Deal would bring significant material cost reductions and expand IP
TORONTO, May 26, 2011 /CNW/ - Innovative Composites International Inc.
(IC:TSX-V) ("ICI" the "Company"), announced today that it has entered into an option agreement to
purchase the assets of Eleison Composites LLC ("Eleison"), a current ICI supplier and leading producer of fibre reinforced
The integration of Eleison equipment would result in a significant
reduction in the material cost of all ICI products which in turn would
enhance margins and allow ICI to compete in lower price segments of
certain markets. Eleison holds six patents and is on pace to generate
approximately USD $2 million in revenue in 2011, net of sales to ICI.
This transaction is the first step in ICI's vertical integration
strategy and would only close subject to ICI securing a major housing
contract in the near future.
According to the terms of the option agreement ICI has an exclusive
right to acquire substantially all of the Eleison assets including
inventory, equipment, customer lists and purchase orders, patents and
any other intellectual property, for a period of 120 days. The purchase
price is USD $2 million payable on closing plus a product royalty of
USD $1 million payable over a maximum of three years after the
acquisition. The closing of the transaction is subject to due diligence
and the execution of an Acquisition Agreement ("AA") containing such representations and warranties as are customary in a
transaction of this type. It is anticipated that current staff would
continue managing Eleison's day-to-day operations after the
This acquisition would allow ICI to control supply of a strategic raw
material that is used in all its products and which is currently
subject to lengthy lead times. In addition, patents held by Eleison
allow for utilization of recycled Polyethylene Terephthalate (commonly
known as PET), in the manufacture of thermoplastic skin and core
materials. According to the U.S. Government Accountability Office
approximately 1 million tons of PET water and soft drink bottles end up
in landfills annually, potentially making it a readily accessible, no
cost raw material for ICI products.
"Vertical integration is one of the keys to our continued growth because
it not only provides cost efficiencies, but also eliminates our
dependency on raw material suppliers," said ICI President and CEO Terry
Ball. "Eleison is an ideal acquisition target because it has the
equipment, intellectual property and expertise that ICI can smoothly
integrate into its manufacturing process and achieve significant cost
and quality advantages."
ICI agreed to immediately advance Eleison $200,000 to be utilized for
the sole purpose of combining two existing thermoplastic skin
production lines into one line capable of producing 10' wide skins. If
the AA is not signed within 120 days, Eleison will provide ICI a credit
equal to the total paid by ICI for the development of the 10' line.
Such credit would be applied to 10% of sales from Eleison to ICI for a
period of three years. The 10' line would remain an Eleison asset.
About Innovative Composites International Inc.
Headquartered in Toronto, Canada, ICI is a high-tech engineering and
manufacturing company established in 2007 by a group of entrepreneurs
with a successful track record in commercializing advanced materials.
The Company is currently focused in two areas: Structure LiteTM panels, a unique line of application-ready structural composite panels
and Hero 451TM, a line of environmentally friendly fire inhibitors and suppressant.
ICI's goal is to deliver products that exceed industry standards with
greater durability, strength, flexibility and safety.
ICI is partnering directly with leaders in its target industries as it
considers it to be the fastest way to bring products to market. ICI's
customized solutions are intended to provide partners with material
advantages over their competitors.
To find out more about Innovative Composites International Inc. (IC:
TSX-V), please visit our website at http://www.innovativecompositesinc.com
Neither TSX Venture Exchange nor its Regulation Services Provider (as
that term is defined in the policies of the TSX Venture Exchange)
accepts responsibility for the adequacy or accuracy of this release.
"Statements made in this press release include forward-looking
statements that involve a number of risks and uncertainties. These
statements relate to future events or future performance and reflect
management's current expectations and assumptions. A number of factors
could cause actual events, performance or results to differ materially
from the events, performance and results discussed in the
forward-looking statements, such as the economy, generally, competition
in its target markets, potential cancellation of existing purchase
orders, the demand for ICI's products and the availability of funding.
These forward-looking statements are made as of the date hereof and ICI
does not assume any obligation to update or revise them to reflect new
events or circumstances. Actual events or results could differ
materially from ICI's expectations and projections."
SOURCE Innovative Composites International Inc.
For further information:
Chief Financial Officer
(416) 646 0754
Brisco Capital Partners