Solar Financier OneRoof Intends to Go Public via Reverse Merger

The old reverse merger trick

Eric Wesoff October 24, 2013

Eric Wesoff

Editor-at-Large
Greentech Media

Eric Wesoff is Editor-at-Large at Greentech Media. Prior to joining GTM, Eric Wesoff founded Sage Marketing Partners in 2000 to provide sales and marketing-consulting services to venture-capital firms and their portfolio companies in the alternative energy and telecommunications sectors. Mr. Wesoff has become a well-known, respected authority and speaker in these fields.

His expertise covers solar power, fuel cells, biofuels and advanced batteries. His strengths are in market research and analysis, business development and due diligence for investors. He frequently consults for energy startups and Silicon Valley's premier venture capitalists.

There are a lot of creative ways to raise money for financing solar in the big city.

A reverse merger is now one of them. Solar financier and contractor OneRoof is trying to do just that -- with a goal of listing on the TSXV through a reverse merger with Carlaw Capital.

Although it was marked "NOT FOR DISSEMINATION IN THE U.S. OR THROUGH U.S. NEWSWIRES," my computer was able to obtain the rather dense press release. Read it here if you dare. The Canadians are awfully strict about this, so maybe your best course would be to tread lightly.

The transaction will result in a reverse takeover of Carlaw by the shareholders of OneRoof Energy. Carlaw has not responded to inquiries. OneRoof representatives saw the transaction as part of "ongoing activities to continue to raise funds," but could only provide a "no comment" regarding the transaction itself.

Here's an attempt at deciphering the deal, with help from a few smart colleagues:

Carlaw is a Canadian capital pool company or "blind pool vehicle" with no assets but cash. "A capital pool company (CPC) uses its cash holdings to evaluate promising businesses or assets that it would acquire in a qualifying transaction, which it has to complete within 24 months of listing," according to Investopedia. OneRoof intends to reverse-merge into Carlaw and use its capital-raising ability as the “qualifying transaction” that keeps Carlaw listed on the TSXV. A OneRoof subsidiary will raise C$55 million from Canadian investors prior to the merger. At the time of the merger, OneRoof's financing subsidiary and OneRoof will merge into the Canadian shell company through a "three-cornered merger." OneRoof will then rename the company and appoint directors and officers. Desjardins Capital Markets is the lead agent.

Note that the capital raise will occur before the merger -- and that there are still a few regulatory hoops to jump through.

It is a transaction not for the faint of heart, as per one of the Canadian translators.

Despite the contortions needed to make this kind of deal happen, it's evidence of the creativity that solar companies show in accessing capital. And if the deal goes well, it means that Canadian investors can invest in a public "Canadian" solar financing firm. It will also illustrates capital's hunger for solar investments.

And we can add "reverse mergers on a Canadian exchange" as a financing category alongside banks, utilities, and car companies amidst the approximately $6 billion brought to bear in residential solar financing. Here's a recent recap of that activity.

In a recent interview with GTM, OneRoof Energy CEO David Field said, “My business is the acquisition of non-regulated customers. It is not necessarily the business of putting solar on rooftops."

OneRoof also needs to be good at raising money, and it has done that as well, with GDF SUEZ Energy North America announcing a minority stake in OneRoof earlier this week. And earlier this year, OneRoof announced that it added another $100 million from Morgan Stanley and Main Street Power Company to its available funds.

OneRoof has also raised more than $80 million in operating capital and finance capital from Hanwha, Black Coral Capital, U.S. Bank, The Quercus Trust, Yellowtree Energy, and Spring Ventures.

Watch an interview with OneRoof Energy CEO David Field: