09/25/2014 01:46 EDT | Updated 11/25/2014 05:59 EST

GLV to focus on water treatment after selling pulp and paper division for $65M

MONTREAL - GLV will be on the hunt for acquisitions in the water treatment sector after agreeing to sell its pulp and paper division to a company owned by its founding family in a deal worth $65 million.

After years of evaluating its options amid losses and a restructuring, GLV said the deal strengthens its balance sheet and positions the company for growth.

"We decided that the water treatment was going to be our future growth," said Marc Barbeau, who will head the company which will change its name to Ovivo.

Barbeau, who heads GLV's water treatment business, said Ovivo will use the proceeds from the sale on acquisitions and other growth opportunities in the North American municipal water and global energy sectors.

"We have companies on our radar," he said, aiming to spend between $50 million to $100 million over the next year. The fragmented market includes global giants like Suez, Geolia and General Electric, along with players the size of GLV or smaller.

GLV endured problems with its 2012 purchase of Austria's Chris Water Technologies, which had some problematic construction contracts that moved the company beyond just delivering water treatment solutions.

Barbeau said Ovivo hopes to more than double its revenues in five years to about $1 billion from the current level of $400 million to $425 million.

The deal announced Thursday will see GLV president and chief executive Richard Verreault resign from the company's management and board to run the family business.

His father, Laurent Verreault, will remain executive chairman of GLV since the family will remain substantial shareholders.

KPMG evaluated the pulp and paper division at between $63 million and $71 million and advised GLV's independent committee that the Verreault offer was fair.

Under the agreement, GLV now has 45 days to solicit other proposals and the Verreault family has the right to match any superior offer.

Laurent Verreault said the family is optimistic about Ovivo's future and intend to remain an important shareholder.

"We are also pleased to acquire the pulp and paper division, the founding activities of GLV, and to ensure that its head office will remain in Quebec," he stated.

The deal, which is expected to close in the third quarter, must be approved by two-thirds of GLV's shareholders and a majority of those excluding the Verreaults.

Ovivo will have about 1,000 of GLV's nearly 1,700 employees and accounts for 60 per cent of the combined company's revenues.

On the Toronto Stock Exchange, GLV's shares gained 13 cents or 4.48 per cent at $3.03 in Thursday afternoon trading.

— With files from Julien Arsenault

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