DAILY MEMPHIAN
A Georgia company believes it has the solution to the environmental scourge of petroleum-based plastic products that litter the Earth’s surface and seas: plant-based plastic that degrades naturally.
It’s producing commercial quantities for the food service industry at a Kentucky plant and is poised to grow through a proposed merger with a Memphis-linked company.
Privately held Danimer Scientific, headquartered in Bainbridge, Georgia, and publicly traded Live Oak Acquisition Corp., led by Memphian Gary Wunderlich, announced a definitive merger agreement on Monday, Oct. 5.
Live Oak, a blank check company that exists to merge with and capitalize an existing company, proposes to bring $410 million and publicly traded status to Danimer Scientific, if the merger is approved by shareholders and regulators.
The money would be used to ramp up capacity at the plant in Winchester, Kentucky, to meet what Wunderlich calls an “almost unlimited” demand for plastic products that disintegrate naturally in the environment.
Danimer produces a proprietary material branded Nodax, a biodegradable plastic made from an enzyme derived from canola oil. The scientific name for the polymer is polyhydroxyalkanoate or PHA. Danimer’s current production is booked by customers including food industry giants such as PepsiCo and Nestle.
The proposed merger would combine Danimer Scientific with Live Oak, a Virginia-based special purpose acquisition company that went public with a $200 million initial public offering in May.
Gary Wunderlich
Wunderlich, longtime Memphis businessman and investment firm veteran, is president of Live Oak Acquisitions. He and his colleagues spent months looking for a company to merge with, vetting more than 50 potential partners, Wunderlich said.
What set Danimer Scientific apart was the fact it’s already in commercial production of biodegradable plastic, the market’s enormous potential in the market and the opportunity to address a pressing environmental issue, Wunderlich said.
In addition to the $200 million raised in the initial public offering, Live Oak has corralled commitments for another $210 million from institutional investors in Danimer stock once the transaction closes and Danimer Scientific becomes publicly traded. The $210 million includes certain funds managed by affiliates of Apollo, Federated Hermes Kaufmann Small Cap Fund and more than $50 million from Live Oak affiliates.
Investors include Memphis businessman Andy Cates, who is chairman of the board of Memphis Fourth Estate Inc., the nonprofit that operates The Daily Memphian. Cates and a partner initially put Live Oak in touch with Danimer as a potential merger candidate.
Wunderlich was chief executive officer of Wunderlich Securities until he sold it in 2018 to B. Riley Financial Inc., to create B. Riley Wealth Management.
Of the Danimer merger, Wunderlich said, “We verified the science and we talked to customers. We talked to Pepsi, we talked to Nestle, we talked to WinCup, GenPak, and got incredible customer confirmation, basically saying Danimer has cracked the code on PHA and they’re big fans of Danimer and hopeful they can increase capacity to meet the demand that they have.”
“We’re seeing almost unlimited demand, just a function of raising capital to build capacity to meet it,” Wunderlich said.
“And they’re actually in business today. They’re selling product. You can buy straws that are made with Danimer resin at Walmart today, so they have clearly commercialized it and have basically a proven technology,” Wunderlich added.
In August, Danimer won an Innovation in Bioplastics award for its work with WinCup to develop PHA-based straws and stirrers. WinCup food service products markets the straws under the brand name phade, “the straw that goes to work then goes away.”
“A lot of the other things we were looking at were still pre-revenue, an earlier stage than we were comfortable with, had some additional financing needs we weren’t sure we could address,” Wunderlich said.
The companies issued a joint press release Monday morning that said the merger would enable Danimer to increase production 10-fold by 2025, going from 20 million pounds a year to 200 million pounds a year. Management is forecasting revenue of more than $500 million in 2025.
Wunderlich said the addressable market for Danimer’s product is estimated at 500 billion pounds a year.
Wunderlich said he would not be involved in management of the new company after closing.
Under the merger agreement, Live Oak chief executive officer Rick Hendrix would join the Danimer board, and John Amboian, non-executive chairman of Live Oak, would become the board’s lead independent director.
Danimer’s current senior management team would continue to lead the new company, which would trade on the New York Stock Exchange. Danimer chief executive officer Stephen E. Croskrey would also serve as board chairman.
In a joint press release Monday, Danimer’s product is touted as “the first PHA polymer to be certified as marine degradable, the highest standard of biodegradability, which verifies the material will fully degrade in ocean water without leaving behind harmful microplastics. “
“As a result, Nodax offers a better beginning-of-life and end-of-life cycle than any of today’s traditional plastics, eliminates the need for recycling and can replace the 80% of plastics that are never recycled or incinerated.”
Croskrey said, “We are excited to partner with Live Oak and transition Danimer to be a public company. We are at an inflection point in our growth trajectory and this transaction will fuel the next phase of our rapid commercial expansion.”
“Our research-based approach to creating environmentally responsible solutions has attracted a blue chip, multinational customer base and our partnership with Live Oak will allow us to further scale production up to meet strong customer demand for our technology,” Croskrey said.
“We believe PHA has the ability to eliminate the pollution caused by single use plastics worldwide, a potentially remarkable achievement. We are well positioned to further expand our 100% biodegradable products to a wide range of plastic and specialty applications, with a long runway for profitable global growth.”
Live Oak CEO Hendrix said, “Danimer represents a unique and compelling investment opportunity with take-or-pay contracted revenue from a blue chip client base for fully biodegradable plastic resin that addresses one of the world’s most significant environmental challenges.”
“PHA adoption is benefiting from powerful tailwinds as the result of widespread corporate commitments and evolving consumer preferences for ecofriendly packaging solutions that address the worldwide problem of plastic waste. We believe Danimer is poised for rapid and sustained growth with a fully financed capacity expansion plan and proprietary customer applications,” Hendrix said.
The release said the deal implies an equity valuation at closing of about $890 million for Danimer. It’s anticipated the company will have about $385 million in unrestricted cash on hand to fund growth and buildout of a contemplated new facility. The current plant was previously operated as an algae fermentation facility by Alltech.
