Strix Group PLC - Completion of Acquisition

As previously announced on 7 February 2019, Strix Group Plc (AIM: KETL), the global leader in the design, manufacture and supply of kettle safety controls and other complementary water temperature management components, confirms that, following approval by HaloSource Corporation ("HaloSource") shareholders at the general meeting held on 26 February 2019, the acquisition of specified assets from HaloSource has now completed.  Strix has entered into an asset purchase agreement with HaloSource, pursuant to which it will acquire specified assets relating to HaloSource's HaloPure division and its Astrea product, for total consideration of US$1.33 million (the "Acquisition").

The Board of Strix believe that the Acquisition represents an opportunity to acquire extensively developed technology, which is complementary to its Aqua Optima division, at an attractive price, as well as gaining access to skilled research and development resource in the USA.  Strix will continue the process of commercialising the technology and products that it has acquired, leveraging its experience of operating in the water filtration sector and bringing to market new consumer products.

 

Strategic Rationale

The Board consider that the medium term opportunities presented by the Acquisition include:

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Integration and commercialisation of HaloSource's technically advanced water purification technologies within Strix to expand existing product portfolio and market penetration.

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An expanded operational presence for Strix, including the creation of an innovation centre for water filtration in the USA utilising the high quality R&D staff transferring from HaloSource.

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Additional customer and supplier relationships in China for the water filtration division.

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Expansion and enhanced differentiation of the Aqua Optima product range, using HaloSource developed technology.

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Potential for operational synergies in China, including the utilisation of Strix's new and larger manufacturing facility scheduled to be operational during 2021.

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Opportunity for additional revenue generation in a range of markets worldwide, both by marketing the acquired technologies and products on a standalone basis (including to existing Strix customers), and by improving Strix's existing product portfolio utilising the acquired technologies.

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Ongoing development of the existing advanced water purification technology to address specific market requirements and develop a range of products that remove impurities to deliver safe drinking water to consumers globally.

 

 

History of HaloSource and description of the assets being acquired

HaloSource has attracted and deployed significant investment over the past 20 years, and as a result, has developed two technically advanced water purification technologies that are being acquired by Strix pursuant to the Acquisition.

HaloSource has two primary patented technologies - a bromine based water treatment bead system proven to kill 99.99%+ of bacteria and viruses, and a composite filter material certified to remove heavy metals from water, with its main differentiator being its lead removal performance.

HaloSource has also developed a consumer product (Astrea) using its filter technology.  This product is a reusable portable water bottle with changeable filters that is certified to remove lead from tap water.  Lead removal is a major differentiator in the USA in particular, where a number of health scares have occurred due to lead levels in drinking water.

Astrea allows consumers to obtain filtered drinking water at a much lower cost per litre than bottled water, whilst avoiding the negative environmental impact of plastic water bottle usage.  Astrea was launched in late 2018 and is available via a number of distribution channels as a subscription product including the delivery of regular replacement filters.

 

Financial Impact of the Acquisition

The Board currently anticipates that the Acquisition will result in a net P&L investment by the group of approximately £2m in the 2019 financial year, but that the Acquisition will be earnings enhancing in the financial year to 31 December 2021.  The Company will provide further guidance as appropriate following a suitable period of ownership.

Mark Bartlett, CEO of Strix Group Plc, commented: "We are very pleased to be adding to our technology and product portfolios through this acquisition of value adding assets.  We maintain that the USA is a key geography for us and this transaction offers us a stronger presence in this market.  As well as bringing additional customer and supplier relationships, we see the opportunity to provide increased differentiation to further expand our filtration division."