The transaction for selling these shares of the ZZ joint venture will be completed offshore of China. Under the terms of the SPIA, the transaction partners will pay $10 million cash to Synthesis in four installments over a period of 15 months for 59.81% of its shares in ZZ.
The transaction partners will also invest a minimum additional equity of $6.6 million to fund the estimated $16 million expansion and increase its ownership to a capped limit of 73.53%. Additional debt financing will be raised by the transaction partners and the ZZ joint venture for completion of the expansion. Synthesis is not required to invest additional equity or provide debt to the expanded ZZ facility and will retain a minimum 24.52% ownership in the new enterprise.
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Under the terms of the OM agreement, the transaction partners will finance all operating costs of the ZZ plant and have preferential profit distribution right for the first 36 months of operations from the expanded facility.
Robert Rigdon, president and CEO of Synthesis, said:
This expansion is expected to allow our two SES gasification systems to operate at 100% design capacity which will drive lower unit costs for the new enterprise plus the production of acetic acid and the related products is expected to provide higher profitability through improved operating margins which we believe will produce long-term financial results from the ZZ joint venture. This move accomplishes our strategic aim to both monetize a portion of the ZZ asset and repurpose the facility for growth and future earnings without additional equity or debt required from SES. A lot of hard work still remains to secure the additional financing and complete the expansion project and we will be working closely with our new partners to get it done successfully.
Shares of Synthesis were down nearly 4% to $1.47 midday Monday. The stock has a consensus analyst price target of $3.00 and a 52-week trading range of $0.63 to $2.10.
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