TIDMCTS TIDMCTSU
RNS Number : 9256L
Catalytic Solutions, Inc.
14 May 2010
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THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR
INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM UNITED STATES, JAPAN, CANADA
OR AUSTRALIA OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A BREACH
OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION.
+-------------------------------+------------------------------------+
| For Immediate Release | 14 May 2010 |
+-------------------------------+------------------------------------+
Catalytic Solutions, Inc.
("The Company")
announcement of Merger with clean diesel technologies, inc. and financing
Catalytic Solutions, Inc. ("CSI") (AIM: CTS and CTSU), the company behind Mixed
Phase Catalyst (MPC ) technology, announces today it has entered into a merger
agreement with Clean Diesel Technologies, Inc. ("CDTI"), (NASDAQ: CDTI), a U.S.
based company that designs, markets and licenses patented technologies and
solutions that reduce harmful emissions from internal combustion engines while
improving fuel economy and engine power (the "Merger"). In addition, CSI is in
the process of negotiating terms of additional $4 million capital injection in
CSI (the "Financing"). The Financing is still subject to finalisation of
documents and further announcements will be made in due course.
SUMMARY
1. Merger with Clean Diesel Technologies, Inc. (CDTI)
The proposed merger, to be effected by way of a reverse merger, is a transaction
that will result in the combination of the businesses of CDTI and CSI, whereby
CSI will become a wholly-owned subsidiary of CDTI (the "Merger").
CDTI, CDTI Merger Sub, Inc., a California corporation and wholly-owned
subsidiary of CDTI ("Merger Sub") and CSI have entered into an Agreement and
Plan of Merger, dated as of May 13, 2010, (the "Merger Agreement"). As
contemplated by the terms of the Merger Agreement:
· In exchange for their shares of CSI common stock and warrants to purchase
shares of CSI common stock, the security holders of CSI will receive shares of
CDTI common stock and (excluding investors in the Financing) warrants to
purchase CDTI common stock. CSI shareholders (including investors in the
Financing and CSI's financial advisor) will receive such numbers of CDTI common
stock so that after the Merger they will own: a) 60% of the outstanding shares
of CDTI common stock, subject to adjustment for the cash position of each of CSI
and CDTI, as defined in the Merger Agreement, at the earlier of closing or June
30, 2010; and b) (excluding investors in the Financing and also CSI's financial
advisor, Allen & Company LLC) warrants to purchase up to three million shares of
CDTI common stock. CSI's financial advisor, will hold warrants to purchase an
additional one million shares of CDTI common stock.
· The Merger is conditional inter alia on obtaining CSI shareholder approval and
CDTI stockholder approval and also a number of further closing requirements
including that each of CDTI and CSI have at least $1.0 million in cash and cash
equivalents at the time of the Merger.
· For every $166,666.66 of shortfall in CSI's cash position below $2.0 million
at the earlier of the effective time of the Merger or June 30, 2010, the
relative share of CSI shareholders will be reduced by 1%, with a maximum
reduction of 12% to a share holding of 48%.
· For every $116,666.66 shortfall in CDTI's cash position below $4.5 million at
the earlier of the effective time of the Merger or June 30, 2010, the relative
share of CDTI shareholders will be reduced by 1% with a maximum reduction of 30%
to a share holding of 10%.
· CDTI will use commercially reasonable efforts to cause all shares of CDTI
common stock to be issued in connection with the Merger and all shares of CDTI
common stock to be issued upon exercise of the warrants to purchase shares of
CDTI common stock to be listed on the NASDAQ Stock Market as of the effective
time of the Merger.
· Neither CSI nor CDTI will be required to complete the Merger if the shares of
CDTI common stock to be issued in connection with the Merger are not approved
for listing, subject to notice of issuance, on the NASDAQ Stock Market.
Following completion of the Merger:
· Merger Sub will merge with and into CSI and CSI will be the surviving
corporation.
· As a result of the Merger the business and assets of CSI will be a
wholly-owned subsidiary of CDTI.
· CSI will cease trading on the Alternative Investment Market (AIM).
· The board of directors of the combined company is expected to comprise seven
directors, four from CSI (Messrs. Call, Ellis, Engles and Cherry) and three from
CDTI (Messrs. Park, Asmussen and Gray).
· The executive management team of the combined company is expected to be
composed of the following members of the current management team of CSI: Charles
F. Call, Nikhil A. Mehta and Stephen J. Golden Ph.D., and Michael L. Asmussen, a
member of the current management team of CDTI.
2. Financing
CSI is currently negotiating an interim capital raise both to provide CSI with
financing for immediate working capital needs and to provide the $2.0 million
cash balance required to ensure the minimum cash position necessary at closing
to result in CSI shareholders receiving at least 60% of the shares of CDTI
pursuant to the terms of the Merger Agreement.
It is currently anticipated that CSI will issue an aggregate of $4.0 million of
convertible subordinated notes at par to a group of qualifying investors, $2.0
million of which is expected to be issued by CSI in four equal instalments prior
to the CSI special meeting of shareholders, and the remaining $2.0 million of
which is expected to be issued after shareholder approval of the Merger and
after other necessary approvals under CSI's articles of incorporation but prior
to the effective time of the Merger. An aggregate of approximately 137,887,188
shares of CSI common stock is potentially issuable upon conversion of these
notes immediately prior to the Merger completion, which would be issued as newly
created "Class B" common stock as opposed to existing CSI shares, which will be
designated "Class A" common stock.
A Form S-4 Registration Statement, providing CSI shareholders with information
about the background to and the reasons for the Merger and Financing, (the
"Circular") and containing a notice of a special meeting of CSI to be convened
on a date to be agreed following review by U.S. and any other regulatory
authorities will be sent to shareholders at the end of such review period. The
Circular outlining the terms of the Merger and Financing will seek shareholder
approval to, inter alia, enable CSI to complete the Merger and Financing.
