VANCOUVER, March 19, 2018 /CNW/ - Fortress Global
Enterprises Inc. ("Fortress Global") (TSX:FGE)
(OTCQX:FTPLF) is pleased to provide an update to its
previously announced acquisition of S2G Biochemicals Inc.
("S2G"). Fortress has prepared an investor presentation
related to this transaction. The presentation is available under
the "Investor Relations" section at www.fortressge.com or by
sending a request to info@fortressge.com.
Please find below an updated overview of the S2G acquisition
originally announced on March 15,
2018:
Fortress Global has signed a share purchase agreement (the
"SPA") with S2G and its shareholders, whereby Fortress
Global will acquire all of the issued and outstanding common shares
of S2G for a purchase price of $2,500,000, payable by the issuance of 666,652
common shares of Fortress Global at a deemed price of $3.75 per Fortress Global share.
Upon completion of the transaction, Fortress Global, through a
newly formed special purpose company, intends to commission the
construction of a demonstration plant to produce xylitol at its
Fortress Specialty Cellulose ("FSC") Mill, utilizing
proprietary process technologies, know-how and expertise developed
by S2G and Mondelēz International, Inc. (NASDAQ:MDLZ), one
of the world's largest snacking companies. The demonstration plant
will use C5 sugars extracted from hemicellulose, which is a
byproduct from the FSC Mill, to produce xylitol. The extraction and
conversion of this byproduct will also further debottleneck the FSC
Mill and increase its annual production capacity of dissolving
pulp. The demonstration plant is expected to commence operation in
2020 and have a production capacity of up to 2,000 tonnes per year
of xylitol. The FSC Mill is expected to produce sufficient C5
sugars annually to provide the feedstock for up to an additional
20,000 tonnes per year of xylitol production which Fortress intends
to utilize by constructing an approximately $150 million full-scale plant following
successful completion of the demonstration plant. When complete,
the full-scale plant would be expected to generate up to
$40 million of EBITDA annually.
Xylitol is a naturally occurring sugar polyol that has a
sweetening property matching that of cane sugar but with 40% fewer
calories. In addition, based on third-party research, Fortress
Global believes that xylitol is currently the best nutritive sugar
substitute with respect to the prevention of dental cavities.
Xylitol is used extensively in a variety of confectionary products
such as gums and candies with estimated annual global xylitol sales
volumes in 2017 of approximately 200,000 tonnes and an expected
annual growth rate of 6.5% through 2024. Current spot prices for
xylitol vary by region and are in the US$3,500 – US$4,500/tonne range.
Fortress Global believes that the majority of xylitol is
currently produced in China using
corn cobs as the feedstock. Fortress Global will use FSC's low
cost, high quality, non-GMO feedstock derived from Canada's sustainable forests and the high
conversion efficiencies of the S2G process to improve the cost
structure, improve efficiency and reduce environmental impact.
Fortress Global believes that a full-scale plant at the FSC Mill
will be one of the lowest cost producers of xylitol globally.
S2G is the exclusive global licensee of the xylitol process
technology that S2G and Mondelēz International have jointly
developed. In connection with the acquisition of S2G, Fortress
Global and S2G have entered into a non-binding term sheet (the
"Term Sheet") with Mondelēz International which sets out a
framework to modify certain terms of the license and to provide for
certain commitments from Mondelēz International with respect to the
output of the demonstration plant and any future full scale
plant.
The construction, commissioning and optimization of the
demonstration plant is budgeted at approximately $33 million. It is anticipated that Fortress
Global will provide $5.0 million in
funding for the special purpose company in cash or in-kind.
Fortress Global is in the process of securing the balance of the
required funding through various non-dilutive sources, including
federal and provincial grants, other non-recourse financing and
consortium partners.
Chadwick Wasilenkoff, President
and Chief Executive Officer of Fortress Global, commented: "The
acquisition of S2G and the expansion of our dissolving pulp
operation into the sugar substitutes business is in line with our
corporate strategy of pursuing innovative and value enhancing
opportunities. We believe that the production of xylitol will
further optimize the utilization of our wood fibre and also provide
us with the added benefit of offloading the recovery boiler which
will provide a separate measurable economic benefit. With the
expertise and know-how of the S2G team, who have dedicated over
eight years to the development of this technology in conjunction
with Mondelēz International, Fortress Global is well positioned to
become a global low-cost producer of a product with an attractive
growth profile. We are pleased with the positive feedback and
funding opportunities provided by the federal and provincial
funding agencies and look forward to finalizing all necessary
arrangements in a timely manner."
