A Discussion With Avantium’s CFO Regarding Its Acquisition of Liquid Light

Bio-based chemicals developer Avantium (client registration required) recently announced that it acquired the IP portfolio and equipment, and recruited two to three full-time research employees, of Liquid Light (client registration required), a company that had previously focused on the electrochemical conversion of CO2 to monoethylene glycol (MEG) and other chemicals. Avantium’s primary technology converts glucose and fructose to furan-2,5-dicarboxylic acid (FDCA). Avantium then combines FDCA with MEG to produce polyethylene furanoate (PEF), a polyester with improved barrier and mechanical properties over polyethylene terephthalate (PET). Given the significance of this announcement, we reached out to Avantium’s CFO Frank Roerink to learn more about the acquisition and its implications on Avantium.

Although both Avantium and Liquid Light have partnered with Coca-Cola to develop a 100% bio-based bottle, Frank said that the two companies had not previously worked together. However, Frank emphasized that Avantium had been closely following Liquid Light’s technology, for its interests in CO2 conversion to chemicals. From a high level, Avantium aims to develop conversion technologies for three feedstock sources: first-generation sugars, second-generation sugars, and CO2. The acquisition of Liquid Light’s assets, therefore, gives Avantium another CO2 technology to strengthen its own CO2 conversion group. Moreover, this acquisition provides Avantium with another alternative path to MEG, complementing its biomass-to-MEG project. Avantium has not established any internal timelines for the development of the acquired technology, but will take a more conservative approach compared to Liquid Light’s previous target of scaling its process to 100 kg/day by the end of 2017. It plans to reevaluate each step from CO2 to MEG to determine if the process will be worth using for MEG production. If the technology is feasible, then Avantium will begin to plan for scaling up, which includes identifying partnerships for CO2 feedstock.

Our analyses of the acquisition suggests that Avantium has taken an opportunistic approach – Liquid Light has consistently struggled in meeting its aggressive internal timelines for scaling up production, creating an opportunity for Avantium to acquire Liquid Light’s assets at a likely discounted price. We’ve seen several of these opportunistic acquisitions in the past year, including CJ CheilJedang’s $10 million acquisition of Metabolix’s biopolymer business. Avantium’s methodological effort to first reevaluate each step in Liquid Light’s process is wise considering the historic difficulties of scaling up COconversion technologies. Avantium will face the same challenges of mass transfer of CO2 into the reaction media, the high energy required to reduce CO2, and poor conversion yields that likely plagued Liquid Light. While Avantium’s cautious approach avoids prematurely devoting resources to scaling up any dead-end processes, it still faces a long road to optimize the technology to the point where it will be profitable without a carbon credit or subsidy for using CO2 as a feedstock.

Readers interested in renewable MEG should closely monitor Avantium’s progress in developing Liquid Light’s CO2-to-MEG process, but should be aware of a long development timeline for Avantium.

By: Gihan Hewage