Geneva Acquisition Corp. (AMEX:GAC.U)
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Geneva Acquisition Corp. (NYSE Alternext US: GAC; GAC-WT; GAC-U)
(“Geneva”) today announced that it has entered into a definitive
agreement for acquiring privately held Global Hi-Tech Industries Ltd.
(“GHIL” or the “Company”), an Indian integrated steel producer. With its
state-of-the-art manufacturing facility built on approximately 138 acres
of land within the last five years, GHIL is a rapidly growing company in
an important and expanding infrastructure segment.
The Company has a solid track record of growth and financial success.
Revenues grew from $6 million in FY (3/31) 2006 to $50 million in FY
(3/31) 2008, while EBITDA during the same period rose from $1.12 million
to $10.4 million.
The Company’s current production capacity of 96,000 metric tons per
annum (MTPA) is expected to grow more than three-fold to 300,000 MTPA
within 18 months following closing. GHIL manufactures three products:
(1) structural steel, which is finished, high value-added ‘long’ steel
used as beams, columns, and joists; (2) billets, which are intermediate
stage products later made into structural steel; and (3) sponge iron, a
high ferrous content material produced in either lump or pellet form
which is a raw material alternative to scrap steel. Approximately 57% of
both billet and sponge iron production is currently sold to other steel
plants, but as capacity expands all production of these two intermediate
products is intended to be utilized internally. The Company is well
situated geographically on the west coast of India enabling easy sea and
rail transport, has access to a large and skilled labor pool, and
presently has limited local competition. The Company’s website address
is www.ironglobal.com.
Demand for structural steel in India has accelerated over the past
several years, driven by the growth of the domestic construction
industry and supported by both central and state government initiatives
for infrastructure development, making this market relatively resistant
to economic downturns. Nationwide initiatives have been undertaken by
the central government for the expansion, modernization and upgrading of
the transport infrastructure, the railroad system, and the electric
power distribution system. In addition, the rise of India’s ‘middle
class’ has fueled the growth of new full-service townships, shopping
malls, and the hospitality industry.
The Transaction
Under the terms of the transaction, Geneva will acquire GHIL to form
India Steel and Metals Corporation in a multi-step transaction,
initially acquiring 51.6% of GHIL at closing, with an option to acquire
an additional 15.7% and plans to then acquire the remaining 32.7%. Both
of the two subsequent acquisition tranches are expected to occur within
30 days of closing.
Total consideration for 100% acquisition of GHIL (a proportional amount
of such consideration will be paid for each tranche):
2.5 million shares of Geneva stock, with approximately 1.29 million
shares payable at closing, approximately 390,000 shares and
approximately 820,000 shares, respectively, being escrowed for the two
remaining tranches of GHIL;
$11.7 million cash, with approximately $6.0 million payable at
closing, and approximately $1.9 million and approximately $3.8
million, respectively, being escrowed for the two remaining tranches
of GHIL;
Assumption of up to $18 million of debt;
1.0 million shares to be earned upon receipt of mining license if
obtained on or prior to March 31, 2010; and,
5.66 million contingent earn-out shares to be earned as follows:
As of March 31,
EBITDA Range
Earn-Out Shares*
2010
$20.0 – $25.0 Million
0 - 1,150,000
2011
$35.0 – $40.0 Million
0 - 1,830,000
2012
$45.0 – $55.0 Million
0 - 1,830,000
2013
$55.0 – $60.0 Million
0 - 850,000
* Should certain EBITDA earn-out target levels not be met in a
given year but the subsequent year’s target are met, then GHIL’s
shareholders are entitled to receive the prior year’s earn-out
shares pursuant to a formula in the definitive agreement.
Dividend
In addition, Geneva’s management announces that it intends to declare a
single cash dividend of $2.00 per share to the public shareholders of
record of the common shares after the consummation of the acquisition of
GHIL.
Retirement of Geneva Promoter Shares
Geneva’s management plans to enter into an agreement with the Company to
return 1.0 million of their 2.5 million pre-initial public offering
shares.
