DuPont Acquires Laird and Danimer Partners with Mars Wrigley

Before I get started I realize there are quite a few new people here now compared to last Friday. On Fridays I try and cover a few things I think are interesting related to four specific themes every month:

1. Oil and Gas

2. Green Chemistry + Circular Plastics

3. Specialty Polymers

4. Financial Chemical News

These four topics get us from the feedstock of most chemicals (oil) to the future feedstocks (biomass and existing plastics) to the current developments in niche or specialized polymers, and then I end on what is happening in terms how these things are financed (mergers, acquisitions, spinoffs, divestments, bankruptcy, SPACs, etc). The goal here is to give a holistic view of what is happening in the chemical industry and how these changes influence our modern lives.

Ideally you read this every Friday. Then when you are at dinner party, conference, board meeting, or talking to someone at the grocery store you’ve got some knowledge in your back pocket. I think you can either sound really smart or you can make someone’s eyes glaze over. Use as needed.

Danimer Scientific Entering Deal With Mars

I’ve written about Danimer Scientific before due to them going public via SPAC a few months ago. Their main product is something called a polyhydroxyalkanoate (PHA), which is a type of polymer that can be made from plants. PHAs have been known about and studied for years primarily because they hold the promise of breaking down in backyard compost piles. Companies have been trying to commercialize PHAs for years, but have been unsuccessful for a host of reasons. Danimer seems like they will be the first in successful commercialization. They recently completed plant in Winchester, Kentucky and sold the first truckload in 2020. Danimer Scientific has deals with many major consumer packaged good brands, but they announced a new partnership to develop packaging for Mars Wrigley:

Danimer Scientific and Mars Wrigley plan to introduce Nodax®PHA into flexible and rigid packaging that reliably breaks down in both industrial composting facilities and backyard compost units, offering an enhanced value proposition for environmentally conscious consumers and retailers. Sourced from the seeds of plants such as canola and soy, Nodax®PHA can serve as an alternative to traditional petrochemical plastic and has been certified as biodegradable in soil and marine environments.

The deal is for two years and there are no details on how much investment each company will be making into developing a PHA for food packaging. The biggest challenge I see here is getting barrier of oxygen and other gases through the PHA packaging. Right now most food packaging is some version of polyethylene paired with a gas blocking component such as polyethylene vinyl alcohol (EVOH) or very thin aluminum. The key component that makes PHAs biodegradable is their susceptibility to being degraded by water and this makes it difficult to create good packaging.

The blocking of gas and water vapor is what keeps packaged food like candy, chips, and crackers fresh. If your packaging is designed to degrade with via microbes and water then its very virtue is also a downfall for packaging. Add in the component that the packaging now has to also block specific gases and it’s much more difficult. I’m not saying that the project is impossible, but success may not be consumers expect from a package of Skittles.

Projects like this are designed to make us feel good about any underlying guilt we might feel for buying a package of Skittles. Candy wrappers currently do not end up in recycling streams so I don’t see a lot of issues here in terms of a waste profiles. If Danimer Scientific and Mars Wrigley can figure out the gas barrier problem I predict that it might be rigid packaging first. There is research out there about using nanocellulose to provide gas barrier properties in biobased plastics like PLA. I believe they could translate this to a PHA.

DuPont Acquires Laird Performance Materials

A slimmed down version of DuPont from 20 years ago has announced that they are acquiring Laird Performance Materials from Advent International for $2.3 billion. The deal is estimated to be valued at 15x projected 2021 EBITDA and the deal will help complete DuPont’s Electronics and Industrials business. Adhesives and Sealants Industry reported:

The transaction brings together DuPont's technology portfolio in films, laminates, and plating chemistry with Laird Performance Materials' electromagnetic shielding and thermal management solutions. The combined organization will reportedly be a leader in rapidly growing advanced electronics applications supporting smart/autonomous vehicles, 5G telecommunications, artificial intelligence, internet of things, and high-performance computing.

Electromagnetic shielding is essentially protecting electronics from interference or stray signals and is commonly abbreviated as EMI shielding. In any situation where you want no interference from outside devices or signals such as spaceships, airplanes, trains, and industrial operations you typically want EMI shielding. I knew a graduate student working on EMI shielding at RPI where he was using graphene and foamed polycarbonate. The graphene essentially worked to block a lot of electromagnetic waves and having the graphene in the foam helped block the signals for a variety of angles. He works at Intel now.

