and
irrevocable proxies to vote in favor of the transaction.
Transaction Benefits
CECO and PMFG's products and end markets are highly
complementary and when combined will represent one of the most
comprehensive product portfolios in the industry with approximately
$500 million in environmental, energy
and fluid handling-related revenue. Some key highlights of the
combination include the following:
- Enables CECO to leverage both companies' blue-chip technology
portfolios and highly respected brand-name products (80 years on
average) across a variety of applications. The combination of these
portfolios will allow the combined company to provide a more
comprehensive customer solution from a single source provider.
- The combination of both silencer technology brands (Burgess
Manning at PMFG and Aarding at CECO) will create a leading global
manufacturer within the noise reduction and abatement market
segment with expanded product alternatives and increased
opportunities for the reduction of sourcing costs.
- PMFG brings one of the leading Selective Catalytic Reduction
(SCR) and Selective Non-Catalytic Reduction (SNCR) technologies to
the portfolio, which are critical to the control of emissions in
both utility and industrial power generation facilities. The
addition of PMFG's SCR and SNCR technologies to CECO's product
portfolio is key to its goal of becoming a complete solutions
provider to its customers in the power generation and industrial
end markets as well as expanding its presence along the energy
value chain.
- PMFG's recently acquired CCA Combustion Systems represents
another significant addition to CECO's air pollution control
business providing critical combustion control technologies used to
reduce air pollutants at the point of combustion for a variety of
facilities including utility power plants, paper & pulp mills,
chemical plants, oil refineries and ethanol plants.
Accordingly, CCA is an ideal technology to integrate within
the OneCECO sales initiative.
- Enhanced selling opportunities through each company's
respective sales channels and cross-selling products to customers
across all industries and geographies. Examples include the ability
to sell PMFG's environmental products and services through CECO's
robust sales network in China and
increasing CECO's European sales through PMFG's well-established
sales channels in Europe and the
Middle East.
- The combination will further broaden CECO's client base for
after-market sales and recurring revenue as a larger installed base
can be targeted. CECO has made significant investments in building
a sales organization focused on targeting key purchasing decision
makers at the customer level including facility operators and
procurement teams, which are critical relationships to secure
after-market orders. The addition of PMFG gives CECO a combined
installed base of $5 billion, which
significantly expands the opportunity to drive recurring revenue
across the company.
Cost Reductions and Operating Synergies
The larger scale and scope of the business will generate
numerous opportunities to improve the combined company's overall
cost structure and create operating efficiencies. This combination
is expected to generate improved margins by leveraging PMFG's
impressive gross margins, while implementing CECO's Operational
Excellence program. CECO will focus the initial integration efforts
on the following areas:
- Reducing the overlap of the combined company's global footprint
by integrating their respective global supply chains, as well as
increasing the operational efficiencies of the combined
organization's manufacturing facilities by leveraging CECO's
asset-light strategy.
- Improving the efficiency of operating expenditures by
consolidating service relationships, eliminating redundant
activities and facilities, and driving out costs that are not
tightly aligned with CECO's global growth strategy.
- Combining best-in-class practices and implementing CECO's focus
on SG&A efficiencies.
In the aggregate, cost savings are estimated to be approximately
$15 million and are expected to be realized over 24 months
following the close of the transaction. These cost savings
will be implemented while CECO maintains a critical focus on
strengthening customer and supplier relationships, maintaining
quality control and ensuring employee retention.
Jeff Lang, Chief Executive
Officer of CECO stated, "This is a major step in the evolution of
CECO and we are very excited to bring PMFG into the CECO family.
PMFG's product portfolio is highly complementary to our existing
businesses, while enabling us to expand into a number of new
applications and growth markets. Not only do we see compelling
potential growth opportunities, but believe by combining PMFG's
operations into our own, there are significant opportunities for
cost reductions that will expand margins and drive returns for our
shareholders. In regard to our balance sheet, CECO has a solid
history of generating strong free cash flow, which we will use to
quickly drive our debt coverage ratio back towards our target of
2.0 times."
Mr. Lang continued, "I would like to thank the PMFG team for
their significant work and effort on this endeavor. PMFG has a
world class operation with strong talent throughout the
organization. We are looking forward to their contributions at
CECO. Our organizations have a shared vision of global growth,
margin expansion and generating long-term value for our
shareholders."
Peter J. Burlage, Chairman and
Chief Executive Officer of PMFG commented, "We are excited to be
joining forces with CECO and believe the scale and synergies
generated by this combination are superior to what could be
captured by either organization independently. Furthermore, the
structure enables our shareholders to participate in the upside
opportunity. The PMFG team is looking forward to working with the
CECO team to drive this transaction forward to the benefit of our
customers, shareholders and employees."
Jason DeZwirek, CECO's Chairman
stated, "We have admired PMFG's product portfolio and gross margins
for a number of years and spent considerable time analyzing a
potential combination. We believe there are significant strategic
and financial benefits to the transaction. This is a unique
situation and there are very few opportunities to find companies
with such a complementary mix of technologies, customers and
geographies. We expect the combined business will be a market
leader across numerous categories with nearly half a billion
dollars in sales and will have a unique global presence to better
serve our customers and drive shareholder value."
