The parties have signed a non-binding Memorandum of Understanding (MOU) and have plans for the injection of significant new funding as outlined further below.
The merger, if approved by shareholders and completed, will constitute a reverse takeover (RTO) under the AIM Rules for Companies.
Both redT and Avalon are well-established technology-led companies in the Vanadium Redox Flow Battery sector. The combination of the businesses will create a leading player in the growing energy storage market with operations in North America, Europe and Asia, and a global sales footprint able to capitalise on the significant opportunities for energy storage presented by the worldwide shift to renewable energy.
In October last year, redT announced that it would seek strategic partners to support and finance the continued growth of the business. redT further announced on 14 March 2019 that it was in active discussions with a number of interested parties.
The MOU sets out the basis upon which the two businesses, subject to a number of conditions, intend to form the leading global company in vanadium redox flow batteries. The merger will take the form of a share-for-share acquisition of Avalon with redT shares valued at 1.65p per share, which values Avalon at $37.5m. The Company will seek re-admission to trading on the AIM market of the London Stock Exchange for its Ordinary Shares including those to be issued to Avalon shareholders.
To drive the growth and development of the Enlarged Group, provide working capital, and take advantage of the substantial opportunity presented by the merger, the merged business intends to raise at least £24 million of new funds as part of the merger.
VSA Capital, redT’s financial adviser and broker, redT and Avalon have received substantial preliminary support for the fundraising from a strong new strategic investor that intends to make a cornerstone investment in the merged business, as well as from existing institutional investors in redT and both existing and certain proposed new investors in Avalon.
The fundraising is expected to be at a price not exceeding 1.65p per share subject to finalising terms and may include some interim financing while the RTO process is underway. It is expected that the merger and the Fundraising will be inter-conditional and complete at the same time.
The merger remains subject to inter alia further due diligence by each party, definitive legal agreements being reached, and a total of at least £24 million of new funds being raised to fund the enlarged business.