Arq Limited entered into a definitive merger agreement to acquire Advanced Emissions Solutions, Inc. (NasdaqGM:ADES) from a group of shareholders for approximately $120 million in a reverse merger transaction on August 19, 2022. Pursuant to the transaction agreement, ADES will issue 19,279,235 shares of its common stock to existing Arq equity holders, in exchange for all of their equity interests. ADES shareholders may elect to receive up to an aggregate of $10.0 million of cash proceeds in the merger (at a price of $0.52 per share) and will retain at least 47.4% of the outstanding shares of the combined company and could increase up to 49.5% based upon 100% equity elections by ADES Investors. Concurrent with the merger, there will be a committed equity placement of $20.0 million from current Arq investors and members of Arq management. ADES shareholders will have the option to receive 1.11 shares of the combined company and a one-time cash payment of $0.52 per share or 1.22 shares of stock in the combined company. Immediately after completion of the merger and giving effect to the PIPE (assuming the PIPE shares are purchased at the Fixed PIPE Price) and dilutive impacts of the warrants, legacy ADES shareholders will own 49.5%, assuming a 100% stock election and that the PIPE shares are purchased at the Fixed PIPE Price. Legacy Arq equity holders and PIPE investors will own approximately 49.5% with the remaining 1% owned by the lending party. ADES will continue to operate as a public company, with its shares listed on the Nasdaq Global Market under its existing ticker symbol (ôADESö). Upon termination of the Transaction Agreement by ADES or Arq upon specified conditions, ADES will be required to pay Arq a termination fee of up to $3.0 million and the $3 million termination fee is not otherwise payable.
The closing of the Transactions is conditioned on the absence of any order, law or injunction preventing the consummation of the Transactions; approval for listing of the shares of New ADES common stock issued in the ADES Merger and the Scheme of Arrangement (subject to official notice of issuance) on the Nasdaq Global Market; approval of the Transaction Agreement by holders of a majority of the outstanding common shares of ADES (the "ADES Stockholder Approval"); the approval of the Scheme of Arrangement by resolution of a majority in number of the Arq shareholders representing three-fourths (75%) or more of the voting rights of the Arq shareholders (the "Arq Shareholder Approval"); expiration of the waiting period under the Hart-Scott-Rodino Act; subject to certain qualifications, the accuracy of representations and warranties of the other party set forth in the Transaction; the performance by the other party in all material respects of its obligations under the Transaction Agreement, court approval of the Scheme arrangement, the Form S-4 shall have become effective under the Securities Act and other customary conditions. In addition, ADESÆ obligation to consummate the Transactions is conditioned upon the consummation of the Debt Financing and the PIPE Investment.
The board of directors of ADES (the "ADES Board") has unanimously approved and adopted the Transaction Agreement and the Transactions and has agreed to recommend that the ADES shareholders approve and adopt the Transaction Agreement, subject to certain exceptions set forth in the Transaction Agreement. The board of directors of Arq unanimously resolved to recommend, upon the terms and subject to the conditions set forth in this Agreement, that the Arq Shareholders vote to provide the Arq Shareholder Approval. Concurrently with the execution of the Transaction Agreement, persons holding more than 75% of the voting rights of the Arq shareholders delivered irrevocable voting agreements to Arq and ADES pursuant to which those shareholders agreed to vote in favor of the Scheme of Arrangement. Concurrently with entry into the Transaction Agreement, certain ADES shareholders holding 10.489% of the outstanding ADES common shares entered into a voting and election agreement (the "Voting and Election Agreement") with the Company, pursuant to which, among other matters, such ADES shareholders agreed to vote all of the shares of ADES which such shareholders have a right to so vote, in favor of the Transaction Agreement and Transactions. The merger is expected to close during the fourth quarter of 2022 or the first quarter of 2023.
Ducera Securities LLC acted as financial advisor and fairness opinion provider to ADES Board. Jonathan M. Whalen and Lane, Brian J. of Gibson, Dunn & Crutcher LLP acted as legal advisor to ADES. Guy P. Lander of Carter Ledyard & Milburn, LLP acted as legal advisor to Arq Limited. Spencer Klein of Morrison & Foerster LLP acted as legal advisor to Ducera Securities LLC in the transaction. ADES has retained D.F. King & Co., Inc. (ôD.F. Kingö) to assist in the solicitation process. ADES will pay D.F. King a fee of approximately $25,000. $500,000 of the Opinion Fee will also be credited against the Transaction Fee of $950,000 to Ducera. Computershare Trust Company, Inc acted as transfer agent to ADES.
Arq Limited completed the acquiistion of Advanced Emissions Solutions, Inc. (NasdaqGM:ADES) from a group of shareholders in a reverse merger transaction on February 1, 2023. As of February 1, 2023, Advanced Emissions Solutions, Inc. ("ADES" or the "Company") entered into a Securities Purchase Agreement (the "Purchase Agreement") with Arq Limited and concurrently closed the transaction. Pursuant to the revised securities purchase agreement, ADES issued a combination of shares of common stock and shares of a newly created series of preferred stock in exchange for all of the equity interests in all of the subsidiaries of Arq Limited. That new preferred shares will automatically convert to common stock upon the approval by ADESÆ shareholders. Until conversion, the preferred security will accrue dividends at an 8% coupon rate (or if greater, the dividend paid on ADES common shares) that will be payable in cash or in kind, which coupon will increase at set intervals if the conversion is not approved within 635 days of closing. Under the terms of agreement, ADES acquired all of the direct and indirect equity interests of ArqÆs subsidiaries (collectively, the "Purchased Interests") in exchange for consideration consisting of (i) 3,814,864 shares of common stock, par value $0.001 per share, of ADES (the "Common Stock"), representing 19.9% of the outstanding shares of Common Stock prior to the completion of the transactions contemplated by the Purchase Agreement, and (ii) 5,294,462 shares of Series A Convertible Preferred Stock, par value $0.001 per share, of ADES (the "Series A Preferred Stock" and the acquisition by ADES of the Purchased Interests, the "Transaction"). In connection with the issuance of the Series A Preferred Stock pursuant to the Purchase Agreement, ADES filed the Certificate of Designations of Preferred Stock for the Series A Preferred Stock (the "Certificate of Designations") with the Secretary of State of the State of Delaware. Capitalized terms used herein but not otherwise defined have the meaning set forth in the Purchase Agreement.