The Merger will complete once both CSI and CDTI have approved the Merger and the
conditions are satisfied. The timing of the shareholder's meetings of both CSI
and CDTI are dependant on the duration of the review of the U.S. and other
regulatory authorities of the Circular, which cannot be determined now. Final
timing relating to the date of the CSI and CDTI shareholders meetings and the
expected completion date for the Merger will be set out in the Circular that is
dispatched to shareholders of CSI and CDTI.
CDTI and CSI have also made a joint announcement regarding the Merger and
Financing in the U.S., a copy of this can be found at Appendix II of this
document. CDTI intends to file the Circular with U.S. regulatory authorities
shortly and a further announcement will be made if and when the filing is made.
Commenting on the Merger and Financing, Charles F. Call, Chief Executive Officer
of Catalytic Solutions, Inc. said:
"Since the second half of 2008, we have made significant progress in improving
CSI's liquidity, reducing debt and reducing operating costs. We believe that the
merger transaction along with the proposed financing transaction will create a
new entity which will be well positioned to grow revenues and achieve
profitability and will benefit from a stronger recapitalized balance sheet. In
addition, the new company will be listed on the NASDAQ capital market in the
United States, thereby providing increased liquidity to our shareholders."
About Catalytic Solutions, Inc.
Catalytic Solutions, Inc. is a global manufacturer and distributor of emissions
control systems and products, focused in the heavy-duty diesel and light-duty
vehicle markets. CSI's emissions control systems and products are designed to
deliver high value to our customers while benefiting the global environment
through air quality improvement, sustainability and energy efficiency. Catalytic
Solutions, Inc. is listed on AIM of the London Stock Exchange (AIM: CTS and
CTSU) and currently has operations in the USA, Canada, France, Japan and Sweden
as well as an Asian joint venture.
The summary forms part of and should read in conjunction with this announcement
and Appendices.
For further details please contact:
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| Catalytic Solutions, Inc. | Canaccord | Buchanan |
| Charlie Call, Chief | Genuity Limited | Communications |
| Executive Officer | Robert Finlay | Charles Ryland |
| Tel: +1 (805) 639-9463 | Guy Blakeney | Christian Goodbody |
| Steve Golden, Chief | | |
| Technical Officer | Tel: 020 7050 | Tel: 020 7466 5000 |
| Tel: +1 (805) 639-9464 | 6500 | |
| Nikhil Mehta, Chief | | |
| Financial Officer | | |
| Tel: +1 (805) 639-9461 | | |
+---------------------------+------------------+--------------------+
This announcement was approved by CSI's Board of Directors on 13 May 2010. A
copy of this release is available on CSI's website at
www.catalyticsolutions.com.
This announcement and the information contained herein is restricted and is not
for publication, release or distribution in whole or in part in, or into, the
United States of America, Canada, Australia, The Republic of Ireland, Japan or
South Africa.
Canaccord Genuity Limitedis not acting for any other person in connection with
the matters referred to in this announcement and will not be responsible to
anyone other than CSI for providing the protections afforded to clients of
Canaccord Genuity Limited or for giving advice in relation to the matters
referred to in this announcement.
The material set forth herein is for informational purposes only and is not
intended, and should not be construed, as an offer of securities for sale into
the United States or any other jurisdiction. The securities of CSI described
herein have not been registered under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), or the laws of any state, and may not be offered
or sold within the United States, except pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the Securities Act
and applicable state laws. There is no present intention to register CSI's
securities in the United States or to conduct a public offering of securities in
the United States. The Circular to be provided to CSI's shareholders in
connection with the proposed Merger will be included in a registration statement
on Form S-4 to be filed by CDTI with the U.S. Securities and Exchange
Commission.
This announcement and the information contained herein include forward-looking
statements relating to CSI and CDTI. Forward-looking statements are identified
by words such as "believe," "anticipate," "expect," "intend," "plan,"
"will," "may," "should," "could," "think," "estimate" and
"predict," and other similar expressions. In addition, any statements that
refer to expectations, projections or other characterisations of future events
or circumstances are forward-looking statements. Such statements reflect the
relevant company's current views with respect to future events and are subject
to risks, assumptions and uncertainties that could cause the actual results to
differ materially from those expressed or implied in the forward-looking
statements. Many of these risks, assumptions and uncertainties relate to factors
that are beyond the companies' abilities to control or estimate precisely, such
as future market conditions, changes in general economic and business
conditions, introduction of competing products and services, lack of acceptance
of new products or services and the behaviour of other market participants.
This announcement does not constitute a prospectus relating to CSI and has not
been approved by the UK Listing Authority, nor does it constitute or form any
part of any offer or invitation to purchase, sell or subscribe for, or any
solicitation of any such offer to purchase, sell or subscribe for, any
securities in CSI under any circumstances, and in any jurisdiction, in which
such offer or solicitation is unlawful.
The board directors of CSI accept responsibility for all the information
contained in this Announcement except for that information regarding CDTI, for
which it accepts no responsibility. To the best of the knowledge and belief of
the board directors of CSI (who have taken all reasonable care to ensure that
such is the case), the information contained in this document for which they are
responsible is in accordance with the facts and does not omit anything likely to
affect the import of such information.
PROPOSED Merger with clean diesel technologies, inc.
Introduction
Your Board announces today that CSI has entered into a merger agreement (the
"Merger Agreement") with Clean Diesel Technologies, Inc., ("CDTI") (the
"Merger"). In addition, CSI is in the process of negotiating terms for an
additional $4 million capital injection in CSI (the "Financing"). The Financing
is still subject to finalisation of documents and further announcements will be
made in due course.
Information about CSI and CDTI
Catalytic Solutions, Inc.
