H2O Innovation Expands its Specialty Products Business Pillar and Builds One of the Largest Global Specialty Chemicals Distribution Networks by Acquiring Genesys, and Announces an Equity Offering of Subscription Receipts of at least $22.0 M

Press Release

Key Highlights

• Acquisition of a UK privately-owned group of companies specializing in the development and manufacturing of specialty chemicals dedicated to water treatment;
• Strengthens H2O Innovation’s specialty chemicals line of products and broadens its range of application;
• Adds nearly 80 distributors and technical sales professionals in complimentary geographies to build one of the largest specialty chemicals distribution networks worldwide;
• Complements existing manufacturing capabilities in Vista (California) with chemical blending facility in Cheshire, UK;
• Acquisition to be financed through committed credit facility as well as proceeds from an equity offering for gross proceeds of at least $22 million, as follows:
• an overnight marketed public offering of Subscription Receipts for anticipated gross proceeds of at least $14 million
• a concurrent brokered private placement of Subscription Receipts with certain institutional shareholders of the Corporation for aggregate proceeds of $8 million; and
• The transaction is expected to be immediately accretive to adjusted EBITDA¹ and net earnings before acquisition costs.

All amounts are in Canadian dollars unless otherwise stated.

Quebec City, October 28, 2019 – (TSXV: HEO) – H2O Innovation Inc. (“H2O Innovation” or the “Corporation”) announces it has entered into a binding sale and purchase agreement (the “Acquisition Agreement”) pursuant to which H2O Innovation, through a wholly-owned UK subsidiary, will acquire, from arm’s-length third parties, Genesys Holdings Limited and its subsidiaries, Genesys Manufacturing Limited, Genesys International Limited and Genesys North America, LLC (collectively “Genesys”), a group of privately-owned companies based in the United Kingdom that develop, manufacture and distribute speciality reverse osmosis (RO) membrane chemicals, antiscalants, cleaners, flocculants and biocides

¹ The Corporation uses both International Financial Reporting Standards (“IFRS”) and certain non-IFRS measures to assess performance. Non-IFRS measures do not have any standardized meaning prescribed by IFRS and are unlikely to be comparable to any similar measures presented by other companies. Non-IFRS measures, as presented herein include adjusted earnings before interest tax, depreciation and amortization (“Adjusted EBITDA”). Please refer to the section entitled “Non-IFRS Financial Measurement” of the management discussion and analysis for the fiscal year ended June 30, 2019 filed under the Corporation’s SEDAR profile at www.sedar.com for the definition and historical reconciliation to the most comparable IFRS measure.

(the “Acquisition”). Genesys offers, through a large distribution network, a portfolio of over thirty-five (35) diversified products with unique formulation that are manufactured in its facility located in Cheshire, UK. In addition, Genesys also offers complete laboratory services such as feed water and pre-treatment tests, membrane autopsies and cleaning program design.

“The combination of Genesys’ product offering with our existing PWT product line will create a leading supplier of specialized chemicals for membrane water treatment plants. Once the acquisition is completed, H2O Innovation will deliver to clients an even broader portfolio of products and solutions through one of the largest distribution networks in the world. The expanded operations and network will also improve our efficiency, when it comes to manufacturing, warehousing and freighting. The reputation of Genesys is proven and solid. Their sales relationships are long lasting and growing and we look forward to welcoming the Genesys partners into the H2O Innovation’s family”, said Frédéric Dugré, President and Chief

Executive Officer of H2O Innovation.

Established in 2001, Genesys provides chemicals and services to the membrane industry in almost 70 countries around the world. “Through our innovative product line and first-class service, Genesys has become a leading name in the membrane market. All our branded formulations have been developed in-house and are produced at our UK factory in Cheshire. Although Genesys is highly profitable and has grown strongly over the years, we realize that the next stage in growth can only be achieved in combination with a larger organization. Our team has been aware of H2O Innovation for many years and consider them as the perfect partner. They will maintain the family feel that Genesys has developed by looking after its staff and distributors. As there are significant areas of synergy for both companies, we fully endorse the acquisition knowing it will be highly beneficial to all those involved”, said Ted Darton, President and Chief Executive Officer of Genesys.

Management is expecting the Acquisition to be immediately accretive to adjusted EBITDA and net earnings before acquisition costs, as Genesys’ revenues and profitability are recurring in nature. The Acquisition will also strengthen H2O Innovation’s position as global player in the specialty chemicals industry dedicated to water treatment. Combining Genesys with the Corporation’s PWT business line, H2O Innovation’s distribution network is expected to reach, following the transaction, one hundred distributors covering both emerging and strategic markets.

The purchase price of the Acquisition was established at £16.95 M ($28.39 M)² (the “Purchase Price”), on a cash-free, debt-free basis fully-payable at closing of the Acquisition. The Purchase Price is subject to customary working capital adjustments as of the closing date.

Genesys’ key financial results are outlined below:

	Genesys’ consolidated	As at and for the year ended	As at and for the six-month
	financial results	December 31, 2018 3	period ended June 30, 20194
	Revenues	£6.01 M ($10.40 M)	£3.23 M ($5.57 M)

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