Best stock to invest in – Corbion Bids To Acquire TerraVia

Best stock to invest in

In California, Corbion has made a $20M stalking horse stock and
asset purchase bid for TerraVia (TRVA).

The purchase agreement provides TerraVia with a binding bid of
$20 million in cash along with the assumption of certain
liabilities, which is subject to higher or otherwise better
offers. As part of the transaction, Corbion will be assuming the
ongoing financial obligations of the business and its joint
venture ownership, therefore the total financial commitment is
expected to be in excess of the cash purchase price. 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.

The bidding process

To facilitate the bidding process, TerraVia and its wholly owned
U.S. subsidiaries have filed Chapter 11 reorganization. Pursuant
to section 363 of the Bankruptcy Code, TerraVia intends to
implement bidding procedures to allow other qualified bidders the
opportunity to submit bids through a court-supervised process to
purchase certain or all of the assets being sold. TerraVia
anticipates that a sale will be completed within 60 to 90 days.

Interim financing

In addition, TerraVia also announced that it has received a
commitment for debtor-in-possession (DIP) financing from holders
of approximately 63% 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 DIP financing announced today 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 going forward

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.

The Solazyme-TerraVia backstory

“We make oils” said the prospectus for the old Solazyme when it
completed its celebrated IPO five years ago, pledging to transform
the market for oils through the power of algae to make them. The
company subsequently ratcheted its focus down to speciality
ingredients and nutrition — but that’s been typical of almost
every algae-based venture, most of which long abandoned the fuels
and big chemicals markets in a search for price points that were
more reachable in the near-term.

Solazyme transformed itself far more than others — renaming the
company and focusing solely on nutrition. That move generally felt
like a Hail Mary to raise fresh money when interest in industrials
collapsed with the fall of oil prices in 2014-15.

We last looked at TerraVia in depth during April, in our “TerraVia
in the Wilderness Years
” column. At the time we noted:

How much clock does TerraVia
have? With a “going concern” warning and a debt re-org on the
menu for this year, it’s far from dire but equally far from “you
have lots of time”. TerraVia will have to find it’s mojo soon if
it to remain independent, we suspect. 2017 appears to be the
year.

The momentum the company is
detailing in releases is not yet translating into financial
results — that’s for sure. The good news? The [most recent
quarterly] results were in line with the painful corporate
guidance in the Q3 call with investors and analysts. The bad
news? The company’s auditors inserted a “going concern” notice
into the company’s 2016 annual report.

We also noted:

It’s been rough going for
TerraVia in recent weeks. The company announced a painful round
of layoffs — 25 percent of the company’s workforce, which had
already been substantially reduced in the past two years. And
the company suspended operations at its Peoria, Illinois
demonstration-scale facility, and said it was seeking “strategic
opportunities to partner its AlgaVia line of products” — which
of course could range from a joint venture to an outright sale
of the brands (while retaining perhaps a manufacturing
contract).

The product portfolio today

The company earlier this year had six active products in “food
& nutrition” and one in “speciality ingredients” – the latter
generally refers to the AlgaPur range of specialty personal care
oils including Capric, Lauric and Oleic-based oils — and Unilever
is currently AlgaPur high lauric oil in certain of its soap
brands.

Two of those products under the AlgaVia brand are in the “seeking
partner” shelf at the moment. Leaving the company with its DHA,
it’s AlgaWise Omega-9 algae oil, the thrive Culinary Algal Oil
(launched in 2015) and the afore-mentioned AlgaWise algae butter.

There is a pipeline of “additional products we expect to launch
in the food, nutrition and specialty ingredients markets in 2017
and 2018” and on those really will rest the fate of the company’s
painful and wrenching shift of company name from Solazyme to
TerraVia. After all, AlgaPur is essentially a carryover from
Solazyme days, Thrive was launched during that period as well, and
since there are a half-dozen companies at least in the algae space
focused on nutritionals without changing identity — in many ways
it comes down, for now, to AlgaWise butter. That’s been the fruit,
so far, of the a titanic identity shift last year and an
refocusing of the brand onto nutrition. Butter is a $4.4 billion
market and a price point around $4400 per ton, so there’s room for
encouragement and that may well be what Corbion sees.

What Corbion is getting

There’s lots for Corbion to like — after all, the company is
focused on food, biochemicals, bioplastics, and biomedicals — so
there’s plenty of cross-over, and Corbion has been looking at more
advanced technologies. We expect that the TerraVia name will be
swiftly retired — but some reasonably established brands will go
on — especially the AlgaPur relationship with Unilever.

Getting in on the auction of the assets

This is a stalking-horse bid for the company — the price could go
higher and the acquiror could change. We’ll know all within 60 to
90 days. Meanwhile, interested bidders “are encouraged to contact,
as soon as practicable” the Rothschild team — that’s Nicholas
Barnes or Tero Jänne at (212) 403 3500.

Jim LaneJim Lane is editor and publisher  of Biofuels Digest where this

article

was originally published.
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