Integumen PLC (LON:SKIN) has agreed to merge with water monitoring partner Modern Water PLC (LON:MWG) through an all-share takeover worth £21.25mln.
The deals values each Modern Water share at 4.05p, a 44.6% premium to the closing price on Thursday.
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The two companies have been working together since March when Integumen provided its AI technology to produce test kits for Modern Water.
Demand has soared amid the pandemic as public bodies and private companies were looking to analyse possible coronavirus contamination in wastewater outlets from residential, hospital and other sewage outflows.
According to Integumen, interest in monitoring water is set to remain strong and there should be substantial new opportunities arising through combining the businesses.
“The Integumen board believes that a merger of the two businesses would be a natural next step and that there are exciting synergies and opportunities across the combined businesses in the areas of science, IT, distribution channels, global reach for supply chain, sales, marketing and distribution channels,” said Integumen chairman Ross Andrews.