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Dynetek Industrial research and analysis

Contributed by eResearch

By Bob Weir

Dynetek has entered into an agreement and certain non-binding letters of intent with respect to a series of four proposed transactions. Among other things, the proposed transactions may result in the acquisition of all of the shares of Dynetek by S.V. Greentech Private Limited (“S.V. Greentech”) and collectively with its affiliates, financial investors and strategic partners (the “S.V. Group”), or an affiliate thereof, for a purchase price of $0.36 per share.

PROPOSED TRANSACTIONS

1. Binding Purchase Order

Dynetek has executed a binding purchase order with S.V. Greentech under which S.V. Greentech will purchase $431,617 of liner inventory from Dynetek. The inventory will be used by S.V. Greentech to assist in the startup of Dynetek India Pvt Ltd., a joint-venture company established by Dynetek and S.V. Greentech to manufacture and supply Dynetek cylinders and systems to India, Pakistan, Nepal, Bangladesh and Sri Lanka. The transaction is expected to close on or about December 19, 2011. The Company’s DyneCell is a lightweight composite cylinder consisting of a seamless thin wall aluminum liner with full carbon fibre overwrap.

2. Asset Sale

Dynetek has executed a non-binding letter of intent, to sell to S.V. Greentech, certain non-core liner manufacturing equipment currently used for the production of single port liners for a purchase price of $1,250,000. A definitive agreement on this sale is expected on or before December 30, 2011, with the financial close expected on or before June 30, 2012.

3. Private Placement

Dynetek has executed a non-binding letter of intent with S.V. Greentech under which the S.V. Group will purchase, on a private placement basis, 2,075,000 common shares of Dynetek at $0.36 per common share for aggregate gross proceeds of $747,000. A definitive agreement on the private placement is expected on or before December 30, 2011, with closing expected to be on or about January 6, 2012.

4. Acquisition of Dynetek

Dynetek has executed a further non-binding letter of intent with S.V. Greentech, under which the S.V. Group will acquire all of the issued and outstanding common shares of Dynetek (excluding any shares held by the S.V. Group under the private placement) for $0.36 per share. The acquisition is expected to be completed through a plan of arrangement under the Business Corporations Act (Alberta). A definitive agreement on the acquisition is expected on or before January 13, 2012, with closing expected on or before May 31, 2012. If the agreement is executed, an Information Circular will be mailed to shareholders in April 2012. The completion of the acquisition will be subject to a number of factors, including approval by at least 66 2/3% of shareholders.

THE COMPANY

Dynetek Industries Ltd. is a Calgary-based designer, producer and marketer of lightweight, advanced fuelstorage systems for compressed natural gas (CNG) low-emission vehicles and compressed hydrogen zeroemission fuel-cell vehicles. The Company has production facilities in Calgary, Alberta and Ratingen, Germany, and recently announced plans for the formation of joint ventures in South Korea and India. These joint ventures are expected to be in operation in the second half of 2011. During the third quarter of 2010, the Company commenced discussions with a potential Chinese joint-venture partner. The Company’s fuel-storage cylinders are marketed under the DyneCell brand name.

THE INDUSTRY

Many environmental factors are expected by industry forecasters to lead to a significant increase in CNGfuelled vehicles over the next several years. Global sales of natural gas vehicles are expected to rise from 1.9 million vehicles per year in 2010 to over 3.2 million annually by 2016. The bulk of this growth will take place outside North America, with India expected to lead the world with sales of over 612,000 units in 2014. By 2016, there are expected to be approximately 19.9 million CNG vehicles worldwide.

eResearch Analysts on this report:
Bill Campbell, B.Comm.,
Bob Weir, B.Sc., B.Comm., CFA