Jefferies LLC is serving as financial advisor to CECO while
Stifel is serving as financial advisor to PMFG. Squire Patton Boggs (US) LLP is serving as legal
counsel to CECO and Jones Day is serving as legal counsel to
PMFG. In support of this transaction, Bank of America Merrill
Lynch, as Lead Arranger and Administrative Agent, has provided a
financing commitment for a $25
million increase and amendment to CECO's existing
$195 million Senior Credit
Facility.
Additional details regarding the transaction will be included in
the Current Reports on Form 8-K that CECO and PMFG will each file
with the Securities and Exchange Commission (the "SEC").
Conference Call Information
CECO Environmental Corp. and PMFG, Inc. will host a conference
call today at 10:30 a.m. Eastern Time
to discuss the merger. Interested parties may join the conference
call by dialing 1-888-510-1785 (within the U.S.) or +1-719-457-2648
(outside of the U.S.). The conference ID is 2835586. The call
can also be accessed at CECO Environmental Corp.'s and PMFG, Inc.'s
web sites at www.cecoenviro.com and www.pmfginc.com. The telephone
replay will be available 2 hours after the end of the call by
dialing 1-877-870-5176 (within the U.S.) or +1-858-384-5517
(outside of the U.S.). The replay PIN number is 2835586.
ABOUT CECO ENVIRONMENTAL CORP.
CECO Environmental Corp. is a leading global environmental,
energy and fluid handling technology company. Through its
well-known brands, CECO Environmental Corp. provides a wide
spectrum of products and services including dampers &
diverters, cyclonic technology, thermal oxidizers, filtration
systems, scrubbers, fluid handling equipment and plant engineered
services and engineered design build fabrication. These products
play a vital role in helping companies achieve exacting production
standards, meeting increasing plant needs and stringent emissions
control regulations around the globe. CECO Environmental Corp.
globally serves a broad range of markets and industries including
power, municipalities, chemical, industrial manufacturing,
refining, petrochemical, metals, minerals & mining, hospitals
and universities. CECO Environmental Corp. is focused on building
long-term shareholder value by bringing its unique technology,
portfolio and operational excellence to strategic key growth
markets around the world, while maintaining the highest standards
of employee development, project execution and safety
leadership.
CECO Environmental Corp. is listed on NASDAQ under the ticker
symbol "CECE". For more information about CECO Environmental Corp.,
please visit the company's website at www.cecoenviro.com.
Contact:
Corporate Information
Jeff Lang, Chief Executive
Officer
Ed Prajzner, Chief Financial
Officer
1-800-333-5475
or
Investor Relations:
Shawn Severson
The Blueshirt Group
Phone: (415) 489-2198
Email: Shawn@blueshirtgroup.com
ABOUT PMFG, INC.
PMFG, Inc. is a leading provider of custom-engineered systems
and products designed to help ensure that the delivery of energy is
safe, efficient and clean. PMFG primarily serves the markets for
power generation natural gas infrastructure, and petrochemical
processing. Headquartered in Dallas,
Texas, PMFG markets its systems and products worldwide.
PMFG, Inc. is listed on NASDAQ under the ticker symbol "PMFG."
For more information about PMFG, Inc. please visit the company's
website at www.pmfginc.com.
Contact:
Mr. Peter J. Burlage, Chief
Executive Officer
Mr. Ronald L. McCrummen, Chief
Financial Officer
PMFG, Inc.
Phone: (214) 357-6181
Fax: (214) 351-0194
www.peerlessmfg.com
or
Mr. Shawn Severson
The Blueshirt Group
Phone: (415) 489-2198
Email: Shawn@blueshirtgroup.com
Important Information for Investors and Stockholders
The information in this press release is not a substitute for
the prospectus/proxy statement that CECO Environmental Corp.
("CECO") and PMFG, Inc. ("PMFG") will file with the SEC, which will
include a prospectus with respect to shares of CECO common stock to
be issued in the merger and a proxy statement of each of CECO and
PMFG in connection with the merger between CECO and PMFG (the
"Prospectus/Proxy Statement"). The Prospectus/Proxy Statement will
be sent or given to the stockholders of CECO and PMFG when it
becomes available and will contain important information about the
merger and related matters, including detailed risk factors. CECO's
AND PMFG's SECURITY HOLDERS ARE ADVISED TO READ THE
PROSPECTUS/PROXY STATEMENT CAREFULLY WHEN IT BECOMES AVAILABLE
BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
MERGER. The Prospectus/Proxy Statement and other documents that
will be filed with the SEC by CECO and PMFG will be available
without charge at the SEC's website, www.sec.gov, or by directing a
request when such a filing is made to (1) CECO Environmental Corp.
by mail at 4625 Red Bank Road Suite 200, Cincinnati, Ohio 45227, Attention: Investor
Relations, by telephone at 800-333-5475 or by going to CECO's
Investor page on its corporate website at www.cecoenviro.com; or
(2) PMFG, Inc. by mail at 14651 North Dallas Parkway Suite 500,
Dallas, Texas 75254,
Attention: Investor Relations, by telephone at 877-879-7634,
or by going to PMFG, Inc.'s Investors page on its corporate website
at www.pmfginc.com. A final proxy statement or proxy/prospectus
statement will be mailed to stockholders of CECO and PMFG as of
their respective record dates.
