November 4 (Renewables Now) - UK energy storage firm redT energy Plc (LON:RED) will receive an interim loan of up to USD 2.5 million (EUR 2.2m) from its US suitor Avalon Battery Corporation that should cover expenses while the companies negotiate their merger.
The loan will be funded by up to USD 5 million provided to Avalon by South African vanadium producer Bushveld Minerals Ltd (LON:BMN). If the proposed combination is completed, that sum will convert into ordinary shares in the merged business, making Bushveld a shareholder in it. The Johannesburg-based company will also get a right of first refusal to supply vanadium products to the enlarged business for two years.
RedT said in a statement that it will use the newly-agreed loan to fund ongoing working capital requirements and expenses relating to the proposed merger. It will allow the company to finalise due diligence process, conclude negotiations and progress the fundraising round planned for after the transaction. RedT estimates that thanks to the loan it will have sufficient cash to close the combination in the first quarter of 2020.
In July, redT and Avalon entered into a non-binding memorandum of understanding (MoU) that outlines a stock-for-stock transaction in which Avalon will be acquired at a total valuation of USD 37.5 million. The transaction would be followed by a fundraising round targeting at least USD 30 million.
RedT and Avalon have very similar technologies and their planned combination is expected to enable the reduction of costs and an acceleration in product development, the UK firm said in July. The enlarged company will have operations in North America, Europe and Asia.
(USD 1.0 = EUR 0.896)