Martek Biosciences Announces Agreement to Sell Majority of Winchester, Ky. Manufacturing Site
The sale is consistent with Martek's previously announced plans to restructure its Winchester, Ky., manufacturing facilities in an effort to streamline operations, improve capacity utilization, and reduce manufacturing costs and operating expenses.
Sep 27 2010 --- Martek Biosciences Corporation announced that it has entered into an agreement to sell a significant portion of the assets at its Winchester, Ky., manufacturing site to Alltech, an animal health company headquartered in Nicholasville, Ky. The assets to be sold include a majority of the land and buildings at the Winchester site as well as certain equipment therein, including all of the production-scale fermentation and recovery equipment. The transaction does not include the sale of, license of, or granting of any rights to any of Martek's strains, patents or any other technologies. It also does not permit the use of the Winchester assets to produce omega-3 and/or omega-6 polyunsaturated fatty acids for human use for a period of 10 years. The sale is consistent with Martek's previously announced plans to restructure its Winchester, Ky., manufacturing facilities in an effort to streamline operations, improve capacity utilization, and reduce manufacturing costs and operating expenses. Under the terms of the sale agreement, Alltech will pay Martek a total of approximately $14 million over the next four years for the assets to be acquired. The transaction is expected to close by November 30, 2010, subject to customary closing conditions.
Also as previously disclosed, as a result of the Winchester plant restructuring and sale, Martek will incur both non-cash asset impairment and cash charges. Based on the terms of the sale, we currently project that non-cash charges of approximately $28-32 million will be recorded in the fourth quarter of fiscal year 2010 as well as cash charges of approximately $1 million related to employee separation costs.
Following the sale and restructuring, Martek plans to continue to maintain a strong presence in Winchester, with approximately 50 skilled employees focused primarily on lab and pilot scale development, limited production, and supply-chain management. In addition, Martek will maintain necessary production redundancies through continuing access to certain key processes at the Winchester facility and arrangements with contract manufacturers.
"The restructuring of our manufacturing operations and this related asset sale is a necessary part of our strategy to significantly offset price reductions resulting from our infant formula contract extensions through the implementation of manufacturing cost savings, product innovation initiatives, and growing our non-infant formula business. Importantly, Martek will continue to have access to back-up production facilities, if needed. This transaction will also enable Martek to maintain a considerable presence in Winchester where we will carry-out a variety of critical innovation, development, and other activities," said Steve Dubin, CEO of Martek Biosciences Corporation.
