FirePower backs Kontrol Energy’s acquisition of CEM Specialties Inc.
Kontrol Energy Corp has closed its $3.35 million acquisition of CEM Specialties Inc, a London, Ontario-based developer of turn-key emission monitoring equipment and solutions. The deal was backed with a $ $2 million secured loan provided by FirePower Capital’s direct lending group along with an affiliate of Pinnacle Funds. Kontrol Energy’s press release announcing the deal follows below.
Kontrol Energy Completes Acquisition of CEM Specialties Inc.
Toronto, ON (FSCwire) – Kontrol Energy Corp. (CSE:KNR, FSE:1K8), (“Kontrol”, or the “Company”) announces that it has completed the acquisition of CEM Specialties Inc. (“CEMSI”), previously announced on March 28, 2018 when the Company entered into a Letter of Intent with CEMSI. CEMSI is an established and leading integrator of turn-key emission monitoring equipment and solutions.
With more than 25 years of successful operating history, CEMSI provides the Canadian and US market with value added solutions for emissions and process monitoring applications. For the fiscal year ending July 31, 2018 CEMSI generated revenues of $6 Million and EBITDA of approximately $1 Million. A significant portion of CEMSI’s annual revenue is from multi-year recurring contracts and equipment sales.
“CEMSI is a leader and recognized brand in the emission monitoring and integration market,” says Paul Ghezzi, CEO of Kontrol Energy. “We are excited about the closing of this acquisition as it is a strong strategic fit with our existing emission business. Expanding our emission monitoring and solutions vertical in Canada and gaining a growing footprint in the USA is part of our overall strategic growth initiatives.”
According to the market research report Emission Monitoring Systems Market by System Type Global Forecast to 2025, the emission monitoring systems market is estimated to reach US $4.44 Billion by 2025 from US $2.39 Billion in 2018, at a CAGR of 9.3% between 2018 and 2025.
The aggregate purchase price for CEMSI is $3,350,000, of which the Company has paid $2,265,000 in cash on closing. There is a Vendor Take Back in amount of $502,500, representing 15% of the Purchase Price. The Vendor Take Back shall accrue interest at a rate of six percent (6%) per annum. An additional $582,500 of the purchase price is subject to a 15-month holdback to accommodate post-closing purchase price adjustment and indemnity obligations of the Vendor. The Vendor has received 250,000 Common Share purchase Warrants. Each Warrant is exercisable for one Common Share of the Company at a price of $0.75 per share for 3 years following the date of issue, subject to accelerated expiry in certain circumstances.
In conjunction with the acquisition, the Company has closed on a $2 Million secured loan with Pinnacle Diversified Private Income Limited Partnership, by its general partner Pinnacle Diversified Private Income GP Inc., and FirePower Capital. The loan has a term of 12 months. It is anticipated that the loan will be replaced by long-term senior secured debt and equity financing over the next 12 months. The lenders have received 750,000 Common Share purchase Warrants in aggregate. Each Warrant is exercisable for one Common Share of the Company at a price of $0.75 per share for 4 years following the date of issue, subject to accelerated expiry in certain circumstances.
“On a consolidated basis the acquisition will add approximately $6 Million to our year over year revenue growth,” continues Mr. Ghezzi. “Further, the acquisition will add to our earnings and operational cash flow generation starting in Q3 2018. We have been able to achieve significant year over year revenue growth while maintaining less than 27 Million shares outstanding. We are keenly focussed on continuing our strong growth trajectory and maximizing shareholder value.”
About Kontrol Energy
Kontrol Energy Corp. (CSE:KNR, FSE: 1K8) is a leader in energy efficiency through IOT, cloud and blockchain technology. With a disciplined mergers and acquisition strategy, combined with organic growth, Kontrol Energy Corp. provides market-based energy solutions to our customers designed to reduce their overall cost of energy while providing a corresponding reduction in Greenhouse Gas (GHG) emissions.
Kontrol Energy was recently announced as the 7th fastest growing Startup in Canada by Canadian Business and Maclean’s.
The investment objectives of Pinnacle Private Diversified Private Income Limited Partnership are to invest in a diversified portfolio of private debt and/or equity securities of issuers involving investments and loans, consistent and reliable cash flows capable of supporting a monthly target cash distribution of 5.5% to 9.0% per annum, after fees and expenses, plus potential additional annual performance distributions. https://www.pinnaclefunds.ca
About FirePower Capital
FirePower Capital is the investment banking and private capital firm built for Canada’s entrepreneurs. Our team of 30+ deal professionals helps their mid-market businesses complete mission-critical transactions, by advising them or investing in their companies directly. https://www.firepowercapital.com
SOURCE Kontrol Energy Corp
GrowthGenius is an AI-assisted sales prospecting service provider for B2B businesses, based in Toronto. The company needed financing to fund its rapid expansion. Raising equity was unappealing because of the high cost of dilution, so the founders sought out a debt solution. After meeting with multiple lenders, they selected FirePower, whose efforts to get to know the founders, understand the business, and tailor a loan structure that worked for the company and its owners proved to be the difference.