Oh my! Dan’s back: AgCertain Industries acquires KemX Global
For some time, many have been uncertain as to what direction former REG CEO Dan Oh would take in developing a new entry into the fast-growing bioeconomy, but now we can be certain, or rather, AgCertain.
News has filtered out of Iowa that Oh’s new company, AgCertain Industries has acquired KemX Global. AgCertain is now operating a certified glycerine and vegetable oil refining company located in Boone, Iowa and will heavily invest in the facility to increase its team, improve logistics capabilities, expand market reach, and broaden its product and service portfolio.
Interestingly, this is uber-clean stuff. Kosher certified, organic, non-GMO certified, sporting a Level 2 certification from the Safe Quality Food Institute, and minimizing the use of chemicals in the refining process.So, this is a step up from a crush facility, one that can work with multiple crush points to ensure a consistent, high-quality oil, and respond to the growing demand for premium oils from the food sector, and think pharma too. More on that in a moment.
Where is Boone exactly?
Head north and take a left at Ames, Iowa along Highway 30, and a few miles out of town is Boone, and the industrial park site on the north side of the rail lines. That’s where the production plant is and remains. Sales, procurement and other operational activities are handled by Ames-based AgCertain Operations Group, LLC.
The plant has capacity to refine up to 115 million pounds of oil per year. The plant opened in spring 2017 following a $27 million investment.
Capabilities include sale and contract manufacturing services for Kosher certified USP grade and technical grade glycerin as well as non-GMO and organic vegetable oils. Conventional GMO vegetable oil production is also readily available through the facility’s flexible manufacturing and storage capabilities. Experts in research and development are on staff to provide higher value, smaller volume, specialized refining and custom formulation with traceability, quality assurance and certainty. Partners include the newly-public Calyxt, which inked an agreement last year to refine Calyxt’s high-oleic soybean oil, an advancement that allows Calyxt to produce food-grade high-oleic soybean oil as the Company’s first product.
The KemX backstory
KemX was built around the processing of crude glycerin into food and pharmaceutical grade glycerine, glycerine, that is, derived from the biodiesel industry. The KemX plant was built to be the second largest in North America. At the time the company launched, the company’s founders tipped plans to build a 10,000-liter fermentation facility that will use the purified glycerin as a raw material to produce seed coatings and high value chemicals.
The AgCertain backstory
Most know Dan Oh from his long service as Renewable Energy Group’s long-time CEO. When Dan came to REG, they had one plant and were one mighty interesting and promising group; when he departed, they had 15 and were the unquestioned industry volume leader.
So, if you’re planning to bet that AgCertain is going to stay with just the one project, let me dissuade you before you lose some hard-earned moolah.
It’s not only in Oh’s DNA to grow, grow, grow, but the company described the KemX plant as “Our first major investment” and noted that the plant is “focused on glycerin and vegetable oils, both building block molecules that support a broad array of food, agricultural and bio-based outcomes”. So, expect diversification may well become part of the story, either in the customer base as the industry itself diversifies its targets or, who knows perhaps follow on acquisitions by the company itself.
Because the vision is clearly facilities, plural, and technologies, plural, too. As Oh sketched out the vision, “AgCertain was built to produce, market and deliver high quality, value-added, agriculturally-derived products and services. Over time we plan to operate multi-technology, integrated production facilities that deliver through environmentally friendly, bio-based operations. We will serve and operate within industries where higher value, lower volume, traced and verified supply chains truly matter.”
Why start with this one, why here?
As Oh phrased it, “As part of the Cultivation Corridor, central Iowa is an ideal place to build and grow AgCertain due to available talent, a growing complex of production expertise, intellectual property, commercial experience, and an ever-evolving agricultural base.”
We’d also point out that probably the numbers looked pretty good. I don’t recall any biodiesel or renewable diesel acquisitions during Oh’s reign at REG that smacked of anything less than “a good deal all around”.
Where it might go
Note the comment about higher value, lower volume, traced and verified supply chains” that AgCertain is pointing to. Therein lies the key, in two parts.
Part one, the higher value part. Think of those higher-value chemicals from the fermentation strategy.
And, let’s also aim the laser pointer at “traced and verified supply chains.” Oh and team are clearly betting that the markets are growing for premium oils with traceable attributes such as non-GMO, kosher, and so forth. After all, softgel tablets are often made with gelatin combined with glycerine, just to mention one application where consumers get educated before they put stuff in their mouths.
Think of that transparency ss a value-added service, where customers pay a little bit more for a certainty that allows them to bring high-value attributes to the front of the label where higher value is created with customers. This may be one of those iceberg tips with a lot more to the story going forward. We’ll be tracking that in weeks and months to come.
The stakeholders
Two additional investors join AgCertain and are providing their capital, talent and experience: Midwest Growth Partners led by John Mickelson (based in Iowa, an investor in growth-oriented companies with a special focus in food and agricultural spaces) and 5K PCC Holdings, LLC led by Mike Kemery. 5K PCC Holdings is the sole prior KemX Global equity investor continuing with AgCertain. Both John Mickelson and Mike Kemery have joined the AgCertain Board of Directors.
Also providing financial services for AgCertain are Bank Iowa, Community State Bank, GNB Bank and Peoples Bank. Bank Iowa is providing a line-of-credit to support commercial operations and the other banks are providing long-term financing in support of AgCertain Boone’s production facility.
Reaction from the stakeholders
Mike Kemery, 5K PCC: “As our customers demanded more and we planned to meet the needs of current and emerging products, we were excited to sell to AgCertain because of the influx of capital, experience and expansion opportunity. We have searched for the right firm that can give our customers confidence to meet the increasing demand for glycerin, vegetable oil, plus other bio-based products and AgCertain is our first and best choice”
John Mickelson, Midwest Growth Partners: “AgCertain meets all of our leading indicators for investment and with its team we look forward to growing a great company that reinforces and builds upon Iowa’s and the United States’ long tradition of value-added agricultural success” said John Mickelson.
“At Bank Iowa we seek out and support companies who add to Iowa, agriculture and our industrial base. Because AgCertain is focused on food, agricultural and bio-based products right here in Iowa with excellent technology and a framework for growth, we are ready and willing to provide financial services,” said Jim Plagge, President and CEO.
“As financial services providers for AgCertain Boone, LLC, Peoples Bank, Indianola and GNB Bank, Grundy Center are excited to assist AgCertain in bringing a value-added agricultural production facility online. Both banks feel these types of industries are essential for Iowa’s economy,” said Kevin Halterman, Peoples Bank President & CEO.
The Bottom Line
First, Dan’s back. Second, think of this as a first platform transaction. Third, there’s enough in here to begin to guess at the direction — think multiple technologies, close integration, high value products and chasing higher values through transparency that may well be table stakes for selling into premium markets going forward. Food first, but more later.
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