H2O Innovation Announces Two Northeast US Acquisitions

Dec. 20, 2021

JCO Inc. & Environmental Consultants LLC will solidify the operations & maintenance business line for H2O Innovation


H2O Innovation Inc. is proud to announce it executed all the documents related to the acquisition of JCO, Inc. and of Environmental Consultants, L.L.C. from arm’s-length third parties. Each of the companies offers complete operation, maintenance and management (O&M) services to municipal and industrial water and wastewater clients from the same region, the Hudson Valley Region in the State of New York.

The acquisition of the Targets, which were owned and operated separately, complements H2O Innovation’s current business activities in the Northeast U.S. and solidifies its position in the North American O&M market. With more than 70 years of combined experience, H2O Innovation, JCO and EC position themselves as significant players in the O&M sector in the State of New York with a total of nearly 200 customers.

JCO and EC both operate sizeable industrial facilities which will grow the industrial customer base of H2O Innovation’s O&M business line. Industrial streams are often more complex to treat and could lead to opportunities for H2O Innovation’s WTS business line to offer added value membrane solutions which could ultimately lower the operating expenses for the customers.

It is expected that this consolidation will foster synergies as the customers currently served by H2O Innovation, JCO, and EC will be offered value-added services that should potentially generate new business opportunities, given H2O's global breadth of technology, its operation expertise, and its aftermarket support. Additionally, JCO and EC operate collectively numerous membrane plants that may benefit from the specialty chemicals of H2O Innovation; which specialty chemicals allow membrane water treatment facility to run longer without cleaning, thus contributing to lower operating expenses.

“These two O&M acquisitions are aligned with our 3-Year Strategic Plan," said Frédéric Dugré, president and CEO of H2O Innovation. "They will allow us not to only expand our O&M platform in the State of New-York, which is the 4th largest populated state in the USA with 19.3 M inhabitants1, but also to provide a unique opportunity to deploy our membrane process expertise and our related specialty products to multiple municipal and industrial customers all along the Hudson Valley Region. We foresee multiple sales synergies between our different business lines, including JCO and EC, which will contribute to solidify customer retention, thus recurring revenues. On top of that, we are welcoming with open arms an experienced team of approximately 120 employees within the H2O Innovation family bringing the total number of employees to nearly 915. Financially, both transactions are expected to be immediately accretive to H2O Innovation’s net earnings and EBITDA. On a pro-forma basis, these acquisitions are bringing the Corporation one step closer to its EBITDA target set in the 3-year Strategic Plan."

The purchase price for these acquisitions, which cannot be disclosed for competitive reasons, will be satisfied from cash on hand, the recently amended credit facility and by the issuance of an aggregate of 1,107,733 H2O Innovation’s common shares, at a price of $2.375 per share. A contingent consideration is payable twelve months after closing subject to achievement of certain revenue objectives by each of the acquired companies. The common shares issued are subject to a statutory resale restriction until April 15, 2022. The transactions are completed with minimal dilution for the shareholders, and the shares of H2O Innovation have been issued to facilitate the integration of the sellers and create an alignment with the business plan of the Corporation, which is to maximize sales synergies and leverage the sales organization.

For the twelve-month period ending on September 30, 2021, JCO and EC generated an aggregate of $13.5 million ($17 million) in revenues with net earnings of $1.1 million ($1.3 million) on a consolidated basis, and an adjusted EBITDA3 of $2.6 million ($3.3 million).

“I have never been prouder to bring our clients and workforce an incredible opportunity to be part of something bigger," said Roy Rysinger, vice president of JCO, Inc. "Our small family-owned company has spent over 30 years growing, learning, and servicing our local communities and environment. We all now have the chance to benefit in the vision that H2O Innovation is bringing to the Hudson Valley. H2O Innovation’s philosophy on focusing on the individual’s growth, and the client’s level of service, is what allows the culture of our newfound family to remain strong."

“I am really excited about the future opportunities for our employees which will be created as we become part of the H2O Innovation’s family," added Steven Mance, vice president of Environmental Consultants, L.L.C. "I am also excited about the enhanced services and treatment technologies for our customers that H2O Innovation will bring to the Hudson Valley. H2O Innovation’s core values and culture are well-aligned with the ideology and values on which Environmental Consultants has been built over time: focusing on the employees is an investment in the business."