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Renewable Energy Group acquires drop-in renewable fuels company LS9 for up to $61.5 million
24 January 2014
Biodiesel producer Renewable Energy Group, Inc. (REG) has acquired LS9, Inc., a synthetic biology company developing fermentation-derived drop-in renewable fuels and chemicals (earlier post), for a purchase price of up to $61.5 million, consisting of up front and earnout payments, in stock and cash. Most of the LS9 team, including the entire R&D leadership group, will join the newly named REG Life Sciences, LLC, which will operate out of LS9’s headquarters in South San Francisco, CA.
Under the terms of the agreement, REG paid $15.3 million in cash and issued 2.2 million shares of REG common stock (valued at approximately $24.7 million based on a trading average for REG stock) at closing. In addition, REG may pay up to $21.5 million in cash and/or shares of REG common stock consideration for achievement of certain milestones over the next five years related to the development and commercialization of products from LS9’s technology.
LS9’s proprietary technologies harness the efficiency of the fatty acid metabolic pathway of microorganisms to convert fatty acid intermediates into petroleum replacement products via fermentation of renewable sugars. LS9 has also discovered and engineered a new class of enzymes and their associated genes for the efficient conversion of fatty acids into hydrocarbons.
The heart of LS9 technology lies in its biological catalysts, which have been engineered selectively to convert renewable feedstocks directly to drop-in and differentiated products. To create these catalysts, LS9 applies synthetic biology to combine the highly efficient metabolism of microorganisms with new biocatalytic capabilities engineered into each cell.
The resulting catalysts selectively convert a diversity of feedstocks to a final product in a single-step fermentation process. The product is secreted from the cell where it conveniently forms a non-toxic, light organic phase that is recoverable.
LS9’s technology platform can utilize diverse feedstocks including conventional corn and cane sugars, low-cost crude glycerin from biodiesel production, and cellulosic sugars.
LS9 is a cornerstone investment for REG Life Sciences, which also plans to develop adjacent and complementary fermentation technologies.
This acquisition is a major step in realizing REG’s strategy to expand into the production of renewable chemicals and other products. The industrial biotechnology platform and robust patent portfolio LS9 has been building will now be combined with REG’s proven production and commercialization capabilities to accelerate the commercial introduction of renewable chemicals to meet increasing customer demand for sustainable products.—Daniel J. Oh, Renewable Energy Group President and CEO
REG, headquartered in Ames, Iowa, owns and operates eight active biodiesel refineries in four states with a combined nameplate production capacity of 257 million gallons and distributes biodiesel through a national network of distribution terminals, distributors and customers. In December 2013, REG entered into an asset purchase agreement under which it would acquire substantially all of the assets of Syntroleum Corporation, and assume substantially all of the material liabilities of Syntroleum, a Fischer-Tropsch gas-to-liquids and renewable diesel fuel technology company. (Earlier post.)
In 2010, LS9 was awarded the US Environmental Protection Agency's highest environmental honor for its revolutionary technology. The company owns and operates a demonstration production facility in Okeechobee, Florida. Investors in LS9 included CTTV Investments LLC, the venture capital arm of Chevron Technology Ventures LLC; Flagship Ventures; Khosla Ventures and Lightspeed Venture Partners.
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