Israeli technology companies are usually listed on stock exchanges on Wall Street, Tel Aviv, or London. Tomorrow, an Israeli company will join a different stock exchange – in Australia. Caesarea-based Emefcy, which develops technological solutions for sewage treatment, was merged last week into Savcor, an Australian stock exchange shell, accompanied by a financing round, and will become a public company with a market cap of 35 million Australian dollars ($25 million).
CEO Eytan Levy and CTO Ronen Shechter founded Emefcy in 2008. They are well known entrepreneurs in their field, having previously founded AqWise. Over the years, they raised $15 million from prominent investors, most of whom are still company shareholders after the current merger: Israel Cleantech Ventures, Plan B Ventures, and GE Ventures, the corporate venture capital arm of General Electric.
Several months ago, a deal with Savcor was agreed, in which the Australian company acquired 100% of Emefcy in a share swap that included a 13.8 million Australian dollar financing round last week. After the deal was completed, the company changed its name to Emefcy. In the initial stage, the original Emefcy shareholders hold 65 million shares in the merged company with a value of 13 million Australian dollars, less than the amount invested in the company to date. At the same time, on the basis of meeting commercial milestones, the value of their holding is likely to grow when they receive more shares. According to Savcor chairman Peter Marks, “The Emefcy shareholders are receiving a position in a company in whose commercial potential they have confidence, and are happy to wait for the arrival of the commercial milestone.”
In a “Globes” interview, Marks talks about the merger of the two companies: “Savcor was a stock exchange shell, and we looked for interested technology companies with which we could merge,” he says. “We weren’t looking for digital or social media companies; we wanted innovative technologies on a global level. Through introduction and connections, we arrived at Emefcy, and began talking about an acquisition several months ago.”
Advice for the deal was provided by Sapir Capital Group managing partner Baruch Halpert, who represented the acquiring company in Israel.
“Globes”: What did you find in Emefcy?
Marks: “It has innovative and leading technology in sewage treatment, developed over seven years. It has high-profile investors and experienced entrepreneurs, Eytan Levy and Ronen Shechter, who have already done it at AqWise, and a group of committed and experienced people. This is a great opportunity, and what’s also important is that it’s not necessary to wait 3-4 years to make the technology commercial: most of the research and development has already been done, and they are current working on the next generations of the products. The financing round we did was designed to help initial sales efforts.
“The technology works, and there’s a strong pipeline of projects. The first project, which was in Israel, will begin in the first quarter of 2016, and we expect additional projects in the Caribbean Islands, the US, Latin America, Australia, and other places, and in the long term, also in China and India. Emefcy’s technology is very suitable for regions with little water. It is both innovative and economically worthwhile.”
So why did Emefcy agree to be sold just before its commercial breakthrough?
“First of all, no existing shareholder is selling. All of them are staying aboard, except for one that cannot invest in companies listed on the Australian stock exchange. They are sticking with us, because they believe in the company’s ability.”
Trading in the Emefcy share on the Sydney Stock Exchange began today through the EMC:AU ticker symbol. Trading in the Savcor share has been suspended for the past 18 months in Australia. According to Marks, the reason is Chapter 11 proceedings (protection against creditors) in the US. The company came to an arrangement with its creditors and became a stock exchange shell, at which point Marks entered the picture, acquired the shell, and started looking for companies to acquire.
According to Marks, he knows of other Israeli companies that want to be listed on the Australian stock exchange. “The Australian stock exchange is like a public venture capital fund, without the existing restrictions applying to an investment by a venture capital fund,” he says. “There are many public companies in the early part of their lifespan. In the US, they would raise money from venture capital funds, while in Australia, they turn to the stock exchange and start raising capital relatively early for the purpose of future expansion. For example, the Australian market is very supportive of the offering and of Emefcy as a company with innovative technology.”
Are there other companies on the Australian stock exchange dealing in sewage treatment?
“No. There are several companies dealing in the environment, but not the same type as Emefcy.”
Do you plan to have Emefcy listed for trading on Wall Street, too?
“Being listed in Australia is a springboard. In order to get to Nasdaq, you need a much bigger market cap, say $200 million. We certainly hope to achieve that.”