Merger transaction follows a fully funded $160
million investment in Lygos to accelerate integration and scale
production to meet increasing demand for agricultural, industrial,
and consumer applications
Lygos, Inc. (“Lygos”), a vertically integrated biotechnology
provider of sustainable specialty ingredients, and Flexible
Solutions International, Inc. (“FSI”) (NYSE American: FSI), a
developer and manufacturer of biodegradable products, today
announced they have entered into a definitive merger agreement
providing for an all-stock transaction. The companies plan to
integrate the two complementary technology platforms, expand the
portfolio of multi-functional organic acids, and scale production
to meet the increasing demand for sustainable products for
agricultural, industrial, and consumer applications. The merger
agreement has been unanimously approved by the boards of directors
of both companies, and the $160 million of growth capital was
funded in April 2022.
“In a world with increasing demand on resources, there is a
greater need for alternative chemical ingredients that are
reliable, scalable, and sustainable,” said Lygos CEO Eric Steen,
PhD. “This merger provides the opportunity to unlock new
high-growth opportunities for our business, our investors, and our
customers by connecting our ingredients to existing downstream
products. Together, we intend to use our collective resources to
expand domestic manufacturing and revive industrial innovation by
providing more environmentally friendly ingredients that enable
better supply chains for common, everyday downstream products.”
FSI is an environmental technology company involved in research,
development, and manufacturing of supplies that are designed to
increase crop yield, conserve energy, and reduce environmental
impact. Over the past four years, Lygos and FSI have been
leveraging Lygos’ proprietary fermentation technology platform to
improve the performance of FSI’s biodegradable, water-soluble
cleaning and water treatment solutions. The Lygos platform utilizes
the latest advances in bioengineering and data science to convert
sustainable sugars into multi-functional organic acids. These
bio-based ingredients feature performance, supply chain and
environmental advantages over traditional industrial chemicals.
“This combination of Lygos’ sustainable organic acid production
capabilities and FSI’s polymer expertise will enable more customers
around the world to create sustainable and biodegradable
solutions,” said Dan O’Brien, CEO of FSI. “I’m very excited about
being part of this combined company for many years to come. FSI has
demonstrated successful growth and ability to attract large and
consistent customers for our products. We have adapted our business
over time with this focus on our customer needs, and believe that
as we enter this new phase, we can achieve even greater
applications for our combined solutions.”
Mr. O’Brien has agreed to vote in favor of the transaction.
Investment Terms of Lygos’ Financing
Prior to the transaction announced today, Lygos secured $160
million in growth capital in support of the prospective
combination. Under the terms of the purchase agreement, Lygos
issued $160 million worth of convertible notes with a 5.5% fixed
annual interest rate and a five-year maturity. The conversion price
of the convertible note will be set 12 months to the date of the
note, and the pricing terms will be set upon the trading price of
the future equity but will be set within a market capitalization
range of no less than $250 million or no greater than $350
million.
Approvals and Timing of Merger Transaction
The transaction is expected to close in the third quarter of
2022, subject to the approval of FSI and Lygos stockholders and the
satisfaction or waiver of certain other customary closing
conditions. Mr. O’Brien, who beneficially owns approximately 36.6%
of the outstanding FSI shares, has signed an agreement with Lygos
agreeing to vote his shares in favor of the transaction at a
meeting of FSI shareholders and the election of directors to the
FSI board of directors to be designated by Lygos. Additional
information about the transaction will be provided in a Current
Report on Form 8-K to be filed by FSI with the Securities and
Exchange Commission and available at www.sec.gov.
Exchange Ratio
Subject to the terms and conditions of the merger agreement,
each outstanding share of Lygos capital stock will be converted
solely into the right to receive a number of common shares of FSI
equal to the exchange ratio. The exchange ratio will equal the
total number of FSI capital shares on a fully diluted basis
outstanding as of the end of the last trading day of the FSI common
shares on the NYSE American before the effective time of the merger
multiplied by two and then divided by the total number of shares of
Lygos capital stock on fully diluted basis outstanding as of the
same time.
Management
Upon closing, Eric Steen will serve as the CEO and a member of
the Board of Directors for the combined company. Dan O’Brien has
entered into a five-year employment agreement to continue
overseeing FSI’s existing business activities. Lygos’ current CFO,
Bryce Dille, and CTO, Nick Ohler, PhD, will retain these respective
roles in the combined company. Also, upon closing, all current
directors of FSI will resign, subject to the election of new
directors designated by Lygos at the FSI Meeting.
Webcast Discussing the Proposed Transaction and
Financing
Management from both Lygos and Flexible Solutions will make a
webcast available as of 9:00 am EDT on April 18, 2022. To access
the presentation, please go to: Lygos and Flexible Solutions Merger
Presentation.
Advisors
BTIG, LLC served as the financial advisor and Hart & Hart
LLP served as legal advisor to FSI in connection with the merger
and offering. Orrick Herrington & Sutcliffe LLP served as legal
advisor to Lygos.
About Lygos
Lygos has created a biological engineering platform focused on
sustainable production of organic acid bio-monomers. Lygos’
bio-based ingredients offer alternatives to traditional industrial
suppliers, enabling customers to create better, environmentally
safer products. For more information, visit www.lygos.com and
follow us @LygosBiotech.
About Flexible Solutions International
Flexible Solutions International, Inc.
