03/31/11 - 05:01 PM EDT
thestreet.com
NEW YORK (TheStreet) -- Shares of Synthesis Energy Systems(SYMX) soared on Thursday after the Houston-based gasification technology developer received a $83.8 million investment from China Energy Industry Holdings.
The deal calls for China Energy, a Beijing-based limited liability company formed by Zhongjixuan Investment Management Ltd. specifically to invest in Synthesis Energy, to receive roughly 37.3 million newly issued common shares, an amount that would represent a 43.5% stake in the company.
Synthesis Energy shares leapt 38% to $2.83 in late trades. Volume of 7.6 million was more than 16 times the issue's trailing three-month daily average of roughly 522,000. The session-high of $3.12 represents a new 52-week peak for the stock, which prior to Thursday's spike was already up more than 75% so far in 2011.
The investment deal, which still requires shareholder approval, also has provisions for China Energy to receive additional stock bringing its stake up to 60% "contingent upon ZJX [ Zhongjixuan Investment Management Ltd.] using best endeavors" to establish a coal gasification joint venture in China with funding of$3 billion, and Synthesis Energy common shares reaching $8 each for 20 consecutive trading days sometime six months after the deal's completion.
"We believe that SES' proprietary U-GAS technology is strategically important to China and many other regions of the world due to its proven ability to cost effectively unlock the potential in challenging, low quality coals in an environmentally friendly manner," said Feng Feng, the managing chairman of ZJX, in a press release.
The deal represents a significant vote of confidence in the company's U-GAS technology, which Synthesis Energy originally developed to convert coal to synthetic natural gas but has been expanded to operate on a variety of materials, including "bituminous coal, sub-bituminous coal, lignite, biomass, coal char and wastes, and metallurgical coke."
With a market capitalization of less than $140 million prior to the deal, the investment represents a game changer for Synthesis Energy, which had a cash balance of $34.2 million as of Dec. 31. The company posted a loss of $3.6 million, or 7 cents a share, for its fiscal second quarter ended Dec. 31.
"This is a major step forward for SES and accelerates our business plan and objectives, especially for China, while enhancing our global, three-pronged growth strategy," said Robert Rigdon, the company's president and CEO, in a statement.
Rigdon continued: "This strategy is designed to provide our proprietary technology and equipment to third parties through technology and equipment sales; make investments in projects that we develop, design, build and operate; and exploit unique opportunities to gain access to coal feedstock resources through implementation of our technology." |