The information in this press release is neither an offer to
sell nor the solicitation of an offer to sell, subscribe for or buy
any securities, nor shall there be any sale, issuance or transfer
of securities in any jurisdiction in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of such jurisdiction. This communication
is also not a solicitation of any vote in any jurisdiction pursuant
to the proposed transactions or otherwise. No offer of securities
or solicitation will be made except by means of a prospectus
meeting the requirements of Section 10 of the Securities Act of
1933, as amended.
Proxy Solicitation
CECO and PMFG, and certain of their respective directors,
executive officers and other members of management and employees
may be deemed participants in the solicitation of proxies in
connection with the proposed transactions. Information about the
directors and executive officers of CECO is set forth in the proxy
statement for CECO's 2015 annual meeting of stockholders and CECO's
10-K for the year ended December 31,
2014. Information about the directors and executive officers
of PMFG is set forth in the proxy statement for PMFG's 2014 annual
meeting of shareholders and PMFG's Form 10-K for the year ended
June 28, 2014. Investors may obtain
additional information regarding the interests of such participants
in the proposed transactions by reading the prospectus/proxy
statement for such proposed transactions when it becomes
available.
Safe Harbor for Forward-Looking Statements
Any statements contained in this press release other than
statements of historical fact, including statements about
management's beliefs and expectations of the proposed merger and
related transactions and future results, are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995 and should be evaluated accordingly. These
statements are made on the basis of management's views and
assumptions regarding future events and business performance. Words
such as "estimate," "believe," "anticipate," "expect," "intend,"
"target," "should," "may," "will" and similar expressions and their
negative forms are intended to identify forward-looking
statements.
Forward-looking statements involve risks and uncertainties that
may cause actual results to differ materially from any future
results, performance or achievements expressed or implied by such
statements. These risks and uncertainties include the ability to
complete the proposed merger and related transactions between CECO
and PMFG; the receipt of regulatory and stockholder approvals; the
availability of financing contemplated by the bank commitment
obtained by CECO; the ability to successfully integrate CECO's and
PMFG's operations, product lines, technologies and employees; the
ability to realize revenue and customer growth opportunities,
combined revenue goals, marketing and cost synergies from the
proposed merger between CECO and PMFG in a timely manner or at all;
factors related to the businesses of CECO and PMFG including
economic, political and financial market conditions generally and
economic conditions in CECO's and PMFG's target markets; dependence
on fixed-price contracts and the risks associated with those
contracts, including actual costs exceeding estimates and method of
accounting for contract revenue; fluctuations in operating results
from period-to-period due to cyclicality of the businesses; the
effect of the merger and related transactions on each of CECO's and
PMFG's infrastructure, resources, and existing sales; the ability
to expand operations in both new and existing markets; the
potential for contract delay or cancellation; changes in or
developments with respect to any litigation or investigation;
unknown, underestimated or undisclosed commitments or liabilities;
the potential for fluctuations in prices for manufactured
components and raw materials; the potential impact of the
announcement or consummation of the proposed transactions on the
parties' relationships with third parties, which may make it more
difficult to maintain business and operational relationships; the
substantial amount of debt expected to be incurred in connection
with the proposed merger and CECO's ability to repay or refinance
it, incur additional debt in the future or obtain a certain debt
coverage ratio; diversion of management time from each of CECO's
and PMFG's ongoing operations; the impact of federal, state or
local government regulations; and the effect of competition in the
air pollution control and industrial ventilation industry.
These and other risks and uncertainties are discussed in more
detail in CECO's and PMFG's current and future filings with the
SEC, including CECO's Annual Report on Form 10-K for the
fiscal year ended December 31, 2014
under the heading "Item 1A. Risk Factors," which was filed with the
SEC on March 18, 2015 and PMFG's
Annual Report on Form 10-K for the fiscal year ended June 28, 2014 under the heading "Item 1A. Risk
Factors," which was filed with the SEC on September 10, 2014. Many of these risks are
beyond management's ability to control or predict. Should one or
more of these risks or uncertainties materialize, or should the
assumptions prove incorrect, actual results may vary in material
aspects from those currently anticipated. Investors are cautioned
not to place undue reliance on such forward-looking statements as
they speak only as of the date the statement is made. All
forward-looking statements attributable to CECO or PMFG or persons
acting on behalf of either CECO or PMFG are expressly qualified in
their entirety by the cautionary statements and risk factors
contained in this press release and CECO's and PMFG's respective
filings with the SEC. Forward-looking statements speak only as of
the date they are made. Except as required under the federal
securities laws or the rules and regulations of the SEC, neither
CECO nor PMFG undertakes any obligation to update or review any
forward-looking statement or information, whether as a result of
new information, future events or otherwise, except as required by
law.
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SOURCE CECO Environmental Corp.