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Section 1: 8-K (FORM 8-K)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

January 24, 2020

(Date of earliest event reported)

 

CONSOLIDATED WATER CO. LTD.

(Exact Name of Registrant as Specified in Charter)

 

Cayman Islands, B.W.I.   0-25248   98-0619652
(State or Other Jurisdiction of   (Commission File No.)   (IRS Employer Identification No.)
Incorporation)        

 

Regatta Office Park

Windward Three, 4th Floor

West Bay Road, P.O. Box 1114

Grand Cayman, KY1-1102

Cayman Islands

(Address of Principal Executive Offices)

 

(345) 945-4277

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Class A common stock, $0.60 par value   CWCO   The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

  

 

 

 

Item 7.01 Regulation FD Disclosure

 

As previously reported, in February 2016, Consolidated Water Co. Ltd. (the “Company”), through its wholly-owned subsidiary, Consolidated Water U.S. Holdings, Inc. (“CW-Holdings”), entered into a stock purchase agreement (the “Purchase Agreement”) with Aerex Industries, Inc. (“Aerex”) and Thomas Donnick, Jr. (“Donnick”). Aerex is a custom and specialty manufacturer of water treatment-related systems and products and provides design, engineering, management, operating and other services applicable to commercial, municipal and industrial water production.

 

Pursuant to the terms of the Purchase Agreement, CW-Holdings purchased a 51% ownership interest in Aerex for an aggregate purchase price of approximately $7.7 million. CW-Holdings also acquired from Donnick an option (the “Call Option”) to compel Donnick to sell, and granted to Donnick an option to require CW-Holdings to purchase, his 49% ownership interest in Aerex to CW-Holdings at a price based upon the fair market value of Aerex at the time of the exercise of the Call Option.

 

On January 24, 2020, as a result of CW-Holdings’ exercise of the Call Option, CW-Holdings purchased from Donnick his remaining 49% ownership interest in Aerex for an aggregate purchase price of $8,500,000. The purchase price was based upon the fair market value of Aerex as agreed to between CW-Holdings and Donnick. After giving effect to the purchase, CW-Holdings owns 100% of the outstanding capital stock of Aerex.

 

Aerex generated income from operations of approximately $2.0 million on revenue of approximately $10.5 million for the nine months ended September 30, 2019. Aerex incurred a loss from operations of ($147,906) on revenue of approximately $7.3 million for the year ended December 31, 2018.

 

On January 29, 2020, the Company issued a press release announcing the consummation of the transaction described above, a copy of which is attached to this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

 

The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, regardless of any general incorporation language in those filings.

 

Item 9.01 Financial Statements and Exhibits.

 

(d)Exhibits.

 

Exhibit No.   Description
99.1   Press Release dated January 29, 2020.

 

 

 

  

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  CONSOLIDATED WATER CO. LTD.
     
     
  By:  /s/ David W. Sasnett  
  Name:     David W. Sasnett
  Title: Executive Vice President & Chief Financial Officer
       

 

Date: January 29, 2020

 

 

 

 

 

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Section 2: EX-99.1 (EXHIBIT 99.1)

 

Exhibit 99.1

 



 

Consolidated Water Acquires Remaining 49% Interest in Aerex Industries

 

GEORGE TOWN, Cayman Islands, January 29, 2020 -- Consolidated Water Co. Ltd. (Nasdaq Global Select Market: CWCO), a leading developer and operator of advanced water supply and treatment plants, has exercised its option to purchase, through its wholly-owned subsidiary, Consolidated Water U.S. Holdings, the remaining 49% interest in its subsidiary, Aerex Industries, for $8.5 million. As a result of the transaction, on January 24, 2020, Consolidated Water became the 100% owner of Aerex.

 

Based in Ft. Pierce, Florida, Aerex is a custom and specialty manufacturer of water treatment-related systems and products. It also provides design, engineering, management, operating and other services applicable to commercial, municipal and industrial water production.

 

Under the terms of the original purchase agreement for Aerex, Consolidated Water acquired an option to compel Aerex’s minority shareholder, Thomas Donnick, to sell his 49% ownership interest to Consolidated Water. Consolidated Water also granted the minority shareholder an option to compel Consolidated Water to purchase his 49% ownership interest. The terms called for the purchase price to be set at a fair market value for Aerex at the time the options would be exercised. The respective options became exercisable in February 2019.

 

Following Consolidated Water’s recent exercise of its option and the close of the transaction, Donnick stepped down as President of Aerex, but he will continue to serve in a consulting capacity. Jason Carlson has been promoted from Vice President to President of Aerex. Jamie Bryan, who was appointed last year as Consolidated Water’s Vice President of manufacturing, will continue to oversee the expansion of Aerex’s operations.

 

“Tom has been an excellent business partner since we invested in Aerex nearly four years ago, and we’re glad we can continue to benefit from his vast industry experience as a consultant to the company,” commented Consolidated Water CEO, Rick McTaggart. “Jason has been an outstanding member of Aerex’s team for more than 11 years, and we are confident he will continue to excel in his new position as President.”

 

“Since our initial acquisition of 51% of Aerex in February 2016, we have strengthened Aerex’s capabilities and resources and expanded its product offerings, which has resulted in improving results,” added McTaggart. “Given our expectations for this business, we deemed this an opportune time for us to exercise our call option for the remaining ownership. We expect this to contribute to increasing shareholder value in the coming years.”

 

Aerex generated income from operations of approximately $2.0 million on revenue of approximately $10.5 million for the nine months ended September 30, 2019. In comparison, Aerex incurred a loss from operations of $(147,906) on revenue of approximately $7.3 million for the full year ended December 31, 2018.

 

About Consolidated Water Co. Ltd.

Consolidated Water Co. Ltd. develops and operates advanced water supply and treatment plants and water distribution systems. The company operates water production facilities in the Cayman Islands, The Bahamas and the British Virgin Islands and operates water treatment facilities in the United States. The company also manufactures and services a wide range of products and provides design, engineering, management, operating and other services applicable to commercial and municipal water production, supply and treatment, and industrial water and wastewater treatment. For more information, visit www.cwco.com.

 

 

 

 

Cautionary Note Regarding Forward-Looking Statements

This press release includes statements that may constitute "forward-looking" statements, usually containing the words "believe", "estimate", "project", "intend", "expect", "should", "will" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to (i) continued acceptance of the company's products and services in the marketplace; (ii) changes in its relationships with the governments of the jurisdictions in which it operates; (iii) the outcome of its negotiations with the Cayman government regarding a new retail license agreement; (iv) its ability to complete the project under development in Baja California, Mexico; (v) the future financial performance of its subsidiary that manufactures water treatment-related systems and products and provides design, engineering, management, operating and other services applicable to commercial, municipal and industrial water production; (vi) the collection of its delinquent accounts receivable in the Bahamas; (vii) its ability to integrate and profitably operate recently acquired subsidiary PERC Water Corporation; and (viii) various other risks, as detailed in the company's periodic report filings with the Securities and Exchange Commission (“SEC”). For more information about risks and uncertainties associated with the company’s business, please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” sections of the company’s SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting the company’s Secretary at the company’s executive offices or at the “Investors – SEC Filings” page of the company’s website at http://ir.cwco.com/docs/. Except as otherwise required by law, the company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Company Contact:

David W. Sasnett

Executive Vice President and CFO

Tel (954) 509-8200

[email protected]

 

Investor Relations Contact
Ron Both, CMA
Tel (949) 432-7566
[email protected]

 

 

 

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