Madison Bidco acquires Velocys for £4.1m
An aerial view of Velocys Ohio Facility.
Velocys announced that Madison Bidco will acquire the company for £0.25 per share at a total valuation of £4.1m.
The transaction is expected to be completed in January 2024.
The technology company said the boards of directors both Bidco and Velocys have reached an agreement of a recommended cash acquisition of the entire share capital of Velocys.
In addition to the cash acquisition, Bidco has also agreed to provide up to £31.5m ($40m) of growth capital to Velocys to provide the company with capital resources to deliver against Velocys’ medium-term strategic plans.
Moreover, the Carbon Direct Capital has also agreed to provide a secured bridging loan of £3.5m to provide sufficient capital for Velocys through to the acquisition becoming effective.
The acquisition values Velocys’ entire issued, and to be issued, ordinary share capital at approximately £4.1m on a fully diluted basis. Meanwhile, the post growth capital valuation of Velocys will be £35.6m ($45.2m).
The Velocys directors unanimously recommended the scheme.
Panmure Gordon is the adviser for the transaction.
Velocys has been struggling to raise significant long-term funding to further scale its business and to allow for the acceleration of the delivery of its technology to clients, including Velocys’ reference projects and an identified pipeline of opportunities.
Towards this, Velocys on 18th May 2023 announced a fundraise of a minimum of £50m ($40m).
However, the company could only raise a total of £6.3m. Velocys said it was due to a challenging public market environment and the risks and circumstances of the business.
Velocys said they have been facing significant market headwinds. It said the company’s ability to earn revenue is reliant on the capability for SAF biorefinery projects to attract significant third-party financing to enable Velocys to invoice the projects.
The SAF industry is relatively nascent and evolving. Velocys also said the industry has been impacted by slower than expected government policies (particularly in the UK) and technical issues with third party SAF technologies which the Velocys board believes, in addition to its funding issues, have impacted the timeliness of completion of the development capital raises for the Altalto Project and Bayou Fuels Project.
Accordingly, Velocys had minimal revenues in 2023 and had to continue to meet the costs of both the Altalto Project (in addition to grant funding) and the Bayou Fuels Project.
