Just two short months ago, General Environmental Management Inc. announced an important first step in its move from a field waste services company into more lucrative sectors such as water treatment. The company reported the completion of its acquisition of Santa Clara Waste Water (SCWW) in California. Santa Clara Waste Water is a profitable, 50 year old company focused primarily on waste water treatment. Since its inception, SCWW has treated more than 2 billion gallons of waste water and was among the top 100 privately-owned, non-hazardous, waste water utilities in the United States.
The company financed the acquisition through six promissory notes in the principal amount of $9,003,000 along with warrants for the principals of SCWW to purchase 425,000 of General Environmental Management’s common stock. The notes bear interest at 6.5% per year. Two of the notes, totaling $3,778,000, are convertible into a total of 15% of the company’s common stock on a fully diluted basis.
The assumption of the long-term debt is secured by SCWW’s plant and equipment. Santa Clara Waste Water generated solid revenues in 2008 of about $7.6 million. The company’s management believes that the transaction is very accretive to General Environmental Management and that the terms of the transaction are very favorable to its shareholders.
The waste water treatment market is large and will continue to grow as demand for water treatment increases exponentially. Santa Clara Waste Water has a profitable, high margin business model and the goal for General Environmental is to build upon this in an effort to become successful – first regionally and then to be a successful national waste water treatment company.
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