5N Plus acquiring AZUR SPACE for €73-79m

Engineered materials and specialty chemicals producer 5N Plus Inc of Montreal, Québec, Canada has entered into an agreement to acquire AZUR SPACE Solar Power GmbH of Heilbronn, Germany, whose workforce of 240 develops and manufactures III-V (GaAs-based) multi-junction solar cells for both satellites and terrestrial concentrated photovoltaic (PV) solar systems.

5N Plus provides purified metals such as bismuth, gallium, germanium, indium, selenium and tellurium, and also produces related II-VI semiconducting compounds such as cadmium telluride (CdTe), cadmium sulphide (CdS) and indium antimonide (InSb) as precursors for the growth of crystals for solar, LED and eco-friendly materials applications. Operating R&D, manufacturing and commercial centers in several locations in North America, Asia and Europe (including three in Germany and one in Belgium), the firm supplies to the thin-film PV renewable energy industry and is a supplier within the US satellite supply chain. The firm reckons that the integration of AZUR will not only expand its position in renewable energy but also, through Canada’s status as a Cooperating State within the European Space Agency (ESA), will establish 5N Plus as a supplier to both the European and US space programs.

The transaction is subject to the customary closing conditions, including regulatory approvals. 5N Plus will fully integrate AZUR’s workforce and will appoint the firm’s managing director Jürgen Heizmann as a member of 5N Plus’ executive committee.

“This acquisition is the foundation of a strategic transformation that will unlock notable market potential,” reckons 5N Plus’ president & CEO Arjang Roshan. “AZUR and 5N Plus complement each other, and our integration will culminate in a sustainable supply chain which will ensure the competitiveness and security of supply for our customers and government agencies. Moreover, the combined value chain will serve as a gateway to new businesses with significantly larger total addressable market,” he adds. “We deem AZUR’s activities in Heilbronn, Germany, along with those of 5N Plus in St George, Utah, and Montreal, Québec, as essential to this plan.”

Subject to prevailing closing adjustments, 5N Plus will acquire all of the issued and outstanding shares of AZUR for an expected €73-79m, This includes 6.5 million shares of 5N Plus (subject to the TSX approval) to be issued from treasury at closing and cash payment (amounting to about €53m, subject to the volume-weighted average closing share price of 5N Plus prior to closing). Furthermore, 5N Plus expects to finance working capital of €20-26m with provision not to exceed €27m. The cash portion of the transaction is expected to be funded through a senior debt facility.

AZUR’s most recent annual revenue was in excess of €50m with average three-year annual EBITDA of about €6m. Notwithstanding the realization of expected cost and revenue synergies, and without consideration of integration expenses and transaction costs, management estimates that the EV/adjusted EBITDA multiple for the transaction to be well aligned with 5N Plus. Post-transaction, pro forma net debt to adjusted EBITDA is expected to be 2.8 times multiple, with a projected target of about 2.2 times multiple within 18-24 months post-closing.