SYDNEY, AUSTRALIA: De.mem (ASX:DEM) has signed a binding agreement to acquire the remaining 25% stake in its German subsidiary De.mem-Geutec GmbH, Velbert, Germany. Subject to the pending completion of the acquisition, De.mem will own 100% in De.mem-Geutec GmbH. De.mem acquired the initial 75% in De.mem-Geutec on 17 October 2019.

De.mem-Geutec supplies waste water treatment products and solutions to small and medium sized companies (“SMEs”) and a number of multinational corporations from the heavy industrial, plating and metals processing industries. It has a strong customer base in Germany and Europe, with more than 100 Small-and-Medium Enterprises (SMEs) and a number of larger corporations as repeat customers.

The company’s product range is based on a range of proprietary chemical formulations which have been developed and optimised over decades of operation. Sales are largely recurring.

The manufacturing of De.mem-Geutec’s chemicals is performed at the company’s facility in Velbert, Germany.

The manufacturing process is low in energy consumption, hence, the margin impact of the rising energy prices in Europe on the manufacturing cost is insignificant.

De.mem-Geutec’s business is led by its local Managing Director Mr. Uwe Graessel, who is committed to stay with the business, ensuring stability and strong local leadership for the planned expansion.

De.mem pays a total of approx. A$ 340,000 for the 25% acquisition. The valuation is only slightly higher than for the first tranche (A$ 915,000 for 75%), in spite of the strong growth which De.mem-Geutec GmbH has accomplished since the initial transaction.

De.mem-Geutec has a strong track record of profitability. In the first six months of CY 2022, the company recorded positive EBITDA of A$ 205,000.

The acquisition is valued based on an EBITDA multiple (calculated as the acquisition price divided by the annualized EBITDA recorded by De.mem-Geutec in the first six months of CY 2022) of approx. 3.3x.

With the full acquisition of and control over De.mem-Geutec, De.mem now has a strong platform for further internationalization and growth into the German and European market.

The region is of particular interest for De.mem, as Germany has a strong industrial manufacturing base combined with strict environmental laws and discharge regulations, resulting in a high demand for advanced waste water treatment technologies.

As De.mem’s Australian business has grown substantially over the past few years, the internationalization is now becoming a key target for the Company.

De.mem CEO Andreas Kroell said: “The purchase of the remaining 25% stake in De.mem-Geutec completes the successful acquisition of this business by De.mem.

The integration of De.mem-Geutec into our group has been highly successful, as evidenced by the revenue growth of 78% since 2019, which we achieved in spite of the difficult market environment due to the Covid-19 pandemic.

With the full control over De.mem-Geutec we now have an excellent platform for the further roll out of our enhanced product range into the Germany and Europe.”