Mark Kirby, President and Chief
Executive Officer of S2G, commented: "We are very excited to become
part of the Fortress team. It is the perfect partnership to
commercialize the proprietary xylitol process technology which we
have developed with Mondelēz International. Fortress brings proven
operational capabilities, strong Canadian and Quebec government relationships, and a large
and stable source of hemicellulose sugars that our research has
shown are a preferred and cost-effective feedstock for xylitol
production due to their high xylose and low ash content."
Closing of the SPA is subject to various customary conditions
and is expected to occur on or before May
31, 2018.
A presentation to complement our fourth quarter earnings is
available under the "Investor Relations" section at
www.fortressge.com or by sending a request to
info@fortressge.com.
As a reminder, effective Feb 1,
2018 the shares of Fortress Global now trade under the
symbol FGE on the Toronto Stock Exchange. In conjunction with
this name change a new website will be rolled out in stages through
the month of March.
About Fortress Global Enterprises
Fortress Global
Enterprises operates its dissolving pulp business at the Fortress
Specialty Cellulose Mill located in Canada, which also operates in the renewable
energy generation sector through its cogeneration facility.
About Mondelēz International
Mondelēz International,
Inc. (NASDAQ:MDLZ) is building the best snacking company in the
world, with 2017 net revenues of approximately $26 billion. Creating more moments of joy in
approximately 160 countries, Mondelēz International is a world
leader in biscuits, chocolate, gum, candy and powdered beverages,
featuring global Power Brands such as Oreo and belVita biscuits;
Cadbury Dairy Milk and Milka chocolate; and Trident gum.
Mondelēz International is a proud member of the Standard and Poor's
500, Nasdaq 100 and Dow Jones Sustainability Index. Visit
www.mondelezinternational.com or follow the company on Twitter at
www.twitter.com/MDLZ.
This press release contains certain forward-looking information
that reflects the current views and/or expectations of Fortress
Global with respect to its performance, business and future events,
including statements regarding: Fortress Global's completion of the
SPA and related agreements and the outcome of its financing
applications and initiatives; the financial benefits, expected
production capacity, expected timing and budget for completion of
the xylitol project at the Fortress Specialty Cellulose Mill;
expectations relating to Fortress Global's business plans at the
Fortress Specialty Cellulose Mill and the expected effects of the
acquisition of S2G on the business of Fortress Global; the state of
the xylitol markets; and expectations regarding future global
demand for xylitol. The reader is cautioned that forward-looking
information is not a guarantee of future performance and involves
known and unknown risks, uncertainties, assumptions and other
factors which are difficult to predict and that may cause actual
results or events to differ materially from those anticipated in
such forward-looking information. Forward-looking information is
based on the then-current expectations, beliefs, assumptions,
estimates and forecasts about the business and the industry and
markets in which Fortress Global operates. Assumptions underlying
Fortress Global's expectations regarding forward-looking
information contained in this news release include, among others:
the ability of Fortress Global and other parties thereto to satisfy
the conditions required in order to complete the SPA and all
related arrangements; Fortress Global's ability to complete the
necessary financing to successfully implement its business plan in
respect of the xylitol project on satisfactory terms; the success,
profitability and other expected benefits of the xylitol project;
the expected effects of the S2G acquisition on the business of
Fortress Global; that the xylitol project will be economically
viable and can be completed within the expected schedule and
budget; and that the market conditions for xylitol will follow
expected trends. Investors are cautioned that all forward-looking
information involves risks and uncertainties including, without
limitation: that the conditions to closing the SPA will not be
satisfied and Fortress Global will not be able to complete the SPA
as contemplated or at all; that Fortress Global will not secure the
necessary financing to complete its business plan in respect of the
xylitol project as planned or at all; that the xylitol project will
not be successful or profitable and will not meet expected
production capacities, or be completed within the expected
timeframes and within the expected budget; that Fortress Global may
experience unforeseen delays, financing difficulties or costs that
will impact its projects, operations, financial performance and
liquidity; and those risks relating to our reputation, competition,
changes in the market, potential downturns in economic conditions,
dependence on major customers, fluctuations in the price and supply
of raw material, foreign exchange fluctuations, labour, regulatory
requirements and other risk factors listed from time to time in
Fortress Global's public filings. These risks, as well as others,
could cause actual results and events to vary significantly.
Accordingly, readers should not place undue reliance on statements
comprising forward-looking information, which are qualified in
their entirety by this cautionary statement. Fortress Global does
not undertake any obligations to release publicly any revisions for
updating any voluntary forward-looking information, except as
required by applicable securities law.
SOURCE Fortress Global Enterprises Inc.