Morphic has reached agreement on the acquisition of the Italian fuel cell company Arcotronics Fuel Cells S.r.l. The company specializes in the development and manufacture of high efficiency fuel cells for stationary energy systems and standby power units. The purchase price is 6.5 MEUR. To finance the acquisition while also bolstering the company ahead of future expansion, a targeted new share issue is to be carried out, in conformity with the authorization obtained at the annual general meeting, to a total value of 13,426,063 million shares.

Arcotronics Fuel Cells offers innovative, competitively priced fuel cells, developed in-house and patented, in a number of variants and sizes. Several of the company’s fuel cell products have moved on from the prototype stage and are already in small-scale series production. Apart from the fuel cells, manufacturing processes for series production are also offered, for individual components as well as complete fuel cell systems. This makes Arcotronics Fuel Cells one of those companies within the industry who have progressed furthest in their preparations for major high-volume series production of fuel cells.

The acquisition means that Morphic gains access to a tried-and-tested fuel cell design, which will hasten introduction onto the market of its own energy systems. Fuel cells from Arcotronics Fuel Cells will be included in Morphic’s energy systems, where surplus renewable energy will be stored to allow electricity and heating to be produced at a later stage via fuel cells. A 5 kW fuel cell from Arcotronics Fuel Cells is included in Morphic’s demo system at Karlskoga, and has already given good results in operational evaluations. The energy systems are to be offered, for example, to the telecommunications industry as replacements for diesel generators at base stations.

The acquisition is the second that Morphic has implemented within a short time. At the end of June, 55 % of shares in the Greek energy technology company, Helbio S.A, was acquired – it is one of the leading players in the development of systems for the efficient, eco-friendly production of hydrogen based on renewable fuels such as ethanol and biogas.

“By acquiring Arcotronics Fuel Cells and Helbio, we are guaranteeing our access to the most critical technologies and products for our energy systems. It is now possible, for example, for us to integrate reformers and fuel cells into one compact unit that will be both easy to use and cheaper to produce in large numbers. Units such as this can produce electricity and heating directly from renewable fuels, and will in future be able to replace diesel-powered generators, without generating any noise, toxic exhaust gases and carbon dioxide”, says Jonas Eklind, President of Morphic Technologies.

Capital injection and strengthened organization
Arcotronics Fuel Cells has its headquarters in Bologna in Italy and currently has around 13 employees. Sales in 2006 were 1.53 MEUR with profits of 0.83 MEUR. As at the end of December 2006, the company had loans to a value of 0.94 MEUR and at the same time, assets were taken to have a value of 1.49 MEUR.

The acquisition is taking place for a purchase price of 6.5 MEUR, which will be paid in cash. Prior to the acquisition, 80% of shares in Arcotronics Fuel Cells has been owned by the multinational group, the Kemet Corporation, a leading manufacturer of components within the electronics industry. The other shareholders include Angelo D’Anzi, founder and present MD, and a number of other private investors.

The present MD, Angelo D’Anzi will remain as managing director of the company. In conjunction with the transaction, D’Anzi is subscribing to B-shares in Morphic to a sum equivalent to 1 MEUR. Angelo D’Anzi has sound industrial experience from a number of previous posts, including within the automotive industry. In the year 2000, he founded the fuel cell company Roen Est Sr. Three years later, Arcotronics Industries SPA became majority shareholder in the company, the name of which was changed at the same time to Arcotronics Fuel Cells. In 2007, Arcotronics Industries SPA was sold to the Kemet Corporation after which certain refinements began to be made to the business.

In conjunction with the acquisition, Morphic intends injecting 2 MEUR of fresh capital into the company with the intention of restructuring and strengthening the business for considerable growth. The company is expected to be cash flow positive during 2008. In terms of organizational structure, Arcotronics Fuel Cells will be integrated into Morphic’s subsidiary Morphic Business Development AB. An acquisition analysis will be included in the financial year’s nine-monthly report.

Targeted new share issue
The acquisition is being financed via a targeted share issue of 13,426,063 B-shares at a price of SEK 18.80 per share. The price at which shares are being issued is an average of the volume-weighted price for Morphic B-shares at First North during the period 15 – 28 November 2007. The new share issue will inject Morphic with MSEK 252.4 before share issue costs.

After the share issue, share capital in Morphic will be MSEK 6.0 distributed over 150,171,059 shares, of which 5,984,000 are of series A and 144,187,059 of series B.

In addition to the acquisition of Arcotronics Fuel Cells, the liquid funds from the share issue will be used for further investments related to the acquisition within energy technology field, and to permit further acquisitions. Morphic is involved in advanced discussions with a number of parties within the field of energy technology, whose products would reinforce Morphic’s range and hasten the development of the company’s energy systems.
Those entitled to subscribe in the share issue are Angelo D´Anzi and global institutions operating in Sweden, Germany, the UK and the USA. The share issue is being carried out with the support of authorization granted by the annual general meeting held on 19 October. Of the authorization from the annual general meeting, after the share issue, the opportunity to issue a further 13,773,937 shares still remains.
Morphic’s energy systems in brief
Within the subsidiary company, Morphic Business Development AB (MBD), complete energy systems are being developed based on fuel cells in combination with various systems and technologies for renewable energy. Morphic’s system comprises energy converters and fuel cells combined with an in-house developed, small-scale wind turbine. The energy from the wind turbine is then converted within the energy converter, via a chemical process, into hydrogen or methanol. The fuel can then be stored, to be used later for powering a fuel cell system.

Many of the energy systems of the future will require the reforming of various fuels, e.g. biogas, ethanol and methanol, to produce very pure hydrogen that is capable of powering fuel cells. In addition, powerful, reliable fuel cells with long working lives will be required, since it ought to be possible to use the systems in continuous operation. MBD is now being provided with these resources through the acquisition of Helbio and Arcotronics Fuel Cells, thus providing the opportunity to offer complete, free-standing energy systems for many different applications, and for different levels of output.

The development and commercialization of the energy system is a strategic priority for Morphic, and the transaction is an important element in this strategy.