Ballard Agrees To Sell Automotive Fuel Cell Assets; Will Concentrate On Commercial Markets
VANCOUVER, BRITISH COLUMBIA, Nov 07, 2007 (MARKET WIRE via COMTEX News Network) -- All Amounts in U.S. Dollars, Unless Otherwise Noted - Ballard Power
Systems (TSX: BLD)(NASDAQ: BLDP) today announced that it has agreed
to sell the company's automotive fuel cell assets to Daimler AG and
Ford Motor Company. Payment for these assets will consist of all 34.3
million Ballard shares held by Daimler and Ford. These shares will
then be cancelled. Ballard expects to record an estimated gain on the
transaction of $95-to-$105 million.
"This transaction will enable Ballard to concentrate on growth in
fuel cell applications which provide clean energy solutions in
commercial markets," said John Sheridan, Ballard's President and CEO.
"It also lowers Ballard's risk profile by addressing the realities of
the high cost and long timeline for automotive fuel cell
commercialization. At the same time, a new private company will be
established and will be positioned for success in automotive fuel
cell technology over the longer term, with management and funding
provided by Daimler and Ford."
Transaction Summary
Ballard will receive, and cancel, the 34.3 million Ballard shares
owned by Daimler and Ford, valued at approximately $168 million based
on the 20-day average share price preceding the announcement.
Ballard will transfer the following to Daimler and Ford:
- Automotive intellectual property.
- 113 employees, primarily in the research and technology development
areas (20% of Ballard's workforce).
- Certain test equipment and inventory (book value of $6 million).
Daimler and Ford will manage and fund automotive fuel cell technology
development programs through a new private company located at
Ballard's facilities. Daimler and Ford will contribute $60 million to
the new private company and Ballard will invest $60 million. The
ownership structure of the new private company will be 50.1% Daimler,
30% Ford and 19.9% Ballard. The value of Ballard's investment in the
private company is protected by a purchase/sale option agreement with
Ford for $65 million plus interest.
Ballard will not be obligated to provide any ongoing funding to the
private company.
In association with its minority ownership position, Ballard will:
- Receive rights to use automotive intellectual property in
non-automotive applications, including both the transferred and
future intellectual property developed by any of the private company,
Daimler and Ford.
- Provide contract technical services to the private company, on a
profitable basis.
- Manufacture fuel cells for the private company, Daimler and Ford,
on a profitable basis.
Ballard, Daimler and Ford have agreed to terminate the Automotive
Alliance Agreement that had defined their respective responsibilities
for automotive fuel cell development work. This transaction also
cancels Daimler and Ford's special voting and veto rights at Ballard,
as well as their rights to four seats on Ballard's Board of
Directors.
Additional transaction details are contained in an Addendum at the
end of this press release.
Transaction Benefits to Ballard
Ballard will obtain several benefits from the transaction, including:
1) Shortened timeline to profitability, as Ballard's annual cash
consumption will be reduced by approximately $15 million.
2) 30% reduction in the number of outstanding shares.
3) Reduced financing requirements.
4) Revenue generation through contract technical services provided to
the private company, largely offsetting the loss of automotive
engineering development revenue.
5) Right to use transferred and future automotive fuel cell
intellectual property in non-automotive applications.
6) Retention of automotive manufacturing facilities and capabilities,
and the right to pursue fuel cell bus opportunities.
Commercial Fuel Cell Markets
Over the past two years Ballard has developed fuel cell products,
partner relationships, channels to market and sales & marketing
capabilities for commercial markets such as materials handling,
backup power and residential cogeneration. Today, commercialization
activities are progressing in each of these markets in North America,
Europe and Asia.
Sheridan said, "These commercial markets represent a very large
global opportunity for fuel cell products. Our product shipments in
the third quarter of 2007 were up 123% over the same quarter in 2006
- clear evidence of the growth potential. We are also confident there
are opportunities for our products in additional geographic markets
as well as product extension opportunities in different
applications."
Ballard also remains committed to fulfillment of current bus
demonstration program contracts, including the supply of fuel cell
modules for up to 20 BC Transit fuel cell buses. Ballard will
continue to actively pursue additional fuel cell bus demonstration
program opportunities. These programs generate environmental benefits
from the use of fuel cells and also promote greater awareness of fuel
cell-based solutions.
Shareholder Approval
The transaction has been approved by Ballard's Board of Directors and
has received the necessary approvals of Daimler and Ford. Completion
of the transaction remains subject to receipt of all necessary
regulatory approvals as well as the approval of the Daimler
Supervisory Board. As the transaction constitutes a related party
transaction for the purposes of applicable Canadian securities laws,
the transaction must be approved by a simple majority of Ballard's
shareholders, excluding any votes cast by Daimler or Ford.
Ballard currently expects to deliver an information circular to its
shareholders in December for a shareholders meeting to be held in
January, 2008. Based on the recommendation of an independent special
committee of Ballard's Board of Directors, as well as a formal
valuation and fairness opinion, the Board of Directors will be
recommending that Ballard's shareholders approve the transaction.