James McGrath, Geneva’s President, commented, “Since our IPO, we have
evaluated many acquisition candidates in a variety of industries and
geographical locations. Given the deterioration of the stock market and
economic environment, several months ago we concluded that our primary
target would be, first and foremost, a foreign company in a basic
industry that participates in a sector relatively insulated from today’s
uncertainties. We believe GHIL is the right company at the right time
because we believe it operates in one of the world’s most rapidly
growing economies; serves a vital growth infrastructure segment driven
by government policies and incentives; and enjoys a strong competitive
position in an area characterized by undersupply. Moreover, we believe
these driving forces are long-term and sustainable in nature and, we
believe, are relatively unaffected by short-term aberrations or even
longer term credit problems. To even further enhance the attractiveness
of this transaction, Geneva’s management has agreed to give back 1.0
million shares of the 2.5 million shares we initially purchased. ”
He continued, “Before signing a definitive agreement, we retained Mott
McDermott, an engineering and technical consulting firm, to evaluate the
feasibility, timing, and cost of GHIL’s proposed expansion plan.
Moreover, Mott McDermott evaluated the Company’s long-term driving
forces and financial dynamics, its management, its success to date, and
its market opportunity, all in light of today’s economic aberrations and
concluded the plan was both sound and executable. By adding R C Krishna
as Chairman and Ash Belur as CEO to GHIL’s management team, both Indians
who together are highly experienced in SPACs and public capital markets
on Wall Street, we add to a terrific operational team the skills needed
to make GHIL a larger, more dominant player in its segment.”
R C Krishna, who will be GHIL’s Chairman post closing, commented, “I
have known Prakash Rajgarhia, GHIL’s Co-Founder, for several years, and
I have followed his entrepreneurial success with GHIL and other
companies he has been involved with. Prakash is a builder with a
long-term vision, which has enabled him to position the Company for
rapid growth to take advantage of today’s economic environment. Knowing
the reputations of the Geneva team, and wanting to play yet another role
in building an important Indian enterprise, I believe that in today’s
market environment this combination represents a great investment
opportunity. I look forward to helping to build GHIL into a preeminent
force within its industry.”
Mr. Prakash Rajgarhia, Co-Founder of GHIL, noted, “We are delighted to
join forces with Geneva. We expect that by devoting the first $5 million
of the proceeds from this transaction into our presently constrained
working capital we can nearly double our utilization on a near-immediate
basis. Further, it will allow us to begin to implement an estimated $35
million capacity expansion program that within 18 months of closing is
expected to triple our production capacity to 300,000 MTPA. This
expansion plan will help us achieve operational efficiencies by enabling
our furnaces to run more continuously, by spreading our overhead over a
larger base and through increasing automation content that lowers labor
costs and improves quality. By nearly doubling our capacity utilization
on a near-immediate basis and by beginning to see initial plant
expansion benefits in as little as eight months, we project EBITDA to
increase from the $11.1 million we expect for FY (3/31) 2009 to $25.3
million for the following year. I firmly believe that we will achieve
our goals for FY (3/31) 2010 and beyond, and through the earn-out we are
staking a very large portion of our ownership on that belief. In
addition, let me note that we have already secured a governmental
indication of approval for our critical initial iron ore prospecting
license and upon final approval we will then open an iron ore mine on
this approximate 50 acre site that has expected reserves of 15 or more
years. This represents both a significant asset in and of itself and a
captive source of raw materials for the long term.”
Upon closing of the transaction, which is expected in mid-February 2009,
Geneva will change its name to India Steel and Metals Corporation. For
additional information on the acquisition, see the Form 8-K filed by
Geneva, which can be obtained, without charge, at the Securities and
Exchange Commission's Internet site (http://www.sec.gov).
Conference Call
Geneva and GHIL’s management team will conduct a conference call to
discuss the details of the agreement on Tuesday, December 2nd
at 11:00 am ET. Interested parties may participate in the call by
dialing (706) 634 - 4739. Please call in 10 minutes before the call is
scheduled to begin, and ask for the Geneva/GHIL call (conference ID#
73112961).
Roadshow Schedule
The management of Geneva and GHIL will hold several meetings with
potential investors prior to the completion of the acquisition to
further discuss the transaction. If any accredited investors are
interested in meeting with management, please contact Lena Cati of The
Equity Group at 212-836-9611 or lcati@equityny.com.
About Geneva Acquisition Corporation
On February 16, 2007, Geneva consummated its Initial Public Offering of
10,000,000 units. On March 8, 2007, the underwriters exercised their
over-allotment option, resulting in the sale of an additional 1,500,000
units. Each unit consisted of one share of common stock and two stock
purchase warrants. Each warrant entitles the holder thereof to purchase
one share of its common stock at an exercise price of $5.00.