CSI is a global manufacturer and distributor of emissions control systems and
products, focused in the heavy duty-diesel and light-duty vehicle markets. Since
being founded in 1996, CSI has grown from not only a provider of unique
catalysts to the automotive industry (gasoline and diesel engines) but also to a
provider of both catalysts and systems in growing clean technology markets,
including heavy duty diesel systems and catalysts for energy systems. CSI's
emissions control systems and products are designed to deliver high value to its
customers while benefiting the global environment through air quality
improvement, sustainability and energy efficiency. In the 12 months to 31
December 2009, CSI had revenues of $50.5 million, operating losses of $8.0
million and net assets of $5.9 million.
Clean Diesel Technologies, Inc.
CDTI develops, designs, markets and licenses patented technologies and solutions
that reduce harmful emissions from internal combustion engines while improving
fuel economy and engine power. It is a Delaware corporation formed in 1994 as a
wholly-owned subsidiary of Fuel Tech, Inc., a Delaware corporation (formerly
known as Fuel-Tech N.V., a Netherlands Antilles limited liability company)
("Fuel Tech"). CDTI was spun-off by Fuel Tech in a rights offering in December
1995. Since inception, CDTI has developed a substantial portfolio of patents
and related proprietary rights and extensive technological know-how. In the 12
months to 31 December 2009, CDTI had revenues of $1.22 million, operating losses
of $7.2 million and net assets of $8.76 million.
Merger Sub
CDTI Merger Sub, Inc. is a California corporation and wholly-owned subsidiary of
CDTI ("Merger Sub"). Merger Sub was formed solely for the purposes of carrying
out the Merger and it has not conducted any business operations.
The Merger
Through a reverse merger, CSI will become a wholly-owned subsidiary of CDTI.
The business of CSI and CDTI will be combined and Merger Sub will merge with and
into CSI, with CSI as the surviving corporation (the "Surviving Subsidiary").
In exchange for their shares of CSI common stock, all CSI shareholders will
receive shares of CDTI common stock and each holder of shares designated as
Class A common stock will also receive a warrant to purchase shares of CDTI
common stock at an exercise price to be set pursuant to a formula at the
effective time of the Merger. Each warrant to purchase CSI common stock
outstanding and not terminated or exercised immediately prior to the effective
time of the Merger is expected to be converted into a warrant to purchase shares
of CDTI common stock, except for warrants held by Silicon Valley Bank, which
could remain outstanding after the effective time of the Merger. All options to
purchase shares of CSI common stock issued under CSI's 1997 Stock Option Plan
that are outstanding and unexercised immediately prior to the effective time of
the Merger will be terminated and cancelled. Options issued under the 2006
Equity Compensation Plan will not terminate, but will continue to be exercisable
for shares of the Surviving Subsidiary. However, CSI has undertaken to obtain
the consent of each current executive officer and director of CSI to agree that
options under the 2006 Equity Compensation Plan will expire at the effective
time of the Merger. CSI has undertaken to use commercially reasonable efforts
to obtain similar agreements from each other holder. Options to purchase
686,000 shares under the 2006 Equity Compensation Plan are not now subject to
such agreements and could remain exercisable after the effective time of the
Merger.
The precise numbers of shares and warrants CSI shareholders will receive cannot
be determined now, and depend on a formula set out in the Merger Agreement. In
aggregate, CSI shareholders (including investors in the Financing and also CSI's
financial advisor, Allen & Company LLC) will receive such numbers of CDTI common
stock so that after the Merger they will own approximately 60% of the
outstanding shares of CDTI common stock, subject to adjustment for the cash
position of each of CSI and CDTI at the earlier of closing or June 30, 2010.
Each share of CSI common stock to be designated Class A will also be converted
into the right to receive a pro rata portion (based on the number of shares of
CSI Class A common stock outstanding and "in-the-money warrants") of warrants to
purchase up to 3,000,000 shares of CDTI common stock. A number of these
warrants will be reserved for possible issuance to holders of warrants to
purchase CSI stock that are "in-the-money".
Both CSI and CDTI intend to issue additional shares of common stock prior to the
Merger in order that they can finance current operations and have, at the
earlier of the effective time of the Merger or June 30, 2010, a cash position of
at least $2.0 million in the case of CSI, and at least $4.5 million in the case
of CDTI. As a result, neither the number of outstanding shares of CSI common
stock immediately prior to the effective time of the Merger nor the number of
outstanding shares of CDTI common stock immediately prior to the effective time
of the Merger can be known at this stage.
Although the interim capital raise is still subject to finalization of
documentation, it is currently anticipated that CSI will issue an aggregate $4.0
million of convertible subordinated notes at par to certain qualifying
investors, $2.0 million of which is expected to be issued by CSI in four equal
installments prior to the CSI special meeting of shareholders, and the remaining
$2.0 million of which is expected to be issued after shareholder approval of the
Merger and other necessary approvals under CSI's articles of incorporation but
prior to the effective time of the Merger. An aggregate of approximately
137,887,188 shares of CSI common stock is potentially issuable upon conversion
of these notes, which would be issued as newly created "Class B" common stock as
opposed to existing CSI shares which will be designated "Class A" common stock.
CDTI currently expects that its interim capital raise will take the form of a
sale of approximately 650,197 shares of its common stock and warrants to
purchase up to 1,000,000 shares of its common stock in a Regulation S offering
to raise approximately $1 million. If these financing activities are completed
in this form, after the effective date of the Merger, and without taking into
account the further adjustment described in the next paragraph, ownership of
CDTI would be distributed approximately as follows:
CSI Shareholders
20%*
Purchasers of CSI convertible
subordinated notes 40%
Existing CDTI Shareholders
37%
Purchasers of newly issued CDTI shares
3%**
____________
* Including CSI's financial advisor, Allen & Company LLC (which will own 4%).
