MONTREAL, CANADA: BioAmber Inc has signed a non-binding letter of intent with South Korean-based CJ CheilJedang Corporation (CJCJ). Under the terms of the agreement, the companies plan to establish a joint venture (JV) in China to produce up to 36,000 metric tonnes of bio-succinic acid annually and commercialise the output in Asia.
The goal is to competitively produce bio-succinic acid in China and quickly penetrate the world's largest succinic acid market. This can be achieved rapidly, cost effectively and with limited capital investment by retrofitting an existing CJCJ fermentation facility with BioAmber's succinic acid technology.
BioAmber would own 35 percent of the JV and CJCJ would own 65 percent. The JV would pay BioAmber a technology royalty for having access to BioAmber's proven bio-succinic acid technology and would pay CJCJ a tolling fee for producing bio-succinic acid on behalf of the JV. Both partners would be entitled to a share of the profits equal to their respective equity ownership positions.
As part of the letter of intent, BioAmber will be selling CJCJ bio-succinic acid manufactured at its Sarnia, Ontario plant, so that CJCJ can undertake market development in China and South Korea in the first half of 2017.
CJCJ would incur all capital costs required to retrofit their fermentation facility, including the capital needed during plant commissioning and startup, and production would begin in Q1 2018. If market demand were to subsequently exceed production capacity, the JV could expand production through debottlenecking and/or additional investment. The partners would also have a mutual right-of-first-refusal to retrofit additional CJCJ fermentation facilities globally.
“This joint venture would allow us to quickly penetrate the Chinese and broader Asian market and accelerate cash flow and earnings for our shareholders. It would also serve as a blueprint for the build-out of additional bio-succinic acid production with very limited capital investment," said Jean-Francois Huc, BioAmber's CEO.
"This JV is an opportunity for CJCJ to leverage BioAmber's unique, low pH yeast technology and utilise our existing fermentation assets more effectively in order to competitively supply the growing market for bio-succinic acid in Asia," added Dr Hang Duk Roh, head of CJ CheilJedang BIO.
Read More: BioAmber, CJ CheilJedang plan succinic acid JV in Asia
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