Simultaneously with the consummation of the Initial Public Offering,
certain officers and directors and the initial stockholders purchased in
a private placement an aggregate of 2,923,077 warrants at $0.65 per
warrant. Net proceeds from the Initial Public Offering, including the
proceeds received upon the full exercise of the over-allotment option,
and the warrant private placement, of approximately $67,440,000
(including $2,070,000 of deferred underwriting discounts), were placed
in a Trust Account. Lazard Capital Markets, Ladenburg Thalmann & Co.
Inc., and Ferris, Baker Watts, Incorporated acted as underwriters in
connection with the IPO.
The closing of the transaction is subject to approval by the
stockholders of Geneva Acquisition Corporation. In accordance with
Geneva’s certificate of incorporation, the transaction will be
consummated if not more than 20% of the shares of Geneva vote against
the acquisition and elect to convert their shares into cash.
This press release contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Those statements include statements regarding the
intent and belief or current expectations of Geneva and GHIL and their
respective management teams. These statements may be identified by the
use of words like “anticipate”, “believe”, “estimate”, “expect”,
“intend”, “may”, “plan”, “will”, “should”, “seek” and similar
expressions. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve risks and uncertainties, and that actual results may differ
materially from those projected in the forward-looking statements.
Important factors that could cause actual results to differ materially
from Geneva’s and GHIL’s expectations include, without limitation, the
failure of Geneva’s stockholders to approve transaction with GHIL, the
number and percentage of Geneva’s stockholders voting against the
transaction with GHIL and electing to exercise their redemption rights,
changing interpretations of generally accepted accounting principles,
costs associated with continued compliance with government regulations,
legislation and the regulatory environment, the continued ability of
GHIL to successfully execute its business plan, the amount of capital
actually deployed into the expansion plan, demand for the products and
services GHIL provides, general economic conditions, geopolitical events
and regulatory changes, as well has other relevant risks detailed in
Geneva’s filings with the Securities and Exchange Commission (the
“SEC”). Geneva and GHIL undertake no obligation to publicly update any
forward-looking statements for any reason, even if new information
becomes available or other events occur in the future.
This press release contains unaudited non-GAAP financial measures.
Management believes that the presentation of these non-GAA? financial
measures serves to the enhance understanding of GHIL’s individual
operating and financial performance. These non-G??? financial measures
should be considered in addition to, but not as substitutes for, the
most directly comparable U.S. GAAP measures.
Certain financial information and data of GHIL contained in this press
release is unaudited and prepared by GHIL as a private company, and may
not conform to SEC Regulation S-?. Accordingly, such information and
data maybe adjusted and presented differently in Geneva’s proxy
statement to solicit stockholder approval of the proposed acquisition.
Geneva Acquisition Corporation expects to file with the SEC later today
a preliminary proxy statement in connection with the proposed
acquisition of GHIL and to subsequently mail a definitive proxy
statement and other relevant documents to Geneva stockholders.
Stockholders of Geneva and other interested persons are advised to read,
when available, Geneva’s preliminary proxy statement, and amendments
thereto, and definitive proxy statement in connection with Geneva
Acquisition Corporation’s solicitation of proxies for the special
meeting to be held to approve the acquisition because these proxy
statements will contain important information about GHIL, Geneva and the
proposed acquisition. The definitive proxy statement will be mailed to
stockholders as of a record date to be established for voting on the
proposed acquisition. Once filed, stockholders will also be able to
obtain a copy of the preliminary and definitive proxy statements,
without charge once available, at the SEC’s internet site at http://www.sec.gov
or by directing a request to: Geneva Acquisition Corporation., 400 Crown
Colony Drive, Suite 104, Quincy, MA 02169.
Geneva, its directors and officers maybe deemed participants in the
solicitation of proxies from Geneva’s stockholders. ? list of the names
of those directors and officers and descriptions of their interests in
Geneva Acquisition Corporation is contained in Geneva’s prospectus dated
February 16, 2007, which is filed with the SEC, and will also be
contained in Geneva’s proxy statement when it becomes
available. Geneva’s stockholders may obtain additional information about
the interests of its directors and officers in the acquisition by
reading Geneva’s proxy statement when it becomes available.