Biofuels Reboot: Verenium Sells Cellulosic Biofuels Business to BP for $98M, Includes San Diego R&D Facilities
[[Updated: 2:15 pm, 7/15/10]] Looking to get out from under ongoing financial losses and focus on new growth opportunities, Cambridge, MA-based Verenium has struck a deal to sells its cellulosic biofuels business for $98.3 million in cash to BP, the energy giant at the center of the oil spill crisis in the Gulf of Mexico.
The transaction will give the BP Biofuels North America division Verenium’s intellectual property in the cellulosic biofuels and cellulosic enzymes spaces. As part of the deal, BP will acquire Verenium’s San Diego-based R&D sites, as well as its demonstration-scale facility and pilot plant in Jennings, LA. In addition to the $98.3 million payment, upon assigning the lease on its San Diego facility over to BP, Verenium will also get access to $10.8 million in cash that was previously restricted.
Verenium (NASDAQ: VRNM), which formed in 2006 from the merger of Cambridge-based Celunol and San Diego-based Diversa, will return to its original focus on the commercial enzyme space. Verenium will also retain rights to access certain biofuels products BP develops from Verenium’s technology.
Verenium and BP (NYSE: BP) have engineered deals together previously. The companies announced a partnership in August 2008, through which BP was to pay Verenium $90 million over 18 months to pursue work in developing cellulosic ethanol technology. In February 2009, they formed a joint venture, Vercipia Biofuels, in which BP will become the sole investor of as a result of the transaction announced today. BP will also take full ownership of Galaxy Biofuels, the joint development company it owned 50-50 with Verenium.
Verenium executives said the deal gives their company the capital needed to operate in the coming years. “This agreement should give both companies the flexibility to pursue the growth opportunities in the respective businesses and achieve goals in the near-term,” said CEO Carlos Riva in an announcement on the deal.
The Cambridge-based company has struggled financially, largely due to losses that piled up from its R&D activities in enzymes that convert high-cellulose materials to ethanol, as Wade wrote last year.
Verenium reported net losses of $12 million in the first quarter of 2010, compared to net income of $3.3 million for the same period in 2009. Its first quarter revenues fell from $14.4 million in 2009 to $13 million for the same period this year. The company has about 260 employees, and has not yet revealed how its headcount will be affected by the BP deal.
As of 2:00 pm, shares of Verenium had climbed 43 percent from Wednesday’s $2.46 closing price, to hit $3.52 per share. [[Updated 2:15 pm]]