PMFG Stockholders to Receive $6.85 in
Cash and CECO Stock
Creates a Global Leader in Environmental,
Energy and Fluid Handling Technologies
$15 Million in Cost Synergies Expected to
be Realized Within 24 Months
CECO Environmental Corp. ("CECO") (Nasdaq:CECE)
and PMFG, Inc. ("PMFG") (Nasdaq: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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