Tecogen (TGEN) Enters Agreement to Acquire DG Energy (ADGE)

November 2, 2016 8:03 AM EDT

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Tecogen Inc. (Nasdaq: TGEN)) and American DG Energy Inc. (NYSE: ADGE) announced that their Boards of Directors unanimously approved a definitive agreement under which Tecogen will acquire all of the outstanding shares of American DG in a stock-for-stock merger. Each share of American DG common stock will be exchanged for 0.092 shares of Tecogen common stock, valuing American DG at an approximately 27% premium to the company's most recent closing share price. The transaction creates a vertically integrated clean technology company able to offer equipment design, manufacturing, installation, financing, and long term maintenance service. The combined company will retain the Tecogen Inc. name and be led by Co-Chief Executive Officers John Hatsopoulos and Benjamin Locke.

"We are extremely pleased with this transaction and believe that over time it will create significant value for shareholders. I'd like to thank the independent special committees of the boards of both companies for their diligent work to bring this deal to fruition," said John Hatsopoulos, co-founder, co-CEO, and director of both Tecogen and American DG.

Transaction Rationale and Highlights

  • Competitive Advantage - Bringing American DG under the Tecogen umbrella allows Tecogen to offer a cost-free-installation option to customers without access to financing, sufficient capital on hand, or for those who may not be interested in owning and maintaining the equipment – creating a vertically integrated clean technology company better able to compete with other distributed generation peers offering in-house financing arrangements.
  • Stable Revenue Base - On a combined basis, approximately half of total company annual revenue is initially expected be from stable, long-term contracted sources (Tecogen Service revenue and American DG Energy revenue). This revenue base will provide a reliable funding source for both operating expense and growth initiatives while also making the combined company's revenue profile more predictable, reducing the revenue volatility caused by somewhat cyclical equipment sales and installations.
  • Growth Potential – Shareholders of the combined company will benefit from Tecogen's ongoing growth initiatives and joint venture interests, including automotive emissions control joint venture Ultra Emissions Technologies Ltd. ("ULTRATEK") and cogeneration joint venture TTcogen LLC.
  • Cost Savings - The combined companies expect to benefit from approximately $1 million of general and administrative cash savings as duplicative functions are eliminated.

Upon closing of the transaction, Tecogen shareholders are expected to own approximately 81% and American DG shareholders are expected to beneficially own approximately 19% of the combined company. The stock-for-stock transaction is intended to be structured such that it is tax-free to shareholders.

Approvals and Timing

Completion of the transaction is subject to satisfaction of customary closing conditions and the approval of shareholders of both companies. No voting agreements have been entered into in connection with the transaction, and there are no lock-up agreements, no-shop covenants or termination fees contained in the merger agreement. The transaction is expected to close in the first half of 2017.

Advisors Scarsdale Equities issued a fairness opinion to the Special Committee of the Board established by Tecogen Inc. in connection with the transaction, and White, White and Van Etten, P.C. are acting as the Special Committee's legal counsel. Cassel Salpeter & Co. is acting as financial advisors to the Special Committee of the Board established by American DG Energy Inc. and Gennari Aronson, LLP is acting as legal counsel to the American DG Special Committee.

Conference Call and WebcastTecogen and American DG will take questions regarding this transaction on their third quarter 2016 earnings conference calls hosted Thursday, November 10, 2016. For information about the conference calls please visit:

For Tecogen http://investors.tecogen.com/webcasts or http://investors.tecogen.com/2016-10-12-Tecogen-Schedules-Earnings-Release-and-Conference-Call-for-Third-Quarter-2016-Results.

For American DG http://investors.americandg.com/webcast or http://investors.americandg.com/2016-10-14-C-O-R-R-E-C-T-I-O-N-American-DG-Energy-Inc.

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