Synthesis Energy Systems, Inc. (NASDAQ: SES) is making a run for the top early on in the premarket this morning, and for good reason. The company announced that it has entered into a definitive merger agreement, exciting investors and sending the stock up more than 90% early on. Here’s what’s going on:
SES Stock Rockets On Definitive Merger Agreement
In a press release issued early this morning, Synthesis Energy Systems said that it has entered into a definitive merger agreement. The agreement was signed with Australian Future Energy Pty Ltd (AFE).
According to the terms of the agreement, Australian Future Energy will merge with SES and become a wholly owned subsidiary of the company. At the moment, SES holds about 35% of issued capital of AFE.
Once the deal comes to a close, SES will issue 3,875,000 shares of common stock for the acquisition of AFE. Each holder of AFE shares will receive one share of SES common stock in exchange for every 24.44 shares of AFE held.
The total value of the transaction comes to about $36 million, based on the $6 per share assumed price of SES shares to be issued.
Aside from the agreement above, SES also said that it has offered to acquire 100% of Batchfire Resources. Batchfire is the owner of the Callide Mine in Queensland, Australia.
The company said that it has set a minimum participation level by Batchfire shareholders of 25%. This includes the 7.3% holding by SES. Each participating Batchfire shareholder will enter into a Share Exchange Agreement with SES.
To date, the company said that it has received signed Share Exchange Agreements from about 33% of Batchfire shareholders. This figure includes its own ownership. The deal values Batchfire at about $80 million.
In a statement, Robert W. Rigdon, President and CEO at SES, had the following to offer:
A lot has been accomplished since forming AFE five years ago, which we believe makes this merger of AFE and SES a best value course of action for both AFE shareholders and the SES shareholders, team members and business partners around the world. The technology commercialized by SES through its five projects built in China has now been well-proven as a clean energy technology solution that converts low-cost, locally sourced resources into high value syngas and energy products.
Together with Edek Choros we created AFE and, two years later, AFE spun out Batchfire Resources, now owner of one of the lowest production cost, largest thermal coal mines in all Australia. We believe that the executive team at AFE, led by Kerry Parker and Ron Higson, under the experienced guidance of AFE’s Chairman Stephen Lonie, Executive Director Edek Choros, Director Richard Barker, and SES have the AFE company well-positioned for growth as a vertically integrated operation. With the exciting new Gladstone Energy and Ammonia Project now coming forward and the increased ownership of Batchfire, the newly merged SES is poised for growth.
Why This Is Such Exciting News
Any time we see merger and acquisition news, we tend to see pretty strong movement in the market to follow. The news issued today was no different.
However, often times the suitor in an acquisition will see declines. In this particular case, we’re seeing tremendous gains. Here’s why investors are so excited.
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