Australasian water treatment company De.mem (ASX: DEM) is set to acquire a majority shareholding in German industrial waste water treatment firm Geutec Umwelt-und Abwassertechnik GmbH following a binding agreement announced today.
The $915,000 cash transaction will see De.mem acquire 75% of Geutec, valued at approximately five times Guetec’s normalised earnings before tax.
De.mem will reserve an option to acquire the remaining 25% at the same valuation.
On completion of the transaction within the next seven days, Geutec GmbH will be re-named De.mem-Geutec GmbH and a water treatment chemicals division will be established across the group’s different locations to enable De.mem to intensify its regional sales efforts.
De.mem chief executive officer Andreas Kroll said the acquisition makes sense given the “highly synergistic” nature of Geutec’s products.
“This acquisition provides a logical expansion of our product range into the supply of industrial chemicals for water and waste water treatment,” he said.
“It will further diversify our revenues and provide growth options in the German and European markets.”
Geutec’s chemicals are complementary to De.mem’s hollow-fibre membrane-based water treatment technologies manufactured at its factories in Singapore and Australia.
The membranes and membrane modules produced are key components in many of the company’s turnkey water and waste water treatment plants.
De.mem said there is strong demand from its existing customer base for Geutec’s chemicals products such as coagulants, flocculants, cleaners and anti-scalants.
These chemicals are also typically requested by customers as a follow-up to De.mem’s equipment sales.
In Australia, De.mem sold approximately $450,000 in chemicals in the year ending 30 June, mostly to a small number of mining and industrial sites through third party vendors.
The acquisition of Geutec will allow De.mem to supply additional customers with a broader range of chemical products, and increase its margins in this segment.
Geutec supplies waste water treatment products and solutions to more than 100 small and medium sized companies and a number of multinational corporations within Europe’s heavy industrial, plating and metals processing industries.
For the year ending 31 December 2018, the company recorded revenue of around $1.8 million and $245,000 in normalised (unaudited) pre-tax profits.
Geutec’s solutions are based on a range of proprietary chemical formulations developed and optimised over the last 30 years.
Manufacturing of these chemicals is currently performed in Germany but could eventually be expanded by De.mem into its Australian or Asian locations.