Investors: 2005 Press Release Archive
HSE Enters into agreement to buy Key Safety Services and Key Monitoring Solutions for $24.5 Million
NEWS RELEASE – December 12, 2005
HSE Integrated Ltd. (“HSE” or the “Company”) is pleased to announce that it has entered into an agreement defining the process and financial terms by which HSE will acquire the shares of Key Safety Services Inc. (“Key”) of Sylvan Lake, Alberta and Key Monitoring Solutions Inc. (“KMS”) of Rocky Mountain House, Alberta for a total consideration of approximately $24.5 million. The transaction is expected to close in early January, 2006.
Upon completion of this transaction, HSE believes it will be the largest oilfield safety services company in the world in terms of revenue, equipment capacity and manpower. HSE intends to use this expanded capability to provide its customers with an unprecedented level of protection for workers, assets and the community.
Over the short term the companies will be operating in a business-as-usual fashion. Customers can expect no changes or disruptions in service or in their respective Key, KMS or HSE contacts.
The highlights of the proposed transaction are summarized below.
Financial Terms
HSE will purchase the shares of JEC Company Ltd. which owns 100% of the shares of Key and 50% of the shares of KMS. The remaining 50% of the shares of KMS is held by Bryton Controls Ltd.
The total purchase price of $24.5 million consists of approximately $15.8 million cash, assumption by HSE of long term debt of approximately $2.7 million, and $6 million in treasury shares of HSE based upon the 10-day weighted average trading price of HSE on the TSX Venture Exchange prior to the announcement of the transaction. The share price will be $2.50 per share, resulting in the issuance of approximately 2,400,000 shares to owners of Key and KMS. The transaction terms also provide that HSE will acquire $3.5 million in working capital at closing.
Additional contingent consideration will include a cash royalty of up to a maximum of $2 million over the next three years based upon the commercial success of a new air quality and environmental monitoring technology platform developed by KMS.
Concurrent with the transaction, HSE will be seeking price protection from the TSX Venture Exchange to issue up to 500,000 shares at $2.50 per share to HSE employees under the Company’s employee share ownership program. These shares will also be made available to the employees of Key and KMS.
HSE will finance the transaction with existing unused senior bank credit facilities, new senior bank credit facilities, and the issuance of treasury shares. To facilitate a prompt closing of the transaction the Key and KMS owners have agreed to provide short-term financing in the form of a promissory note if necessary.
For the fiscal year ended August 31, 2005, Key had unconsolidated revenue of $23.5 million and EBITDA of $4.2 million (unaudited). For the nine month interim period ended October 31, 2005, KMS generated revenue of $2.3 million and EBITDA of $1.1 million (unaudited).
Conditions Precedent
The transaction described above is subject to numerous conditions precedent. These include the completion of audited financial statements for Key for the fiscal year ended August 31, 2005, the completion of audited financial statements for KMS for the nine-month interim period ended October 31, 2005, expansion of HSE’s senior bank lending facilities based upon the review of the audited financial statements, the approval of the TSX Venture Exchange regarding the issuance of HSE treasury shares, completion of due diligence, the approval of the Board of Directors of HSE, and other financial and regulatory approvals normally associated with transactions of this size. Significant progress in satisfying many of the foregoing conditions precedent has been made prior to the announcement of this transaction.
Operational Highlights – Key Safety
HSE believes Key is the largest independent, full-service oilfield safety services company in Canada. It offers emergency response services, well control services, fire protection, shower units, on-site medical, breathing air and industrial training from locations in Sylvan Lake, Whitecourt and Grande Prairie. All employees and contractors with Key will be offered continued employment with HSE. Once Key and HSE are combined, collectively they will represent:
- Largest staff of trained safety professionals
- Largest fleet of “on demand” industrial firefighting equipment and trained personnel
- Largest portable breathing air services capability
- One of the largest providers of on-site medical services
Operational Highlights – Key Monitoring Solutions
KMS specializes in providing air quality monitoring services and technologies, a full suite of air quality suite of air quality monitoring systems for sour gas and plant safety operations, and other innovative oilfield electronic equipment and services.
KMS and Key have jointly developed the Carmen-Reactor (“CR”) technology platform which is a technologically advanced, stand-alone air quality data collection and communication system.
The CR technology platform is currently used for air quality monitoring for critical sour gas drilling operations in populated areas. The system measures air quality, meteorological conditions and other environmental parameters and continuously transmits this data to a secure website by cellular telephone or satellite. The data can then be easily accessed using the internet by all stakeholders in the area to ensure the safety of workers, local residents and emergency response personnel.
HSE intends to adapt the CR technology for other markets in the upstream petroleum industry and other industrial markets. It is HSE’s intention that KMS will become a significant operating division under the “E” or Environmental component of the HSE name. Brad Turner, KMS President, will lead the KMS division within HSE.
A Major Step for HSE
David Yager, Chairman and CEO of HSE, had the following comments on the Key and KMS acquisitions.
“Since it was conceived in 1999, the HSE safety consolidation project has been about building an industrial Health, Safety and Environmental services company large enough to meet the needs of our upstream petroleum and other industrial customers. Our customers are undertaking larger projects and developments in the face of increasingly stringent legal and corporate obligations to protect workers, capital assets and the communities in which they operate. Their needs have changed and HSE is responding to those needs.
With the acquisition of Key and KMS, HSE will have the financial strength, equipment capacity and trained personnel to commit to major safety projects on a national level. The owners of Key and KMS have built outstanding companies that are technical leaders in their fields and believe strongly in the HSE vision. We are pleased to welcome the owners of Key and KMS as HSE partners and significant shareholders.
HSE is a public company built with the best ideas, procedures, people and equipment from several of Canada’s leading private safety service providers. We welcome the Key and KMS staff into the HSE family, and know they will make a valuable and personally satisfying contribution in continuing to build HSE”.
Investor Conference Call
HSE will host an investor conference call and webcast to discuss the Key and KMS acquisitions on Tuesday December 13 at 2:00 PM Mountain Standard Time (4 PM Eastern Standard Time). The details of the conference call and webcast are contained in a separate News Release.
Forward Looking Statements
Statements in this document that may be considered forward-looking are based on management’s current expectations that involve a number of risks and uncertainties, which could cause actual results to differ from those anticipated.
HSE is an integrated supplier of industrial Health, Safety and Environmental services. From its head office in Calgary, Alberta, its serves its clients from field service locations in Alberta, British Columbia, Ontario, Nova Scotia and Michigan. HSE trades on the TSX Venture Exchange under the symbol “HSL”.
The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.
For more information please contact:
David Yager, Chairman & CEO
Telephone: (403) 266-1833
E-Mail:
Tony Hidalgo, Chief Financial Officer
Telephone: (403) 266-1833
E-Mail: