HydroDec sells off Australian plant and equipment in deal with Greenbottle

Industrial oil re-refining company HydroDec Group announced the disposal of its Australian plant and equipment, and an agreement to licence certain other rights with regards to those assets, to Greenbottle Re-refining UK on Tuesday.

The AIM-traded firm said that, as a result of its strategic review last year, it had decided that with the “sub-scale capacity” of the Australian plant, the impact of the business on management bandwidth, and the “limited and fragmented” domestic market providing “significant” feedstock challenges, shareholder equity was better invested behind the United States growth plans.

As a result, HydroDec initiated a formal process to sell its Australian assets and business.

The strategic review was initiated in the first half of 2018, following which a sale process was conducted by an independent third-party financial adviser, through which potential purchasers were identified, approached and invited to submit indicative offers for the plant and operations owned by HydroDec Australia.

Multiple indicative offers were received and evaluated up until the end of June this year, the board said.

“One of the potential purchasers identified was Greenbottle - a company controlled by Andrew Black, a non-executive director and a substantial shareholder of the company,” the HydroDec board said in its statement.

It explained that a subcommittee of the board, excluding Andrew Black and David Dinwoodie, both of whom are directors of both HydroDec and Greenbottle, and chaired by audit committee chair Chris Ellis, took legal and corporate governance advice as a result of the related party involvement in the disposal process.

They also carried out a “detailed review” of the offers, and continued discussions and engagement with several of the interested parties.

“At the conclusion of that process the subcommittee recommended pursuing the offer proposed by Greenbottle, being the highest in absolute value terms and the most efficient in respect of HydroDec's requirements to satisfy the terms of the sale.

“In reaching this decision, the independent directors of the company considered … the progress of the initial discussions, the respective values proposed by the different buyers, the bidders' ability to execute the transaction on an expedited basis, and the potential to offer the company future value in relation to the further development of its technology.”

HydroDec said the plant owned by its Australian operations had been sold to Greenbottle for a consideration of AUD 2m (£1.12m) in cash, less estimated decommissioning and transportation costs to the Australian port of AUD 0.3m.

Ongoing costs of transportation from Australia to the UK were for the account of Greenbottle, HydroDec confirmed.

In addition, the group said it had the right to receive a royalty from Greenbottle, for an initial period of eight years, following the granting of an exclusive licence to operate HydroDec's technology in the UK, calculated at 5% of revenues derived.

The royalty fee would be subject to a minimum charge in the fourth year of AUD 30,000 rising to AUD 0.15m in the eighth year.

“Any further development or improvements to the technology will accrue to HydroDec under the terms of the licence.

“The anticipated net proceeds of AUD 1.7m will be used to satisfy outstanding liabilities of the Australian operating entities.”