LONDON - VivoPower International Plc (NASDAQ:VVPR), a sustainable energy solutions company, has announced a strategic heads of agreement to merge with Future Automotive Solutions and Technologies (FAST), a Canadian hydrogen technology firm. The combined entity will remain headquartered in the UK, aiming to capitalize on the UK government's commitment to clean energy, which includes a $21 billion investment into the Great British Energy unit and the National Wealth Fund.
The UK, having reaffirmed its goal to decarbonize electricity generation by 2030, is prioritizing green hydrogen as an investment sector. This political backdrop may provide significant incentives for the merger, with VivoPower leveraging its UK base since 2016.
The non-binding agreement, exclusive for 90 days, outlines a post-merger structure where VivoPower will acquire FAST and issue restricted shares as consideration. The equity valuation of the pro forma combined company stands at $1.13 billion, with VivoPower shareholders owning 49% valued at $556 million and FAST shareholders owning 51% at $578 million.
VivoPower, established in 2014 and listed on Nasdaq since 2016, specializes in electric solutions for customized fleet applications and related sustainable energy services. FAST focuses on hydrogen conversion technologies and is set to launch hydrogen-powered vehicle models and conversion platforms for existing vehicles.
The merger is subject to several conditions, including the closing of Tembo's previously announced business combination and the satisfactory completion of an independent third-party opinion.
This strategic move comes as Bloomberg New Energy Finance (BNEF) reported an 84% year-on-year increase in UK clean energy transition sector investment, highlighting the UK's position as the fourth-largest investor in clean energy globally. Nevertheless, BNEF analysts suggest that investment would need to more than double to meet the UK's 2030 net-zero goal.
The information regarding the merger is based on a press release statement, and the completion of the transaction depends on both parties reaching a definitive agreement and fulfilling the outlined conditions.
In other recent news, VivoPower International PLC reported a 22% year-on-year decline in annual consolidated revenue to $11.8 million for the fiscal year ended June 30, 2024. Despite the drop in revenue, the company's gross profit from continuing operations increased to $1.6 million, up from a $2.3 million gross loss in the previous year. The company also reported an underlying net after-tax loss of $25.1 million, with earnings per share falling to ($8.01).
In other significant developments, VivoPower's subsidiary Tembo E-LV and Cactus (NYSE:WHD) Acquisition Corp. 1 Limited have entered into a definitive Business Combination Agreement, valuing the combined enterprise at $904 million. If completed, this merger will result in Tembo becoming a separately listed company on NASDAQ, with VivoPower expected to remain the majority shareholder.
In line with its strategic focus, VivoPower sold Kenshaw Electrical, one of its Critical Power business units, for approximately A$5.0 million. These recent developments reflect VivoPower's strategic pivot towards Electric Vehicle and Sustainable Energy Solutions, and the anticipated completion of the business combination and separate NASDAQ listing.
InvestingPro Insights
As VivoPower International Plc (NASDAQ:VVPR) embarks on its strategic merger with Future Automotive Solutions and Technologies (FAST), the company's financial health and market performance offer key insights for investors. VivoPower's market capitalization currently stands at a modest $5.95 million, reflecting its position as a smaller player in the sustainable energy sector. Despite analysts' expectations of sales growth in the current year, the company's revenue has seen a significant decrease of 38.18% over the last twelve months as of Q1 2023. This contraction in revenue is coupled with a concerning gross profit margin of 18.03%, which may point to challenges in VivoPower's operational efficiency.
The company's stock price has experienced substantial volatility, with a 1-month price total return of -41.28%, underscoring the high-risk nature of the investment. This is further evidenced by the stock's poor performance over the last year, with a 1-year price total return of -65.75%. Investors should also note that VivoPower operates with a significant debt burden, which may hinder its ability to make interest payments on debt, as the company is quickly burning through cash. This financial strain is reflected in the company's negative P/E ratio of -0.17, indicating that it is not currently profitable.
InvestingPro Tips highlight that VivoPower's short-term obligations exceed its liquid assets and analysts do not anticipate the company will be profitable this year. These factors, along with the absence of dividend payments to shareholders, suggest a cautious approach may be warranted when considering this stock. For those interested in a deeper analysis, InvestingPro offers additional tips on VivoPower's financial health and market prospects, which can be found at https://www.investing.com/pro/VVPR.
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