Thermal management solutions refers to being able to move heat around in electronics. I was watching Halt and Catch Fire a few weeks ago and there was a lot of talk about “heat sinks.” What this all comes back to is figuring out where to put the heat that is generated by the computer. Have you ever opened 40 tabs in Chrome while also working on 4 documents and had multiple spreadsheets open while also on a video call across three screens? You might notice that your computer gets hotter when doing all of these tasks simultaneously and maybe fan kicks on. Being able to move and manage the heat is the second business that DuPont bought here with their Laird acquisition.

As proliferation of electronics grows into other areas so too will the chemicals required to make these electronics a reality. This deal may seem like a lot of money right now, but I expect this to pay out very well for DuPont in the future.

Covestro Sells Joint Venture in Dubai Systems House

A systems house in the polyurethane foam world is a name for the company that formulates, markets, and sells polyurethane foam systems. A systems house may also manufacture their own finished polyurethane foams, but they are primarily focused on a B2B business model of selling packaged systems to companies that make insulation or need to use insulation in their manufacturing.

Covestro has been on a divestment of its systems house investments since 2017 and did a significant amount of divestments in 2019. The announced this latest divestment in a press release:

On February 25, 2021, Covestro has signed an agreement on the sale of its 51 percent share in the joint venture Pearl Covestro Polyurethane Systems FZCO, which operates systems house business in Dubai (United Arab Emirates), to the current co-shareholder Pearl Industries Overseas Ltd. The sale will generate proceeds in the mid-single-digit million euro range.

Covestro is likely making some modest amount of money here on the transaction and they will be maintaining their sales of raw materials to the systems house. In the polyurethanes industry moving high volumes of isocyanate based chemicals is the name of the game for companies like Covestro, Huntsman, Dow, and BASF. These divestments for Covestro sound like they want to conserve cash and deploy it towards another industry.

Their competition in Huntsman has taken the opposite approach. Back in 2019 Huntsman invested into a systems house in Dubai and they acquired spray foam systems house Demilec in 2018. The more foam that Huntsman can sell the more isocyanate they can sell and ultimately the more money that they can make on the sale. I find the fact that Covestro is divesting to be interesting and I wonder what they will focus on instead with the capital from the sales.

From Bota Bio

BASF Investing In Bota Bio

Melody M. Bomgardner reported for C&EN that BASF has invested an undisclosed sum into Bota Bio in China. Bomgardner reported:

Bota, launched in 2019, is developing microbes and enzymes that produce sweeteners, vitamins, and personal care and crop protection products. BASF says the technology expands market opportunities for products that can’t be made cost effectively via conventional means. It adds that Bota’s computational abilities allow quick improvement of organisms and processes.

Actually, that’s the whole thing from Bomgardner. I did some more digging and found BASF’s press release and in reading Bota Bio’s website it appears that they are focused on cracking the biomanufacturing problem. People have been talking about biomanufacturing for years, but investment from VC firms often yields slower than desired results and products have high costs. There are plenty of broken dreams and failed attempts to get biomanufacturing to work at scale for a lot of commodity products.

Bota Bio appears to be focused on enzyme engineering, strain engineering, and the downstream processing of fermented products. Enzyme engineering means getting nature’s catalyst to perform the specific task that is wanted. Typically, enzymes can do both regio and stereoselective chemical transformations in one step that might take an organic chemist three steps with low yield. Engineering enzymes to work at higher temperatures or have more use over time can unlock a lot of value.

Strain engineering means turning microbes like E. Coli into little factories that can produce high value chemicals that are really difficult for organic chemists to synthesize. Think about stuff like heparin, which is currently harvested from swine stomachs, but also biosurfactants such as sophorolipids and rhamnolipids. In theory if you can ferment something with nature you can get nature to break it down too.

Downstream processing can crush a lot of biological focused companies. If you are fermenting a biosurfactant, but it requires liters of organic solvent to isolate the surfactant from the rest of the fermentation broth you are probably not going to be successful. Getting high purity and high yields without a lot of effort is the goal here and for that you need the downstream processing piece.

BASF is clearly placing a bet here that Bota Bio will be able to figure something out in the next few years and they might want first mover advantage into one of the largest growing markets in the world. This investment also fits into BASF’s attempt to transition their businesses to focusing on circular chemical economies.

Talk to you next week,

Tony