Does not give effect to warrants to purchase four million shares of CDTI common
stock (up to three million of which are part of the merger consideration and one
million of which will to be issued to CSI's financial advisor, Allen & Company
LLC).
** Does not give effect to warrants to purchase one million shares of CDTI
common stock
In addition, for every $166,666.66 by which CSI's cash position at the earlier
of the effective time of the Merger or June 30, 2010 is less than $2.0 million,
the percentage of post-closing outstanding common stock of CDTI to be held by
CSI shareholders will be reduced by 1%, but not below 48% (and the percentage of
post-closing outstanding common stock of CDTI to be held by CDTI stockholders
will be increased by 1%, but not above 52%). For every $116,666.66 by which
CDTI's cash position at the earlier of the effective time of the Merger or June
30, 2010 is less than $4.5 million, the percentage of post-closing outstanding
common stock of CDTI to be held by CSI shareholders will be increased by 1%, but
not above 90% (and the percentage of post-closing outstanding common stock of
CDTI to be held by CDTI stockholders will be reduced by 1%, but not below 10%).
Reasons for the Merger
CSI's Reasons and Considerations in relation to the Merger
In reaching its unanimous decision to approve the Merger, the CSI board of
directors believe there are a number of compelling reasons to support the
Merger, including, but not limited to:
· the fact that the Merger will allow the CSI shareholders to gain an
equity interest in the enlarged CDTI, thus providing a vehicle for continued
participation by the CSI shareholders in the future performance of not only
CSI's existing business, but also that of CDTI;
· the Merger will allow CSI shareholders to participate in a better
capitalized business, with the operations of the enlarged group having improved
access to development capital;
· the judgment that CSI would be able to continue to sell its verified
heavy duty diesel systems while engaging in the process of obtaining
verification for CDTI's products and systems, which CSI judges will be
complementary to its own and which will contribute to an expanded product
portfolio;
· the increased liquidity available to CSI shareholders on a U.S.
securities exchange through receipt of the registered shares of CDTI;
· the belief of the CSI board of directors that the combined company
after the Merger will be better positioned to pursue and implement its business
strategy; and
· the belief that the Merger represents the strategic option most
likely to optimize shareholder value, given the board's assessment of CSI's
strategic alternatives.
CSI believe that the Merger will be in the best interests of its stockholders
and shareholders. However, achieving these anticipated benefits of the Merger is
subject to risk and uncertainty. Further details of these risks will be set out
in the Circular which is expected to be filed with the U.S. regulatory
authorities shortly.
Overview of the Merger Agreement
The Merger Agreement contains the full terms and conditions of the proposed
combination of the businesses of CDTI and CSI, a summary is set out below.
Merger Consideration
At the effective time of the Merger, each share of issued and outstanding CSI
common stock existing immediately prior to the effective time of the Merger
will, without any action on the part of the shareholder thereof, automatically
be retired and cease to exist, and be converted into the right to receive a
number of shares of CDTI common stock to be determined, and, in the case of
shares to be designated as Class A, a warrant to purchase shares of CDTI common
stock pursuant to a formula set out in the Merger Agreement; provided that the
following shares will not be converted:
· shares owned by CDTI or Merger Sub;
· shares held by CSI; and
· shares that are held by shareholders properly demanding and perfecting
dissenter's rights pursuant to Sections 1300 through 1313 of the California
Corporations Code.
The number of shares of CDTI common stock into which each share of CSI common
stock will be converted will be that number of shares that will result in the
holders of CSI common stock (including investors in the Financing and also CSI's
financial advisor, Allen & Company LLC) holding 60% of the outstanding CDTI
common stock after the Merger, subject to adjustment for each of CSI's and
CDTI's cash position at the earlier of the effective time of the Merger or June
30, 2010, but not more than 90% and not less than 48%. The fractional share of
CDTI common stock represented by a warrant issuable in respect of each share of
CSI common stock (to be designated "Class A") will be a pro rata portion of up
to 3,000,000 shares of CDTI common stock.
All issued and outstanding options to purchase CSI common stock are currently
out-of-the-money (i.e., the exercise price exceeds the current trading price of
shares of CSI common stock). Prior to the effective time of the Merger, each
option to purchase shares of CSI common stock issued under CSI's 1997 Stock
Option Plan, in accordance with the terms of such Plan, will be given a window
of time in which to exercise following which any options issued under the 1997
Stock Option Plan that remain outstanding will terminate at the effective time
of the Merger. The terms of outstanding options issued under CSI's 2006 Equity
Compensation Plan differ from the 1997 Stock Option Plan, and as such, will not
terminate at the effective time of the Merger but will continue to be
exercisable for shares of the Surviving Subsidiary. However, CSI has undertaken
in the Merger Agreement to obtain the consent of each of CSI' directors and
executive officers who has options outstanding under CSI's 2006 Equity
Compensation Plan and to use commercially reasonable efforts to obtain the
consent of the other holders of any options, grants or other awards granted
under CSI's 2006 Equity Compensation to terminate such awards at the effective
time of the Merger, and to terminate its 2006 Equity Compensation Plan.
At the effective time, certain warrants to purchase shares of CSI common stock
outstanding and not terminated or exercised immediately prior to the effective
time of the Merger are expected to be assumed by CDTI in accordance with their
terms and thus become exercisable for that number of shares of CDTI common stock
and warrants to purchase CDTI common stock calculated according to the
conversion ratio as defined in the Merger Agreement. One of these warrants is
"in-the-money" and two of these warrants are "out-of-the-money." For one
outstanding warrant that is out-of-the-money whose terms do not provide for
assumption by CDTI, CSI has agreed in the Merger Agreement to use commercially
reasonable efforts to obtain the consent of the holder of such warrants to a
cancellation or an assumption of the CSI's obligations thereunder by CDTI
similar to CSI's other warrants.
