Westport Innovations To Acquire Fuel Systems Solutions In Stock-for-stock Deal

(RTTNews) - Westport Innovations Inc. (WPRT, WPT.TO) and Fuel Systems Solutions, Inc. (FSYS) announced that they have entered into a merger agreement to create a premier alternative fuel vehicle and engine company. The transaction will result in a combined equity value of $351 million based on the closing trading prices for the shares of both companies on August 31, 2015 and combined annual revenues ranging from $380 million to $405 million projected for 2015.

The merger combines 17 brands in the automotive and industrial space and will allow customers and stakeholders to benefit from the consolidation of technologies, and the expansion of product portfolios, OEM relationships, and global distribution networks.

Upon closing, the combined company will trade on both the TSX and Nasdaq under the Westport Fuel Systems name and be headquartered in Vancouver, Canada with a new business unit called Fuel Systems Automotive and Industrial Group.

Under the terms of the merger, Westport will acquire all of the outstanding shares of Fuel Systems common stock in a stock-for-stock transaction under which Fuel Systems shareholders will receive 2.129 Westport shares for each share of Fuel Systems common stock they own at closing, representing a 10% premium to Fuel Systems shareholders based on the closing trading prices of Westport's and Fuel Systems' shares on August 31, 2015 or an implied value to Fuel Systems shareholders of $7.54 per share.

Following closing, existing Westport shareholders will hold approximately 64% of the combined company and Fuel Systems shareholders 36% of the combined company on a fully diluted basis.

The transaction is subject to regulatory approvals, including expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and other customary closing conditions.

The transaction is also subject to the required approval of both Fuel Systems and Westport's shareholders. To date, shareholders owning 34% of Fuel Systems and 15% of Westport outstanding shares have each agreed to vote their shares in favor of the merger. Subject to the satisfaction of closing conditions and receipt of required approvals, the companies anticipate closing the transaction in the 4th quarter of 2015. Westport and Fuel Systems will operate as separate companies until that time.

The companies believe there is significant potential for improved profitability even in current volatile market conditions, including untapped savings and merger synergies in excess of $30 million per year starting in 2016 and fully realized by calendar year 2018, excluding one-time costs. Included in the $30 million per year is $15 million in annualized benefits expected to be generated by Fuel Systems' restructuring program in 2016 and beyond, Westport's previously announced initiatives to reach adjusted EBITDA positive by mid-2016, and an additional $15 million in merger synergies through a combination of reductions in corporate management costs, manufacturing costs, and operating expenses.

For the year ended December 31, 2015, both Westport and Fuel Systems are reiterating their respective revenue outlooks. Westport expects consolidated revenue to be between $110 million and $125 million for the year, while Fuel Systems expects consolidated revenue to be in the range of $270 to $280 million for the year, resulting in a combined range from $380 million to $405 million projected for the year ended December 31, 2015.

The companies expect the transaction to be accretive to the combined company's adjusted EBITDA and earnings in 2016, excluding one-time costs, through approximately $30 million of annual pre-tax savings and merger synergies fully realized by calendar year 2018.

Included in the $30 million per year is $15 million in annualized benefits expected to be generated by Fuel Systems' restructuring program in 2016 and beyond and Westport's initiatives to reach positive adjusted EBITDA by mid-2016 and through a combination of reductions in corporate management costs, manufacturing costs, and operating expenses as a result of the merger.

David Demers, CEO of Westport, and the rest of the Westport executive team will lead the combined company, while Mariano Costamagna, who is retiring as CEO of Fuel Systems, will serve in a senior advisory position of the company's new business unit with additional titles in the organization to be determined at a later date.