DECEMBER 17, 2018
AETI Announces Signing of a Definitive Share Exchange Agreement with Stabilis Energy to Create a Leading North American Small-Scale LNG Production and Distribution Platform
HOUSTON, TX – American Electric Technologies, Inc. (NASDAQ: AETI) (“AETI” or the “Company”) has executed a definitive share exchange agreement with privately-held Stabilis Energy, LLC (“Stabilis”) and its subsidiaries to create one of the leading public small-scale liquefied natural gas (“LNG”) production and distribution companies in North America. The combined business will include Stabilis’ small-scale LNG production and distribution businesses as well as AETI’s existing international businesses (the “Combined Company”).
At the closing, Stabilis and its subsidiaries will become wholly-owned subsidiaries of AETI and the existing AETI shareholders will own 11% of the Combined Company. The former owners of Stabilis will own 89% of the Combined Company. After closing, James Reddinger, current President and Chief Executive Officer of Stabilis, will serve as President and Chief Executive Officer of the Combined Company. Casey Crenshaw, the controlling shareholder of Stabilis, will serve as Executive Chairman.
“AETI is pleased to announce this combination with Stabilis,” said Peter Menikoff, Chairman and Chief Executive Officer of AETI. “We believe the transaction will give the Company a substantial North American LNG business to complement its international operations. Additionally, we believe the transaction will benefit AETI by increasing the breadth of its operations to more comfortably support its fixed overhead expenses, de-leveraging its balance sheet, and facilitating access to capital.
Stabilis is a leader in the small-scale production and distribution of LNG in North America. Demand for natural gas for power generation and heating applications is increasing across multiple end markets, but many of these customers are not directly connected to a pipeline. Natural gas is liquefied so it can be transported efficiently via truck to these off-pipeline applications. LNG can be used to supplement existing natural gas fuel sources or to displace other fuel sources, including diesel fuel, fuel oil, and propane. North America’s abundant supply of natural gas can provide LNG customers lower costs and greater pricing stability when compared to other fuels. Customers utilizing natural gas fuel can also realize significant environmental benefits from reduced emissions of carbon dioxide, particulate matter and sulfur emissions, among others. Stabilis operates its LNG production business under the “Stabilis Energy” brand name and its LNG distribution business under the “Prometheus Energy” brand name, which we believe is one of the oldest and most recognized brand names in the small-scale LNG business.
Stabilis had net revenue of $26.5 million and Earnings before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) of $1.8 million during the nine months ending September 30, 2018. Stabilis delivered 26.5 million LNG gallons to its customers over the same period, a 75% increase over comparable 2017 deliveries. Stabilis’ operating assets include a 120,000 LNG-gallon per day production plant in George West, Texas, a 30,000 LNG-gallon per day production plant that is being relocated to the West Texas region, and a fleet of cryogenic rolling stock equipment that is capable of servicing customers throughout North America.
“We believe the combination of Stabilis and AETI will create a leading platform for growth and consolidation in the North American small-scale LNG industry,” said James Reddinger, President and Chief Executive Officer of Stabilis. “Stabilis plans to continue to invest in the assets and capabilities required to provide our customers with a low cost, reliable, and comprehensive LNG solution across North America.”
Following the closing, the Combined Company will continue to operate AETI’s existing Brazilian subsidiary and Chinese joint venture. Art Dauber, former Chairman and CEO of AETI, plans to join the Combined Company as President of International Operations and a member of the Board of Directors. Mr. Dauber will lead the development of Stabilis LNG operations in South America and China. He will also help deliver AETI’s expertise in power delivery and electrical systems to Stabilis’ power generation projects.
Casey Crenshaw, Executive Chairman of Stabilis, added, “We are pleased to combine our investments in AETI and Stabilis to create a public company growth platform in the small-scale LNG industry. We believe that small-scale LNG has tremendous growth potential across multiple end markets in North America, and this transaction gives us the opportunity to grow Stabilis’ footprint aggressively in the near future.”
Upon completion of the transaction, the Combined Company will be renamed “Stabilis Energy, Inc.” and will apply to continue trading on the NASDAQ Stock Market under the symbol SLNG.
Closing of the transaction is subject to certain closing conditions, including approval of the issuance of AETI common stock to acquire Stabilis and other transaction-related matters by the holders of AETI’s outstanding common stock and Series A Convertible Preferred Stock voting as a combined group. Certain shareholders of AETI are entering into a voting agreement concurrently with the definitive agreement pursuant to which they are agreeing to vote their respective shares in favor of the transaction at the special meeting. Each company has agreed to pay the other company’s expenses if the share exchange agreement is terminated under certain circumstances prior to the closing of the transaction. The transaction is expected to close during the first quarter of 2019, subject to customary closing conditions.
AETI’s Board of Directors has determined that the share exchange agreement is fair to and in the best interests of AETI and the holders of AETI’s common stock.
Stabilis is a privately-held company owned by LNG Investment Company, LLC, an entity controlled by Casey Crenshaw. Mr. Crenshaw is also President of The Modern Group, Ltd, a privately owned diversified manufacturing, parts and distribution, rental/leasing and finance business. Mr. Crenshaw, through his investment vehicle JCH Crenshaw Holdings, LLC, is currently an AETI common and Series A Convertible Preferred shareholder. Mr. Crenshaw is also a member of the AETI Board of Directors. As part of the transaction, Mr. Crenshaw will convert all of his AETI Series A Convertible Preferred stock into AETI common stock contemporaneously with the closing. Mr. Crenshaw will also restructure his and his affiliates’ debt investments at Stabilis to reduce leverage at the pro forma Combined Company.
Simmons Energy, a division of Piper Jaffray & Co., acted as transaction advisor and Thompson & Knight LLP acted as legal advisor to Stabilis. Oppenheimer acted as transaction advisor and Locke Lord LLP acted as legal advisor to AETI.