The merger consideration will be appropriately and proportionately adjusted to
reflect any stock dividend, subdivision, reclassification, recapitalization,
split, combination, or exchange of shares with respect to CSI common stock and
CDTI common stock between the date of the Merger Agreement and the effective
time of the Merger.
No Solicitation
With certainexceptions, CSI and CDTI agreed that immediately following the
execution and delivery of the Merger Agreement, each of the parties and their
subsidiaries would cease any and all existing activities, discussions, or
negotiations with any person relating to any acquisition proposals.
Conditions to Completion of the Merger
In addition to the requirement of obtaining CDTI stockholder approval and CSI
shareholder approval, each of the other closing conditions set forth in the
Merger Agreement must be satisfied or waived by the appropriate party, including
in particular minimum cash positions. For a summary of the conditions that need
to be satisfied to consummate the Merger, see Appendix I entitled "Conditions to
the Completion of the Merger".
Termination of the Merger Agreement
It is possible that the Merger and the other transactions contemplated by the
Merger Agreement will not be completed. This might happen if, for example,
CDTI's stockholders do not approve the issuance of the CDTI shares and warrants
in connection with the Merger, or if CSI's shareholders do not approve the
Merger or if other conditions to the Merger are not satisfied. Should that
occur, neither CDTI nor CSI will be under any obligation to make or consider any
alternative proposal regarding the combination of CDTI and CSI.
Termination Fee
In certain circumstances, CDTI or CSI may be obligated to pay the other party a
termination fee of $300,000, plus an amount equal to all out-of-pocket expenses
(excluding the cost of employee time), up to a maximum of $350,000, incurred by
the recipient party in connection with the Merger Agreement, the ancillary
agreements, and the transactions contemplated thereby.
Interests of Directors, Executive Officers and Affiliates of CSI and CDTI
CSI
Certain directors and executive officers of CSI have interests in the Merger
that differ from, or are in addition to, their interests as CSI shareholders.
Specifically:
· Four of the directors of CSI, Mr. Call, Mr. Cherry, Mr. Ellis and Dr.
Engles, are expected to be appointed as directors of CDTI after the Merger.
· CSI's three executive officers, Mr. Call, Chief Executive Officer, Mr.
Mehta, Chief Financial Officer and Dr. Golden, Chief Technical Officer, are
expected to continue with CDTI after the Merger pursuant to the terms of their
existing Employment Agreements that will be assumed by CDTI at the effective
time of the Merger.
CDTI
Certain directors and executive officers of CDTI have interests in the Merger
that differ from, or are in addition to, their interests as CDTI stockholders.
Specifically:
· Innovator Capital, an investment banking firm wholly owned by CDTI's
non-executive Chairman, is advising CDTI with respect to its capital raising and
the Merger, and will receive a fee in respect to those activities.
· Three of the directors of CDTI, Mr. Park, Mr. Gray and Mr. Asmussen, are
expected to continue as directors of CDTI after the Merger. Two of the
directors of CDTI, Mr. Grinnell and Mr. Merrion are expected to resign at the
effective time of the Merger and be replaced by former directors of CSI.
· CDTI's director and President, Mr. Asmussen, has indicated his intention
to continue with CDTI as its President through the consummation of the Merger.
CSI has indicated its desire that Mr. Asmussen continue to serve CDTI as its
Chief Commercial Officer subsequent to the effective time of the Merger. It is
expected that CDTI and Mr. Asmussen will discuss a mutually acceptable amendment
to Mr. Asmussen's employment agreement to this effect, but no assurances can be
given that these discussions will be successfully concluded. Any such amendment
entered into prior to the effective time of the Merger would have to be approved
by CSI as well.
Ownership of CDTI Following the Merger
After the Merger, CSI will be a wholly-owned subsidiary of CDTI and CSI
shareholders will no longer have any direct interest in CSI, but will have an
equity stake in CDTI. Immediately after the Merger, CDTI stockholders are
expected to own approximately 40% of the outstanding shares of CDTI common stock
and the former CSI shareholders (including investors in the Financing and also
CSI's financial advisor, Allen & Company LLC) are expected to own approximately
60% of the outstanding shares of CDTI common stock, in each case assuming that
no adjustment is made for the cash position of each of CSI and CDTI at the
earlier of the effective time of the Merger or June 30, 2010.
NASDAQ Stock Market Listing
Prior to consummation of the Merger, CDTI intends to cause all shares of CDTI
common stock to be issued in connection with the Merger and all shares of CDTI
common stock to be issued upon exercise of the warrants to purchase shares of
CDTI common stock to be approved for listing (subject to notice of issuance) on
the NASDAQ Stock Market as of the effective time of the Merger, including filing
any required additional listing applications or notices with the NASDAQ Stock
Market pursuant to the NASDAQ Stock Market LLC rules.
AIM Stock Market Listing
In addition, prior to the consummation of the Merger, CSI intends to apply to
the London Stock Exchange to cancel the admission of its shares to trading on
the AIM market, to be effective on completion of the Merger.
Directors' and Executives
CDTI currently anticipates that Charles F. Call, Alexander ("Hap") Ellis, III,
Charles R. Engles, Ph.D., Bernard H. Cherry, Mungo Park, Derek R. Gray and
Michael L. Asmussen will serve as its board of directors following completion of
the Merger.