(www.flexiblesolutions.com), or FSI, based in Taber, Alberta, is an
environmental technology company. FSI provides biodegradable,
water-soluble products utilizing thermal polyaspartate (TPA)
biopolymers. TPA beta-proteins are manufactured from the common
biological amino acid, L-aspartic acid, and can be used in
applications including scale inhibition, detergent formulation,
water treatment and crop enhancement. FSI is the developer and
manufacturer of WaterSavr™, a commercially viable water evaporation
retardant. WaterSavr™ reduces evaporation on reservoirs, lakes,
aqueducts, irrigation canals, ponds and slow moving rivers.
Heatsavr™, a “liquid blanket” evaporation retardant for the
commercial swimming pool and spa markets, reduces energy costs and
can result in reduced indoor pool humidity.
Additional Information about the Proposed Merger and Where to
Find It
In connection with the proposed merger, FSI and Lygos intend to
file relevant materials with the Securities and Exchange Commission
(the “SEC”), including a registration statement on Form S-4 that
will contain a prospectus and a proxy statement. Investors and
security holders of FSI and Lygos are urged to read these materials
when they become available because they will contain important
information about FSI, Lygos and the proposed merger. The proxy
statement, prospectus and other relevant materials (when they
become available), and any other documents filed by FSI with the
SEC, may be obtained free of charge at the SEC website at
www.sec.gov. In addition, investors and security holders may obtain
free copies of the documents filed with the SEC by FSI by directing
a written request to: FSI at 6001 54th Ave., Taber AB, Canada T1G
1X. Investors and security holders are urged to read the proxy
statement, prospectus and the other relevant materials when they
become available before making any voting or investment decision
with respect to the proposed merger.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale 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 any such jurisdiction. No offering of securities
in connection with the proposed merger shall be made except by
means of a prospectus meeting the requirements of Section 10 of the
Securities Act of 1933, as amended.
Participants in the Solicitation
FSI and its directors and executive officers and Lygos and its
directors and executive officers may be deemed to be participants
in the solicitation of proxies from the shareholders of FSI in
connection with the proposed transaction. Information regarding the
special interests of these directors and executive officers in the
proposed merger will be included in the joint proxy
statement/prospectus referred to above. Additional information
regarding the directors and executive officers of FSI is also
included in FSI’s Annual Report on Form 10-K for the year ended
December 31, 2021. These documents are available free of charge at
the SEC web site (www.sec.gov) and from the CEO of FSI at the
address described above.
Forward-Looking Statements
This press release contains forward-looking statements based
upon FSI’s and Lygos’ current expectations. Forward-looking
statements involve risks and uncertainties, and include, but are
not limited to, statements about the structure, timing and
completion of the proposed merger; the combined company’s listing
on the NYSE American after closing of the proposed merger;
expectations regarding the ownership structure of the combined
company; the expected executive officers and directors of the
combined company; the combined company’s expected cash position at
the closing of the proposed merger; the future operations and
success of the combined company; the nature, strategy and focus of
the combined company; the success, cost and timing of the combined
company’s product development activities, studies and clinical
trials, the success of competing products that are or become
available, the combined company’s ability to obtain approval for
and commercialize its product candidates; the executive and board
structure of the combined company; the location of the combined
company’s corporate headquarters; the expected charges and related
cash expenditures that FSI expects to incur; and other statements
that are not historical fact. Actual results and the timing of
events could differ materially from those anticipated in such
forward-looking statements as a result of these risks and
uncertainties, which include, without limitation: (i) the risk that
the conditions to the closing of the proposed merger are not
satisfied, including the failure to timely obtain stockholder and
shareholder approval for the transaction, if at all; (ii)
uncertainties as to the timing of the consummation of the proposed
merger and the ability of each of FSI and Lygos to consummate the
proposed merger; (iii) risks related to FSI’s ability to manage its
operating expenses and its expenses associated with the proposed
merger pending closing; (iv) risks related to the failure or delay
in obtaining required approvals from any governmental or
quasi-governmental entity necessary to consummate the proposed
merger; (v) the risk that as a result of adjustments to the
exchange ratio, FSI shareholders and Lygos stockholders could own
more or less of the combined company than is currently anticipated;
(vi) risks related to the market price of FSI common shares
relative to the exchange ratio; (vii) unexpected costs, charges or
expenses resulting from the transaction; (viii) potential adverse
reactions or changes to business relationships resulting from the
announcement or completion of the proposed merger; and (ix) risks
associated with the possible failure to realize certain anticipated
benefits of the proposed merger, including with respect to future
financial and operating results. Actual results and the timing of
events could differ materially from those anticipated in such
forward-looking statements as a result of these risks and
uncertainties. These and other risks and uncertainties are more
fully described in periodic filings with the SEC, including the
factors described in the section entitled “Risk Factors” in FSI’s
Annual Report on Form 10-K for the year ended December 31, 2021,
which is on file with the SEC, and in other filings that FSI makes
and will make with the SEC in connection with the proposed merger,
including the proxy statement/prospectus/information statement
described above under “Additional Information about the Proposed
Merger and Where to Find It.” You should not place undue reliance
on these forward-looking statements, which are made only as of the
date hereof or as of the dates indicated in the forward-looking
statements. FSI expressly disclaims any obligation or undertaking
to release publicly any updates or revisions to any forward-looking
statements contained herein to reflect any change in its
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statements are
based.
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version on businesswire.com: https://www.businesswire.com/news/home/20220418005200/en/
Flexible Solutions Jason Bloom 800-661-3560
info@flexiblesolutions.com
Lygos, Inc. Kevin Murphy Argot Partners 617-947-2312
lygos@argotpartners.com
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