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Proton Announces Northern Acquisition
Will make special $1-per-share distribution to shareholders
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Business New Haven
6/9/2003
By: BNH
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WALLINGFORD - Proton Energy Systems (NASDAQ: PRTN), which manufactures hydrogen generators and regenerative fuel cell systems, announced May 22 that it would acquire Northern Power Systems, which designs, manufactures and installs integrated on-site power systems for stationary commercial and industrial applications.
The companies say they will collaborate on practical energy technologies, including Proton's advanced hydrogen generation products and Northern's state-of-the-art renewable and fossil-fuel power systems.
Officials of both companies say that with growing interest in the "hydrogen economy," this transaction will accelerate widespread understanding and adoption of the essential link between renewable power and hydrogen as a fuel for energy sustainability.
Proton will pay $27.5 million to Northern's security holders, approximately two-thirds in cash and the balance in Proton common stock. Northern's security holders will also receive warrants to purchase approximately 2.5 million shares of Proton stock.
Proton also plans to make a special cash distribution of $1 per share, or approximately $33.5 million, based on current shares outstanding, payable on June 20 to shareholders of record as of June 6.
Northern Power Systems has developed stand-alone and grid-connected power systems built upon combustion and renewable technologies in hundreds of applications worldwide.
"We have worked with Northern over the past several years and are excited about bringing together the top-flight engineers and scientists of both companies to form a leader in the distributed power industry," said Walter W. (Chip) Schroeder, Proton's president and CEO.
"The commercial and industrial markets are ready for products that can give end-users more control over the cost and quality of their energy," Schroeder said. "Northern has already proven its skills in originating and developing distributed generation projects, thereby adding a valuable dimension to Proton's business plan. At the same time, continuing global concerns for pollution and fossil-fuel depletion will create the environment for a growing array of demonstration programs that will validate Proton's vision for energy sustainability."
In announcing the acquisition, Schroeder characterized the $33.5 million disbursement as "a tangible example of Proton's commitment to properly meet the needs of today's shareholders, while advancing breakthrough technology for tomorrow's energy marketplace." The $1-per-share distribution is expected to represent a tax-free return of capital to Proton's shareholders to the extent of their adjusted tax basis in the company's common stock.
Robert W. Shaw Jr., chairman of Proton's board of directors, is also chairman of Northern. Venture funds affiliated with Shaw hold approximately 12 and 52 percent, respectively, of outstanding Proton and Northern stock. According to the companies, Shaw did not participate in negotiations on behalf of either company, nor did he vote on the transaction as a board member for either company.
The transaction is subject to approval by the shareholders of Proton and Northern; closing is anticipated in the third quarter. The transaction will be structured so that after closing, Northern and Proton's hydrogen business will be held as separate subsidiaries of a to-be-formed corporate parent.
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