Comparison of Stockholder/Shareholder Rights
The rights of CSI shareholders are currently governed by the California
Corporations Code, CSI's articles of incorporation, as amended, and the bylaws
of CSI. The rights of CDTI stockholders are currently governed by the Delaware
General Corporation Law, the restated certificate of incorporation of CDTI, as
amended, and the bylaws of CDTI. If the Merger is completed, CSI shareholders
will become stockholders of CDTI, and their rights will be governed by the
Delaware General Corporation Law, and the amended and restated certificate of
incorporation, as amended of CDTI and bylaws of CDTI. The rights of CSI
shareholders contained in the articles of incorporation and bylaws of CSI differ
from the rights of CDTI stockholders under the certificate of incorporation of
CDTI and bylaws of CDTI.
Timing
The Merger will complete once both CSI and CDTI have approved the Merger and the
conditions are satisfied. The timing of the shareholder's meetings of both CSI
and CDTI are dependant on the duration of the review of the U.S. and other
regulatory authorities of the Circular, which cannot be determined now. Final
timing relating to the date of the CSI and CDTI shareholders meetings and the
expected completion date for the Merger will be set out in the Circular that is
dispatched to shareholders of CSI and CDTI.
CDTI intend to file the Circular with U.S. regulatory authorities shortly and a
further announcement will be made if and when the filing is made.
APPENDIX I
CONDITIONS TO THE COMPLETION OF THE MERGER
The obligations of each of the parties to effect the Merger are subject to the
satisfaction, at or prior to the Merger, of various mutual conditions (which
may, to the extent permitted by applicable law, be waived in writing by any
party in its sole discretion, with such waiver only effective as to the
obligations of such party), which include the following:
· the CSI shareholders must have approved and adopted the Merger Agreement;
· the CDTI stockholders must have approved the Certificate of Amendment
effecting the reverse stock split and the approval of the issuance of CDTI
common stock and warrants exercisable for shares of CDTI common stock to be
issued to CSI in the Merger;
· authorization of the listing of the shares of CDTI common stock to be
issued in the Merger and the shares of CDTI common stock to be issued upon
exercise of the warrantsto be issued in the Merger on the NASDAQ Capital Market
System, subject to official notice of issuance;
· effectiveness of the Circular and the absence of a stop order or
proceedings threatened or initiated by the U.S. regulatory authorities for that
purpose;
· the obtaining of all consents, approvals and authorizations of any
governmental body required to consummate the Merger.
· all shares of capital stock of Merger Sub outstanding immediately prior to
the Merger and all shares of capital stock of the Surviving Corporation
outstanding immediately after the Merger shall be owned by CDTI;
· delisting of the CSI Common Stock for trading on AIM; and
· the Merger shall not have been prohibited or an injunction issued.
In addition, CDTI's obligation to effect the Merger is subject to the
satisfaction or waiver of the following conditions:
· the representations and warranties of CSI in the Merger Agreement must be
true and correct except for deviations and inaccuracies that do not, in the
aggregate, constitute a material adverse effect;
· CSI must have performed in all material respects the obligations required
to be performed by it under the Merger Agreement at or prior to the closing date
of the Merger;
· CSI's principal credit facility shall have been extended, modified or
refinanced on terms reasonably satisfactory to CDTI, or the lender shall have
entered into a forbearance agreement reasonably satisfactory to CDTI;
· CSI's cash and cash equivalents will be not less than $1,000,000; and
· No more than 3% of CSI's outstanding shares of common stock will be
eligible to be dissenting shares.
In addition, the obligation of CSI to effect the Merger is subject to the
satisfaction or waiver of the following conditions:
· the representations and warranties of CDTI in the Merger Agreement must be
true and correct except for deviations and inaccuracies that do not, in the
aggregate, constitute a Material Adverse Effect;
· CDTI must have performed in all material respects the obligations required
to be performed by it under this Agreement at or prior to the Closing Date;
· CDTI must take steps to cause transactions contemplated by the Merger
Agreement to be exempt from reporting under Rule 16b-3 of the Exchange Act;
· CDTI will elect Charles F. Call, Nikhil A. Mehta, and Stephen J. Golden,
PhD as officers of CDTI after the Merger;
· the board of CDTI is expected to be 7 members and the directors shall be
Mungo Park, Derek R. Gray, Michael L. Asmussen, Charles F. Call, Alexander
("Hap") Ellis, III, Charles R. Engles, Ph.D., and Bernard H. Cherry;
· certain of the other officers and directors of CDTI shall have submitted
to CDTI his or her resignation in such capacity to be effective as of the
effective time;
· CDTI's holdings of auction rate securities shall have been redeemed in
accordance with the terms of commitment governing such auction rate securities
or, if the effective time of the Merger is prior to the date of redemption of
such auction rate securities , CSI will be reasonably satisfied that (i) such
redemption of auction rate securities will occur no later than July 11, 2010 and
substantially in the manner set forth in the commitment governing the redemption
of such auction rate securities notwithstanding the Merger, (ii) such commitment
will remain enforceable in accordance with it terms following the effective time
and (iii) the ability of CDTI to continue to utilize the credit facility
associated with the auction rate securities until the time of the redemption of
such auction rate securities will be unimpaired; and
· CDTI's cash and cash equivalents will be not less than $1,000,000.
APPENDIX II
For immediate release
Clean Diesel Technologies, Catalytic Solutions
Announce Plans to Merge
Combined Companies 2009 Revenue in Excess of $50 Million
BRIDGEPORT, CT and VENTURA, CA, May 13, 2010. Clean Diesel Technologies, Inc.
("CDTI") (NASDAQ: CDTI), a cleantech emissions reduction company providing
sustainable solutions to reduce emissions, increase energy efficiency and lower
the carbon intensity of on- and off-road engine applications and Catalytic
Solutions, Inc. ("CSI") (AIM: CTS and CTSU), a global manufacturer and
distributor of emissions control systems and products, focused in the heavy duty
diesel and light duty vehicle markets, announced today that they have entered
into a definitive merger agreement. The proposed merger will combine the
businesses of CDTI and CSI whereby CSI will become a wholly-owned subsidiary of
CDTI. In exchange for their shares of CSI common stock, current security holders
of CSI will receive shares of CDTI common stock and warrants to purchase CDTI
common stock.
