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Deal Catalysts

March 16

Catalytica Energy Systems (Nasdaq: CESI) -- in the business of cutting gas turbine nitrous oxide emissions with catalysts -- has purchased SCR-Tech, operator of a plant that cleans or regenerates catalysts used to break down coal plant nitrous oxide emissions.

SCR, which generated 2003 revenues of about $3 million, claims to run the only such regeneration plant in North America, and also controls patents for a range of other related catalytic cleaning and rejuvenation processes.

In purchasing SCR-Tech, Catalytica made an initial cash payment of $3.5 million, and agreed to a following mid-2004 payment of another half million. These payments, totaling $4 million, therefore represent a transaction multiple of 1.25x SCR sales. In addition to these payments, SCR may also earn contingency fees based on development of its intellectual property for up to another $7.5 million over a 10-15 year period beginning in 2005.

In sum, Catalytica is paying what appear to be a full price for what we must assume is valuable proprietary nitrous oxide management technology.


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