Huge win for H2O and the Peterson Capital network
Here are three things we thought You Should Know today:
As you may have heard by now, H2O Innovation (HEO-T) announced after market close yesterday that it has signed a definitive sale agreement with New York based private equity firm Ember Infrastructure.
This is a huge win for H2O - this company has been a flagship Peterson Capital client since 2016 and has consistently hit milestones while it’s been on a path to becoming a global leader in the water industry. Starting off as a water and wastewater project designer, this company expanded into two more business pillars - operations & maintenance and specialty chemical sales - and continued to grow high-margin, recurring revenue which is now in the 90% range. It has delivered solid EBITDA growth and maintained a very strong M&A discipline, using very little equity and adding small “tuck-in” acquisitions along the way to expand its product offering.
This is a huge win for the Peterson Capital network in Canada and Europe - The all-cash offer of $4.25 per share is a 70% premium over Tuesday’s close of $2.51. As well, the $395 million valuation that H2O received on this transaction was actually above the range of $3.25 to $4.00 that was recommended in a fairness opinion by Desjardins Capital Markets. This is very rare, since in going-private transactions, the final valuation in the majority of cases falls within the fairness opinion valuation. Over the past several years we have introduced the H2O story to literally hundreds of Investment Advisors and family offices in our network. This network was key in offering market support in the early days of H2O’s capital markets efforts, long before the nine dealers that cover the stock today were interested. Our network helped step into financings in the $0.90 cent range to fuel the first acquisitions, and they stepped into the secondary market in a big way from March to June in 2020 when the shares dropped down to the 60 cent range. It’s clear that The Power of Retail that our group represents has been instrumental in the success of this story.
This is a huge win for CEO Frédéric Dugré and CFO Marc Blanchet - these two leaders founded, launched, bootstrapped and grew this company starting from Fred’s idea coming out of Laval University in 2000 and Marc joining him three years later. Check out their profiles here: Leadership & Corporate Governance - H2O Innovation.
As likes to say, “this is a 20-year overnight success story”. We are so very grateful at Peterson Capital to have played a role in this success - and we owe a huge “Thank-you” to all of you who have supported this story and our efforts along the way.
If you have any questions or comments about the transaction or any of the steps that will take place prior to the December close - or if you’d like me to arrange a direct call for you to Frédéric or Marc - please let me know.
Thank you for your continued interest and support.
Rick Peterson (He/him)
Chair