Under the terms of the merger agreement announced today:
· CSI will merge with a newly-formed subsidiary of CDTI, a wholly-owned
California merger subsidiary created solely for this transaction, with CSI
remaining as the surviving corporation and becoming a wholly-owned subsidiary of
CDTI, subject to potential dilution through the exercise of currently
out-of-the-money options and warrants.
· Immediately after the Merger, existing CDTI stockholders and participants
in the CDTI Regulation S offering described below are expected to own
approximately 40% of the outstanding shares of CDTI common stock (with
approximately 3% of the total outstanding expected to be held by participants in
the CDTI Regulation S offering). The existing CSI shareholders and participants
in the CSI private placement described below and CSI's financial advisor are
expected to own approximately 60% of the outstanding shares of CDTI common stock
(with approximately 40% of the total outstanding expected to be held by
participants in the CSI private placement and approximately 16% of the total
outstanding expected to be held by CSI's existing shareholders). Final ownership
percentages are subject to adjustment based on the relevant cash position of
each of CSI and CDTI as of the earlier of June 30, 2010 and the closing of the
Merger, but the percentage of outstanding shares of CDTI common stock to be
owned by CSI's current shareholders and the participants in CSI's private
placement and CSI's financial advisor, as a group, can not be less than 48% or
more than 90%. The foregoing percentages do not include shares underlying
warrants.
· The board of directors of the combined company is expected to comprise
seven directors, four from CSI (Charles F. Call, Alexander "Hap" Ellis, III,
Charles R. Engles Ph.D. and Bernard H. Cherry) and three from CDTI (Mungo Park,
Michael L. Asmussen and Derek R. Gray).
· The management team of the combined company is expected to be composed of
the following members of the current management team of CSI: Charles F. Call,
Nikhil A. Mehta and Stephen J. Golden Ph.D., and Michael L. Asmussen, a member
of the current management team of CDTI.
· CDTI's certificate of incorporation will be amended to increase its
authorized capital stock to 35,100,000 shares.
· CDTI will effect a reverse stock split to accommodate the listing on NASDAQ
of the shares to be issued to CSI shareholders in the merger.
In parallel with this transaction, each company will undertake a capital raise
prior to the merger in order to meet the target cash thresholds set out in the
Merger Agreement that would ensure CSI shareholders, including those
participating in the capital raise, would receive 60% of the shares of the
combined company and CDTI shareholders, including those participating in the
capital raise, would own 40% of the shares of the combined company, and, in the
case of CSI, to raise cash for operations prior to the Merger. CDTI has
obtained commitments to raise $1.0 million at the time of the Merger through the
sale of common stock and warrants pursuant to a Regulation S offering and CSI is
contemplating raising $4.0 million, half prior to the Merger and half at the
time of the Merger, through a private placement of convertible subordinated
notes to a group of accredited investors, which will convert into equity at the
time of the Merger.
CDTI expects to file a Registration Statement on Form S-4 with the U.S.
Securities and Exchange Commission prior to the close of business on Friday, May
14, 2010. Said Registration Statement will contain additional details regarding
the terms of the transaction.
Michael L. Asmussen, CDTI's Chief Executive Officer and President, issued the
following statement:
"On behalf of the CDTI board of directors, I am extremely pleased to announce
this agreement. It is the culmination of many months of preparation and
extensive strategic analysis made possible by the patience and support of our
stockholders. The board decided unanimously that this agreement is in the best
interests of CDTI and its stockholders and represents a compelling strategic
opportunity to expand its product offerings, customer base, and operational
scale, thereby strengthening its position in the emissions control industry.
The complementary nature of the companies creates the potential for financial
stability and significant operational synergies to help mitigate risk and
improve operating flexibility. The merger addresses several CDTI objectives by
immediately broadening the technology portfolio and improving global OEM channel
access for CDTI intellectual property. Moreover, the resulting company's large
number of verified products and greater scale is expected to provide additional
sales revenue and the market credibility critical to future success."
Charles F. Call, CSI's Chief Executive Officer, issued the following statement:
"The CSI board of directors is very pleased to announce this agreement with
CDTI. We believe this is a very important strategic and practical step for both
companies that will provide a solid foundation for future success. The board
of directors has determined through an extensive review process that the
transactions are in the best interests of CSI and its shareholders. The merger
allows CSI shareholders to gain access to the NASDAQ market, participate in the
future performance of both CSI and CDTI and positions the "new" company to
pursue a more aggressive growth strategy in the diesel emissions reduction
business.
The merger will allow CSI access to a better capitalized business, with a
greater ability to pursue new business opportunities and to help create
financial stability so that we can better serve our customers. Since the second
half of 2008, we have made significant progress in improving CSI's liquidity,
reducing debt and reducing operating costs. We believe that the merger
transaction, along with the proposed financing transaction, will create a new
entity well positioned to grow revenues and achieve profitability and will
benefit from a stronger recapitalized balance sheet. In addition, the new
combined company is expected to continue to be listed on the NASDAQ capital
market in the United States, thereby providing liquidity to our shareholders."
With combined 2009 revenues in excess of $50 million, the merged company will
offer a broad portfolio of verified products and a technologically advanced
intellectual property portfolio-both of which will enable it to appeal to a
broad and diversified customer base and provide a platform for additional
complementary acquisitions.
The merged company is expected to operate under the name of Clean Diesel
Technologies for the foreseeable future and will have its corporate offices in
Ventura, California, with manufacturing centers in Oxnard, California; Toronto,
Canada; and Malmo, Sweden. An integrated global sales team and sales offices in
key locations will support a broad, multi-channel product portfolio.
