Aiming for Chartbuster, Germany’s BASF Acquires San Diego’s Verenium
San Diego-based Verenium (Nasdaq: VRNM), created in 2007 with the merger of Cambridge, MA-based Celunol and San Diego-based Diversa, had all the makings of a country-western song.
Diversa was a rambler, and gathered enzymes from the farthest corners of the world. Celunol was an Ivy League moonshiner. They got married—changed their name to Verenium—but times was hard and the marriage didn’t take. The part that was Celunol ran off with BP to make ethanol in Florida. (That didn’t take neither.) Carrying a woeful debt, Verenium came home to San Diego to start anew. Sold off some heirlooms from its enzyme library to pay down the debt. Last week, little Verenium said it had agreed to a buyout offer from Germany’s BASF, the largest chemical company in the world.
Know any words that rhyme with BASF?
There’s even a bit of discord in the harmony. At least eight law firms have announced that they are investigating the deal on behalf of shareholders, presumably to argue that Verenium’s board failed to get a better deal.
BASF offered $4 a share, which works out to more than $51 million based on nearly 12.8 million current Verenium shares outstanding—a total for the deal that was carried in numerous press reports over the weekend. In its statement, however, BASF said the total transaction amounted to roughly $62 million including debt.
Asked to clarify, BASF spokesman John Schmidt wrote in an e-mail this morning, “Based on all outstanding shares and including all net financial liabilities on June 30, 2013, and an exchange rate of €1 = US$ 1.30, the enterprise value would be approximately $62 million. At this time BASF can’t comment beyond what is on the news release.” Verenium CFO Jeff Black wrote in another e-mail, “The $62 million includes the $4 per share for all fully diluted shares (including options and warrants expected to be converted) plus an estimate for net liabilities that will be assumed.”
The offer was about 56 percent higher than the six-month average price of Verenium, and gives BASF billions of industrial enzymes that Diversa had collected from organisms collected from deep sea thermal vents, Arctic tundra, soda lakes, and remote areas of the world. Jeffries analyst Laurence Alexander wrote in a research note, “We believe this deal should enhance the growth profile of BASF’s enzymes franchise, and herald a significant longer-term shift in the competitive landscape in industrial enzymes and agricultural enzymes for Novozymes and DuPont.’’
Such enzymes are typically used as catalysts that act in highly specific ways to make certain biochemical reactions and processes possible. Verenium also generates more than $50 million in annual sales from a product line that includes alpha-amylase and related enzymes used in grain processing to make ethanol as well as several enzymes used in hydraulic fracturing, or fracking.
The boards of both companies approved the deal unanimously, and the acquisition is expected to close in the fourth quarter. Verenium generated sales of $57 million in 2012—the year it also sold its food processing and oil extracting assets to Netherlands-based Royal DSM, a multinational life sciences company.
Verenium has about 130 employees, according to its corporate fact sheet, including 90 in San Diego. So far, it’s unclear whether BASF plans to maintain Verenium’s operations in San Diego.