Cellulac yesterday formally requested Metabolix shareholders to consider merger proposal. Cellulac plc is an industrial biochemicals investment technology company, that have been interested in Metabolix Inc., ($MBLX) for some time and after their announcement, in May 2016, of a strategic review, Cellulac made a formal proposal via the CEO to merge both companies.
The proposal meant Cellulac would contribute industrial scale production assets with biochemical and biopolymer capacity, independently valued at up to $40m. In addition, terms for a manufacturers licensing agreement of the combined Metabolix and Cellulac biopolymer assets with access to debt and equity funding from Cellulac assets and shareholders for a commercially focused growth strategy of the enlarged entity. According to Gerard Brandon, CEO of Cellulac, “The Board of Directors of Metabolix decided the $40m merger offer was not important enough to inform shareholders. A merger with Cellulac, based on the biopolymer intellectual property and associated institutional knowledge, would reduce Metabolix development overhead to a more manageable level where manufacturing license fees and future royalties would transform Metabolix, for the first time in 24 years, into a profitable part of an enlarged bio-based company. Synergies would contribute shared management and development costs across a larger corporate group, multiple revenue streams comprising of production equipment installations, recurring revenue from biochemical production, manufacturing product licensing agreements, process licensing with biopolymer offtake agreements worth $38m already in place. Right up to July 2016, Metabolix continued to burn $2m a month. This was no surprise considering the content of the presentation at the Roth Investor Conference on the 15th March 2016 and reiterated in the year-end report later that month.”
“In my opinion – Brandon writes – by declining the offer from Cellulac, current management and Metabolix Board demonstrate a complete lack of business acumen or commercial vision. Displaying utter contempt for shareholder value they are adopting a strategy that requires investment of $35m over the next 7 years leading to further destruction in equity value with no visibility of revenue, other than government grants. It is incumbent upon the Board members, but especially Independent Directors, majority and minority shareholders to immediately review the reasons for this illogical decision and become vocal about Cellulacs’ offer that adds $40m in biochemical and biopolymer assets for commercial scale production and manufacturer licensing and offtake agreements. This is likely to be the last opportunity to transform Metabolix, a 24 year loss making company, into part of a high growth enlarged group with multiple revenue streams for biochemicals and biopolymers, which would be cash generative this year.”