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.
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