OSLO, NORWAY: The board of directors of Otovo AS has announced a merger plan with European Distributed Energy Assets Holding AS (EDEA).
On 10 November 2021 Otovo offered an all-share offer for EDEA, and after the completion of the transaction Otovo had increased its ownership from 18.63% to 88.43%. Now in order to optimise the ownership structure of EDEA, and to reduce excess reporting and operational expenses in EDEA the board of directors of Otovo and EDEA have jointly prepared a merger plan for the merger between the companies, where Otovo will be the acquiring entity and EDEA will be the transferring entity.
The merger will be completed by the dissolvement of European Distributed Energy Assets Holding AS (EDEA) and by the transfer of all of EDEA’s assets, rights and liabilities to Otovo.
As consideration, the shareholders of EDEA, with the exception of Otovo, will receive 1.7 new shares in Otovo for each share owned in European Distributed Energy Assets Holding AS (EDEA). The share-for-share exchange ratio is based on fair values in accordance with recognised valuation principles.
In the merger, Otovo is valued at a total equity value of NOK 3,484,390,351 based on volume-weighted trades on Euronext Growth Oslo in the period from 25 March 2022 to 29 March 2022 and EDEA is valued at a total equity value of NOK 285,132,515. Otovo currently owns 88.43% of the shares in EDEA and no merger consideration will be issued for such shareholding.
The merger will result in a share capital increase in Otovo of NOK 12.660 million, by the issuance of 1.266 million new shares. The new shares will be admitted to trading on Euronext Growth Oslo immediately after the merger has been completed, together with Otovo’s other shares.
The reason for the Merger is to optimise the business of EDEA. Since Otovo established EDEA, leasing has proven to be attractive to customers in Europe, and access to capital and the interest in investing in this space has increased significantly. While the unlevered internal rate of return for EDEA’s current portfolio is around 10%, higher return on the equity can be obtained by financing parts of the balance sheet by debt.
Volume is key to increase the debt to equity ratio and unlock additional value in EDEA. Therefore, it is preferable to increase marketing spending and other customer acquisition efforts but this is difficult in today’s setup where Otovo decides the marketing spend, but is not exposed to the full value creation in EDEA.
The market practice in the residential solar sector is increasingly to have the financing entity of leasing assets as a fully-owned subsidiary within the same group as the origination company that sells the leasing contracts. In such a setup, the interests between the originator and the financier are aligned, and the origination company is incentivised to increase the leasing share of sales thereby increasing the total value created.
The merger is further expected to reduce excess reporting and operational expenses in EDEA, and the merged company is expected to be better positioned for accelerated growth and have greater flexibility in terms of capitalization and future strategy for financing leasing of solar constructions.
The merger plan will be submitted to the annual general meetings of Otovo and EDEA for approval, both scheduled for 26 April 2022. Subject to approval by the general meetings, the merger is expected to be completed in mid-June 2022 following expiry of the creditor notice period.
For homeowners, Otovo is the easiest way to get solar panels on the roof, and batteries in the home. Otovo is a marketplace that organises hundreds of local, high quality and qualified energy installers. The company uses its proprietary technology to analyse the potential of any home and finds the best price and installer for customers based on an automatic bidding process between available installers.