Burnaby, B.C.-based Ballard Power Systems Inc. is acquiring United Kingdom-based GeoPura Ltd., a producer of zero-emission hydrogen, for approximately $515 million in a mix of equity and cash. The deal aims to overcome a key hurdle for Ballard: customers' lack of access to hydrogen fuel for its fuel cells.
Deal Structure and Financial Terms
Under the agreement, Ballard will pay about $515 million upfront, including $154 million in cash plus 50.8 million shares, which will give GeoPura about 14.4 per cent of the combined company. Additional payments may be due if GeoPura reaches certain financial milestones.
GeoPura is expected to generate US$50 million in revenue, compared to Ballard's estimated US$168 million, according to Baltej Sidhu, an analyst at National Bank of Canada Capital Markets.
Strategic Rationale
Martin Neese, chief executive of Ballard, said: “This acquisition … shifts our business toward recurring, high-margin revenues and reinforces our path to profitability by 2028.” He took over last July and immediately announced a “fundamental reset,” including workforce adjustments, that the company said has cut its operating expenses by 40 per cent.
Ballard has focused on fuel cells for transportation, such as buses and trucks. Neese has said customers’ inability to access hydrogen has been a major friction point to growing sales. The combination with GeoPura will address this and create an entry point to the market for zero-emission backup power solutions, including for data centres.
Market Expansion
Sidhu described the deal as Ballard’s “most strategically significant” acquisition. “The acquisition also broadens Ballard’s addressable market beyond transportation applications, where hydrogen has progressed more slowly than many industry participants originally anticipated,” he said in a note on Tuesday.
GeoPura already holds a 15-year contract with the U.K. government to provide hydrogen. The company said the majority of its revenues are from fuel sales and that it has established relationships with customers such as Microsoft Corp., Walt Disney Co. and Netflix Inc., as well as the U.K. Ministry of Defence.
North American Opportunity
Neese said the majority of GeoPura’s sales are in the European Union and “there is clearly an opportunity to do more in North America.” The acquisition positions Ballard to expand its hydrogen fuel and fuel cell offerings across both continents.
