Corbion makes US$20m “stalking horse” bid for bankrupt TerraVia

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02 Aug 2017 --- Corbion has signed an agreement to bid for substantially all of the assets of innovative microalgae specialist TerraVia, as the bidding war for the beleaguered microalgae company begins. Corbion announced that it has entered into a "stalking horse" stock and asset purchase agreement with TerraVia Holdings, Inc., a food and specialty ingredients company with a broad and diverse platform centered on ingredients and branded products derived from microalgae. The execution of the stock and asset purchase agreement is subject to a sale process to be conducted under Section 363 of the US Bankruptcy Code. 

Corbion offered a cash purchase price of approximately US$20 million, in accordance with the terms and conditions of the stock and asset purchase agreement. The transaction is subject to the receipt of any higher offers from other potential bidders in an auction process as part of the Section 363 sale. As TerraVia's operations are currently loss making, Corbion expects the total financial commitments to be substantially in excess of the cash purchase price.

Tanno Massar of Corbion tells FoodIngredientsFirst: “This is the first step in the sales process in which we are the “stalking horse” bidder, which means that we are the party that has agreed to an offer in principle. But that is subject to potentially other bidders joining with higher and more attractive bids for the company.” The process will likely take 60-90 days, after which no companies will be allowed to make a new bid for the company. “The agreement that we have signed is a form of progress and a first step, but we cannot predict whether others will join the auction process.” 
 
San Francisco-based TerraVia leverages its microalgae platform to deliver high-value ingredients with clear benefits, such as omega 3 for animal nutrition and tailored oils, structured fats and proteins for food and biochemical applications. It operates an R&D center in San Francisco, and two manufacturing facilities: one wholly-owned in Peoria, Illinois and one in Brazil in a joint venture (50.1 percent owned by TerraVia) with Bunge. The acquisition of TerraVia's microalgae platform would extend Corbion's product portfolio into algae-based fatty acids and proteins while leveraging Corbion's extensive fermentation and downstream processing capabilities.
 
Click to EnlargeTerraVia announced it filed a voluntary petition under Chapter 11 of the US Bankruptcy Code on August 2, 2017. The stock and asset purchase agreement will constitute a primary bid for substantially all of the TerraVia assets in a sale process to be conducted under Section 363 of the U.S. Bankruptcy Code. The auction process and final agreement will be subject to the approval of the United States Bankruptcy Court for the District of Delaware. In addition, completion of the transaction remains subject to customary closing conditions and regulatory approvals. The auction process and transaction closing are expected to conclude within 60 to 90 days.

Massar notes: “TerraVia would expand our product portfolio into an area that is on the one hand new, but also adjacent to our portfolio, as it is also fermentation based. We have a long history of successful fermentation business from our lactic acid process, so we have those capabilities to actually be able to leverage those into the area of algae, where they are specialists. So that’s a natural and sustainable based food ingredients area that fits in well with Corbion.” 

In terms of production of the product going forward. “It’s early days, but part of the agreement and the scope of what we would be acquiring would be a couple of production facilities in the US and Brazil, so it would make sense to make use of those facilities.”

Click to Enlarge TerraVia noted that through this proposed transaction, TerraVia employees, who bring with them a wide range of highly valued skills and expertise, together with its customers, have an opportunity to benefit from joining a global leader in its markets.

To facilitate its competitive transaction process, TerraVia and its wholly owned US subsidiaries have filed voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware under the Case number 17-11655. In addition, TerraVia also announced that it has received a commitment for debtor-in-possession (DIP) financing from holders of approximately 63 percent of the outstanding principal amount of its senior unsecured convertible notes. The DIP financing will be used to finance the working capital needs of TerraVia's business through the completion of the sale transaction and to support payments to vendors for post-petition purchases in the ordinary course.

The company stressed that the DIP financing provides the necessary financing to support continued operations and TerraVia's ability to service customer demand, while the Section 363 bankruptcy restructuring process provides the tools to execute an expedited and orderly strategic transaction. This process will create a level playing field for all interested bidders to compete to provide the highest or otherwise best offer for certain or all of TerraVia's assets.

The company stressed that the chapter 11 cases and the sale process should have no material impact on TerraVia's ability to fulfill its obligations to its customers and employees going forward. TerraVia has filed a series of motions with the Bankruptcy Court requesting authority to continue normal operations, including requesting Bankruptcy Court authority to continue paying employee wages and salaries, certain vendors and customer obligations in the ordinary course without interruption. TerraVia will continue its efforts to work closely with its suppliers and partners to meet ongoing obligations and continue its business without interruption.

The rebranded TerraVia came into being in March 2016 following a renaming from Solazyme: “to focus exclusively on food, nutrition and specialty ingredients, harnessing the power of its transformational algae innovation platform.” This came after Solazyme and Roquette had previously dissolved their joint venture Solazyme Roquette Nutritionals in mid-2013, to go in separate ways. 

The joint venture eventually led to a court dispute, whereby on December 21, 2015, the United States District Court for the District of Delaware filed in favor of Solazyme. The United States District Court's confirmation of the Arbitration Award confirmed that:

  • Essentially all of the intellectual property from the Solazyme Roquette Nutritionals joint venture, including all patent applications and all "know-how" related to the products, is assigned solely to Solazyme,
  • Roquette was told to assign to Solazyme all of Roquette's patent applications filed on or after November 3, 2010 related to microalgae foods, microalgae ingredients, microalgae nutritionals and all methods related to making and using them, and;
  • Roquette was told to pay Solazyme US$2.3 million dollars to cover all of Solazyme's fees for the arbitration.

Despite a somewhat checkered past, Massar stresses that for Corbion it is about looking at the current status of the company. “It is not for us to look at the historical status of the company. We are looking at what the current status is and we do see potential there and that’s what we based our offer on. The company is obviously not in the best shape, they are effectively going through part of the US bankruptcy law. But having said that we do see the quality and potential of the company and are confident that based on our capabilities and expertise we see possibilities to make it successful,” he concludes. 

In February 2017, Univar, a distributor of food ingredients and provider of value-added services across Europe Middle East and Africa (EMEA), announced a distribution agreement across Europe for the AlgaVia brand of Whole Algae Ingredients from TerraVia.

By Robin Wyers

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