EarthRenew (ERTH.C) inks Replenish Nutrients purchase agreement

EarthRenew (ERTH.C) announced they have entered into a share purchase agreement to acquire Replenish Nutrients.

EarthRenew announced their plan to acquire Replenish Nutrients in February, after they had initially planned to only buy 38% of it. EarthRenew’s CEO Keith Driver said that through the diligence process it became apparent that the two companies “were more aligned with our collective vision than we originally thought” and so “the natural next step was for EarthRenew to become much more than a minority owner of Replenish Nutrients”.

Replenish Nutrients are a producer of sustainable fertilizers. They take by-products, such as sulphur, phosphorus, and organic resources, and repurpose them, turning them into a valuable resource. EarthRenew, whose technology transforms livestock manure into fertilizer, obviously sees a kindred spirit in Replenish.

The top-line number for the deal is still subject to certain adjustments, although they expect it to come in around $9 million. The deal will see EarthRenew send $1.41 million in cash and 21,264,096 ERTH shares (deemed to be worth $0.248 each) to Replenish’s vendors, as well as an agreement to satisfy $2.8 million in loans Replenish owes.

“I am extremely pleased to announce the signing of the definitive agreement in connection with our much-anticipated acquisition of Replenish, and we are looking forward to completing the remaining legal formalities to close the transaction. Once the acquisition has completed, we intend to leverage the inherent strengths of the two teams and to build on the success each of our companies has experienced. We are confident that, upon completion, our new, combined entity will not only drive shareholder value, but also position us at the important intersection of upcycling nutrient waste streams and providing regenerative crop inputs,” stated EarthRenew President and CEO Keith Driver.

The deal also included some additional provisions. There are ongoing earn-out payments totaling an aggregate of up to $7 million based on qualifying gross annual revenue of Replenish multiplied by an earn-out factor for each of its 12-month fiscal periods ending June 30, 2025. This payment will be made through a combination of cash and ERTH shares. There will also be supplemental earn-out payments of up to $2 million based on certain sales parameters.

By absorbing Replenish, EarthRenew is growing its revenue base substantially, as Replenish Nutrients had over $5 million in revenue in the second half of 2020 through to January. The soon-to-be-formed combination of the two companies is projected to bring in $9.9 million in revenue between July 2020 and June 2021, compared to $3.6 million in the same period the year before.

The subsequent conditions for the deal are expected to be completed by May 14, 2021.

“The appetite for Replenish’s soil health solutions has been remarkable as evidenced by the success of their formulation and sales efforts. We are excited to begin applying our financial horsepower to this model to help extend Replenish’s market reach and broaden our joint product offerings by incorporating alternative nutrient waste streams into new crop input products,” commented Keith Driver.