TORONTO - Water Ways Technologies Inc. (TSXV: WWT) ("Water Ways" or the "Company"), is pleased to announce that it entered into a non-binding letter of intent ("LOI") on March 18, 2019 with an arm's length third party to acquire the assets ("Acquisition") of a Canadian distributor of irrigation and agriculture components located near London, Ontario ("Distributor"). The Distributor was established in 2004 and finished the year ended October 2018 with sales of approximately CAD $3.74 million1.
Ohad Haber, CEO of Water Ways commented: "We are pleased to take this first important step in rolling out our international operations. This Acquisition will allow us to secure a foothold in Canada and leverage our expertise in the irrigation sector in the North American market. Our access to the latest Israeli irrigation and ag-tech technologies provides us with a solid competitive advantage in the space. We look forward to working with the Distributor's management team, as we continue to build this important sales channel."
Strategic Rationale
Water Ways intends to establish a wholly owned Canadian subsidiary which will acquire the Distributor's assets and leverage their business relationships with the Canadian farming community to market and sell irrigation projects and components. Water Ways further intends to retain the Distributor's sales force to focus on marketing and selling irrigation projects to the growing needs of Canadian cannabis licensed producers. Water Ways believes that the Distributor's sales force is well positioned to capture a significant share of the Canadian wholesale irrigation market. In addition, Water Ways' extensive offering of Israeli technology based irrigation components and equipment as well as access to the latest industry know-how provides it with an advantage to potentially become a significant vendor to Canadian farmers and cannabis licensed producers in the short to medium term.
Terms of the Acquisition
According to the terms of the LOI, Water Ways will acquire assets of the Distributor which include its customer base, inventory, certain equipment and goodwill for total consideration of CAD $500,000. The consideration will be payable as follows:
- CAD $20,000 is payable in cash on the date of signing the LOI;
- CAD $455,000 is payable in cash on the closing date ("Closing Date")
- CAD $25,000 is payable in common shares in the capital of Water Ways ("Shares"), at a deemed per share issue price equal to the lesser of (i) $0.25 and (ii) the 30-day volume-weighted average price prior to the Closing Date, subject to escrow provisions to be agreed upon.
Upon closing, the Distributor will cease commercial operations and its sole shareholder and managing director (the "Shareholder") will become an employee and manager of the Company's Canadian operations and will enter into an employment agreement with the Company. As noted above the Company also anticipates retaining the Distributor's current sales force. The LOI also provides for certain working capital adjustments, whereby the receivables for orders prior to the Closing Date and inventory relating thereto shall remain the property of the Shareholder. The Acquisition is subject to the Company completing due diligence, entering into definitive agreements, securing a lease to operate the Distributor's business by Water Ways after completing the Acquisition, receipt of applicable regulatory approvals and entering into a non-competition agreement with the Shareholder. Subject to satisfying the above conditions, it is anticipated that closing will take place in the second quarter of 2019.
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