Clearford Industries Inc. is going back to square one, with the company agreeing to sell off its most profitable business, to look at selling another recently acquired division, and to find a replacement CEO in Bruce Linton's place.

The Ottawa-based wastewater treatment solutions maker said it had entered into an agreement with Guelph-based Armtec Infrastructure Income Fund, through its wholly owned subsidiary Armtec Limited Partnership, to divest the business assets of its Brooklin Concrete Division and to assign the right to acquire the shares of Boucher Precast Concrete Ltd. for a purchase price of up to $65 million.

Clearford in May had announced the deal to buy Boucher, also an Ottawa company, for $22 million, but until now it had not disclosed the name of the company. Clearford is currently waiting to close the Boucher acquisition, which is scheduled to be completed on or about July 31.

A condition to the closing of the deal is that Clearford's current president and CEO Bruce Linton will enter into a consulting agreement with Armtec, with the expectation that a new chief will be appointed on or before the closing of the deal.

Mr. Linton will act as part of Armtec for roughly a two-year period to aid with the transition and to help build up Armtec's eastern Canadian operations. As well, SC Stormont, of whom Mr. Linton is a vice-president will continue to provide management and direction for the concrete businesses.

"Clearford's Brooklin Concrete division has been a strong and reliable source of funding that has enabled the advancement of the Small Bore Sewer system, which now includes methane capture and collection," said Mr. Linton in a statement. "The divestiture of the Brooklin assets will provide the financial capacity that will enable Clearford to aggressively pursue the global wastewater servicing market."

The move could be a tough one for Clearford as its remaining wastewater division – the company's original business – recorded no revenues during the first quarter, and Mr. Linton has previously complained of Clearford's problems in trying to break through to the market with its innovative small bore sewer system, citing "a bias towards historic methods of servicing."

However, in an interview Mr. Linton noted that the company's difficulties in the Ontario and Canadian markets meant that the company would likely look at reaching out to developing nations with its sewer system, enabled by the cash the company is receiving as a result of this deal.

He pointed out that incidents like Ottawa's 'Sewergate' episode, where raw sewage was released into local rivers a few years ago because of an unusually large amount of groundwater flooding the sewers, would not have occurred if Clearford's small bore sewer had been used since the system does not allow groundwater to mix with sewage and flood the sewers.

"Just because we live in Ontario doesn't mean we have to focus on Canada and Ontario," he said, likening Clearford to tech companies in Kanata who are often forced to look to distant shores to market their products. "There are 2.6 billion people in the world who have no infrastructure for sanitary sewers, and that number is growing, and places like India and China have replacement requirements. The company is now totally focused and funded to concentrate on that."

Mr. Linton said Clearford's acquisition of Brooklin had helped the company gain a strong balance sheet and enough money to develop intellectual property, for which the company has filed provisional patents, with the deal also giving Clearford working capital to build its original business.

"If you could find anything about sewers exciting, this would be it," said Mr. Linton about the company's pending technology patents, adding that the patents would also present a strong investment opportunity for those with capital, which would help the company bring in income outside of its projects.

Brooklin, which Clearford bought at the beginning of 2006, brought in the company's only revenues of $1.4 million in the first quarter, and Brooklin provided $23.5 million of the $24.4 million in total sales for fiscal 2007. Brooklin has four plants in Ontario, located in Brooklin, Newmarket, Huntsville and Haliburton.

Boucher, whose facilities are located in Gloucester, specializes in various concrete products including commercial tanks, bridges, electrical manholes and parking curbs, and primarily services the greater Toronto area, North Bay, Sudbury and the Ottawa region.

Armtec will pay $43 million for Brooklin, with $40 million to be paid in cash to Clearford and $3 million will be paid in the form of units of Armtec that will be immediately exchanged post-closing for exchangeable Armtec units. Two-thirds of the exchangeable units will be held in escrow for two years in support of Clearford's obligations and released in equal amounts every six months from the closing date of the deal.

Clearford is expected to be left with approximately $4 million at the end of the transaction after the payment of related debt and expenses, subject to a working capital adjustment.

Mr. Linton said the company will not be laying off any staff as a result of the deal, and in fact will likely be hiring engineers to grow its sewer business.

"We took this business on with no cash, limited to no prospects and barely any staff, and now we have no debt, a substantial sum of cash, without having issued more shares than had existed two years ago," said Mr. Linton. "We were financially tight in past, since we had to take on significant debt to buy Brooklin, and this gets us to situation we can grow again."