CDTI plans to schedule an informational conference call intended to provide
stockholders and investors an opportunity to learn more about the proposed
transaction. Further details will be announced in the coming days.
Information about Clean Diesel and CSI
Clean Diesel Technologies, Inc.
Clean Diesel Technologies (NASDAQ: CDTI) is a cleantech company providing
sustainable solutions to reduce emissions, increase energy efficiency and lower
the carbon intensity of on- and off-road engine applications. Clean Diesel's
patented technologies and products allow manufacturers and operators to comply
with increasingly strict regulatory emissions and air quality standards, while
also improving fuel economy and power.
CDTI's solutions significantly reduce emissions formed by the combustion of
fossil fuels and biofuels (without increasing secondary emissions such as
nitrogen dioxide, NO2), including particulate matter (PM), nitrogen oxides
(NOx), carbon monoxide (CO) and hydrocarbons (HC). As a result, they are
effective for: OEMs, Tier 1 suppliers and retrofit providers; businesses
entering the emissions control market seeking solutions and expertise; operators
requiring compliant emissions solutions; fuel, biofuels and additive suppliers
seeking low emissions and energy efficient products; and regulators creating
public policy. Clean Diesel's solutions, therefore, are ideal for such markets
as: on-road vehicles, construction, mining, agriculture, port/freight handling,
locomotive, marine, and power generation.
Clean Diesel develops and manages intellectual property from original concept to
full-scale commercial deployment. Building on its more than 200 granted and
pending patents, its offerings include ARIS selective catalytic reduction
(SCR); the patented combination of SCR and exhaust gas recirculation (EGR);
hydrocarbon injection for emissions control applications; Platinum Plus
Fuel-Borne Catalyst (FBC); the Purifier(TM) family of particulate filter
systems; and its wire mesh filter particulate filter technologies. CDTI was
founded in 1995 and is headquartered in Bridgeport, Connecticut. A wholly-owned
subsidiary, Clean Diesel International, LLC is based in London, England. For
more information, please visit www.cdti.com.
Catalytic Solutions, Inc.
Catalytic Solutions, Inc. is a global manufacturer and distributor of emissions
control systems and products, focused in the heavy duty diesel (HDD) and light
duty vehicle (LDV) markets. Since being founded in 1996, CSI has grown from a
provider of unique catalysts to the automotive industry (gasoline and diesel
engines) to a provider of both catalysts and systems in growing clean technology
markets, including heavy duty diesel systems and catalysts for energy systems.
Catalytic Solutions' emissions control systems and products are designed to
deliver high value to its customers while benefiting the global environment
through air quality improvement, sustainability and energy efficiency.
Catalytic Solutions' businesses include:
· HDD Systems (Engine Control Systems), a full range of products for the
original equipment manufacturer (OEM), occupational health driven and verified
retrofit markets in order to reduce exhaust emissions created by on-road,
off-road and stationary diesel and alternative fuel engines including propane
and natural gas.
· LDV/HDD Catalysts, the business behind Catalytic Solutions' proprietary
Mixed Phase Catalyst (MPC ) technology, enabling CSI to produce catalyst
formulations for gasoline, diesel and natural gas induced emissions that offer
superior performance, proven durability and cost effectiveness for multiple
markets and a wide range of applications.
For more information, please visit www.catalyticsolutions.com.
Safe Harbor
This news release may contain "forward-looking statements" as defined in the
U.S. Private Securities Litigation Reform Act of 1995. Such forward looking
statements include statements regarding revenues of the combined company, and
assume that the Merger will be completed. Readers are cautioned not to place
undue reliance on these forward-looking statements and any such forward-looking
statements are qualified in their entirety by reference to the following
cautionary statements. All forward-looking statements speak only as of the date
of this news release and are based on current expectations and involve a number
of assumptions, risks and uncertainties that could cause the actual results to
differ materially from such forward-looking statements. Such factors include,
among others, unanticipated issues associated with obtaining necessary approvals
to complete the transaction, the ability to complete the interim capital raises
to meet the target cash conditions, obtaining NASDAQ approval for the listing of
the CDTI shares to be issued in the merger and continued listing of the combined
company, or other unexpected issues that could impact the closing of the merger.
Both CDTI and CSI disclaim any obligation to update or revise any
forward-looking statements.
Important Legal Information
Any offering of securities in connection with the merger will be made only by
means of a prospectus. An S-4 registration statement relating to these
securities shall be filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy any
securities described herein, nor shall there be any sale of these securities in
any state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
In connection with the proposed merger, CDTI will file with the Securities and
Exchange
Commission (the "SEC"), and will furnish to its stockholders, a proxy statement.
Stockholders are advised to read the proxy statement when it is finalized and
distributed, because it will contain important information about the proposed
merger. Stockholders will be able to obtain, free of charge, a copy of the proxy
statement (when available) and other relevant documents filed with the SEC from
the SEC's website at www.sec.gov. Stockholders will also be able to obtain a
free copy of the proxy statement and other relevant documents (when available)
by directing a request to Clean Diesel Technologies, Inc., 10 Middle Street,
Suite 1100, Bridgeport, CT 06604-4244, Attention: Chief Financial Officer, or in
Europe to the Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, Attention:
Capital IRG, Foreign Department.
For Further Information Contact:
John Wynne
Vice President, Treasurer and Interim Chief Financial Officer
Clean Diesel Technologies, Inc.
10 Middle Street, Suite 1100
Bridgeport, CT 06604-4244
Office (203) 416-5290
jwynne@cdti.com
Nikhil A. Mehta
Chief Financial Officer
Catalytic Solutions, Inc.
4567 Telephone Road, Suite 206
Ventura, CA 93003
Office (805) 639-9458
irinfo@catsolns.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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