Conference Call and Additional Information
A conference call for investors and analysts will be held at 8:00
a.m. PST (11:00 a.m. EST) on Thursday, November 8, 2007. Dial-in
telephone numbers: 604-638-5340 or 1-800-319-4610. The web cast can
be accessed at:
http://www.ballard.com/be_an_investor/confcalls_webcasts
- Participants are encouraged to pre-register at:
http://services.choruscall.com/links/ballard071108_preregistration.html
- Pre-registrants will receive a special dial-in number and PIN,
which will bypass operator registration for quicker access to the
live conference call.
Following the call, the audio web cast will be archived on the
www.ballard.com website. A digital recording of the call will also be
available for playback for twenty-four hours (Telephone: 604-638-9010
PIN: 8186#).
You may also access a video interview with Ballard's President and
CEO regarding this transaction at the following link:
Ballard will receive all 34.3 million Ballard shares currently held
by Daimler and Ford.
- The current market value of these shares, as determined by the
20-day average share price preceding the announcement, is
approximately $168 million;
- This will reduce Ballard's outstanding shares by 30%.
The following will be transferred from Ballard to Daimler and Ford:
- 113 personnel;
- Automotive fuel cell test equipment and other automotive assets
such as service spares and test materials;
- Ownership of Ballard's automotive patents, which represent
approximately 20% of Ballard's current patent portfolio;
- A perpetual, royalty-free, sub-licensable license to Ballard's
remaining patents for use in automotive applications. As long as
Ballard is a shareholder of the private company, Ballard will
continue to grant perpetual, royalty-free, sub-licensable licenses to
fuel cell patents developed by Ballard to Daimler and Ford for use in
automotive applications.
Daimler and Ford will establish a new private company to focus on
automotive fuel cell technology development.
- Ballard will invest $60 million in the private company. Ford and
Ballard have a purchase/sale option agreement by which Ford will
purchase Ballard's equity for $65 million plus interest, any time
after the fifth year from closing if requested by Ballard. Likewise,
Ballard will sell its equity to Ford for $65 million plus interest,
any time after the fifth year from closing if requested by Ford;
- Daimler and Ford will transfer $60 million to the private company
to fund development.
Daimler and Ford will own the majority of the private company.
- Daimler will own 50.1%, Ford will own 30% and Ballard will own
19.9%;
- Ballard will have a board seat.
Ballard will not have any obligation to fund the private company's
automotive fuel cell development activities or other operating
expenses.
The transaction includes non-compete provisions.
- For as long as Ballard is a shareholder of the private company,
Daimler, Ford and the private company will not compete in
non-automotive markets (except for auxiliary power units for
vehicles);
- Ballard will not compete in automotive markets as long as it is a
shareholder of the private company;
- An exception allows Ballard to participate worldwide in fuel cells
for public transit buses and also in the Canadian market for smaller
shuttle buses.
Going forward, Ballard will provide services to the private company,
and will have rights to automotive IP for use in non-automotive
applications.
- The private company will purchase key services from Ballard, such
as manufacturing, testing and administrative support, at a positive
margin;
- The private company will lease facilities from Ballard, at
Ballard's Vancouver headquarters;
- Ballard will have an exclusive, perpetual, royalty-free,
sub-licensable license to all the transferred automotive fuel cell
patents for use in non-automotive applications. Ballard will also
have the same license to the IP developed by Ford, Daimler or the
private company during the period that Ballard is a shareholder of
the private company.
About Ballard Power Systems
Ballard Power Systems Inc. (TSX: BLD)(NASDAQ: BLDP) is recognized as
a leader in the development, manufacture and sale of hydrogen fuel
cells. Ballard's mission is to make fuel cells a commercial reality.
To learn more about what Ballard is doing with Power to Change the
World(R), visit www.ballard.com.
This release contains forward-looking statements that are based on
the beliefs and assumptions of Ballard's management and reflect
Ballard's current expectations as contemplated under section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities and Exchange Act of 1934, as amended. Such assumptions
relate to our financial forecasts and expectations regarding our
product development efforts, manufacturing capacity, and market
demand. These statements involve risks and uncertainties that may
cause our actual results to be materially different, including,
without limitation, the rate of mass adoption of our products,
product development delays, changing environmental regulations, our
ability to attract and retain business partners and customers, our
access to funding, increased competition, our ability to protect our
intellectual property, changes in our customers' requirements, and
our ability to provide the capital required for product development,
operations and marketing. Readers should not place undue reliance on
Ballard's forward-looking statements and Ballard assumes no
obligation to update or release any revisions to these forward
looking statements. For a detailed discussion of the risk factors
that could affect Ballard's future performance, please refer to our
most recent Annual Information Form.
Ballard, the Ballard logo, Power to Change the World and Mark 9 SSL
are registered trademarks of Ballard Power Systems Inc.
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Contacts:
Ballard Power Systems Inc.
Lori Vetter or Guy McAree
Investor Contacts
(604) 454-0900
Email: investors@ballard.com
Ballard Power Systems Inc.
Rebecca Young or Guy McAree
Media Contacts
(604) 454-0900
Email: media@ballard.com
Website: www.ballard.com
