By Lisa Kerner
Charlotte, N.C., May 20 - Heckmann Corp. announced it will acquire China Water and Drinks Inc. in a cash and stock deal valued at approximately $625 million as a means of building a global water company.
Of the $625 million, about $455 million is expected to be paid in common stock at an exchange ratio of 0.8 per share of Heckmann stock for each share of China Water stock, according to a Heckmann news release.
The remaining $170 million will be paid in cash at an estimated $5 per share.
Each company is responsible for payment of its fees and expenses, with a remedy of up to $2 million if Heckmann terminates the agreement, it was reported in an 8-K filed with the Securities and Exchange Commission.
China Water's majority stockholders have already approved the transaction, which is expected to close in the fall of 2008, the release stated.
Heckmann said it will fund the acquisition using cash held in trust in addition to the 60 million new shares it expects to issue. Remaining proceeds from the trust account will be used for working capital.
Under the agreement, Heckmann may also pay an additional $150 million to certain noteholders and investors if the combined company achieves $90 million in adjusted net income for 2009.
"China Water's well-established bottled water platform, combined with the economic growth, favorable demographic characteristics, and need for clean, safe drinking water in China, make this combination a compelling growth story," Heckmann chairman and chief executive officer Dick Heckmann said in the release.
"We plan to leverage this foundation to execute an aggressive acquisition program in the highly-fragmented water business and look forward to leading this company through its next stage of growth," he added.
According to Heckmann, total sales for bottled water in China could reach $4.6 billion in 2008. Consumption of bottled water in China between 2002 and 2007 grew at a compound annual growth rate of 17.5%, doubling the growth rate of consumption in the United States and outpacing growth worldwide.
Heckmann is in the process of assembling a board and senior management team with "extensive experience" in the water sector in Asia and other international markets.
China Water founder Xu Hongbin will join the board of the newly formed company, along with Andy Seidel, chairman and CEO of Underground Solutions, a U.S. water infrastructure company.
Dick Heckmann will remain chairman and CEO of Heckmann. Xu will be CEO of China Water, which will operate as a wholly owned subsidiary of Heckmann.
Credit Suisse Securities (USA) LLC is advising Heckmann, while Roth Capital Partners LLC is advising China Water on the transaction.
China Water is a licensed bottled water producer and distributor based in Hong Kong.
Heckmann is a blank check company located in Palm Desert, Calif.
| Acquirer: | Heckmann Corp.
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| Target: | China Water and Drinks, Inc.
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| Announcement date: | May 20
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| Transaction total: | $625 million
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| Price per share: | 0.8 shares of Heckmann plus $5
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| Termination fee: | Up to $2 million remedy for fees and expenses
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| Expected closing: | Fall of 2008
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| Stock price of target: | OTCBB: CWDKE: $9.75 on May 19
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