GranBio, Solvay JV acquires Cobalt Technologies’ assets

Price undisclosed. So Cobalt’s array of microbes and know-how finds a new home. What will happen with the technology? What happened with Cobalt? The Digest investigates.

We can now affirmatively report that SGBio, a joint venture between the Solvay Group and GranBio, has acquired assets from Cobalt  including the bank of microorganisms and intellectual property related to patents, trademarks, processes, operating procedures and know how. Neither sellers nor buyers are disclosing the transaction price.

A recent Thought Leadership column in the Digest, penned by Sam Nejame and James Evangelow, tipped Cobalt’s status and trajectory: “Sad to say Cobalt Technologies is dead – no really they’re dead – it’s not just double secret probation anymore.”

“Now, with the Mountain View HQ closed, team dispersed and pots, pans, IP and strain library in the auction process, Cobalt is absolutely, officially, financially, technologically over. If they owe you money you have until October 15, 2015 to get in touch with the disposition guys.

Nejame and Evangelow commented:

Such as what happens to all those relationships and plans to use Cobalt butanol as a platform for jet fuels, plastics, synthetic rubber, etc? What about the patent license agreement with the Navy for biojet and the relationship with the Naval Air Warfare Division at China Lake? What about the strategic butadiene work in Asia? Or the Solvay/GranBio relationships in S. America. Are those up for grabs? The vultures are circling.

We’re off to Brazil: the what and why

It’s not entirely surprising that Brazil could provide a home for n-butanol technology at scale — for sure. Cobalt had been active down that way for more than 5 years now, primarily with Rhodia, which was acquired for $4.8 billion by Solvay in 2011. Two years ago, GranBio came into the mix, as we reported here, signing a deal with Rhoda and entering into undisclosed discussions about licensing the Cobalt technology.

Roughly eight months ago, it became apparent to a number of parties that Cobalt had become quite fragile as a company, and might not have the staying power to support a licensee. That’s when discussions took a turn toward outright acquisition of the assets. Clearly, GranBio and Rhodia/Solvay were one of the parties who advanced in this way and, in this case, have emerged as the owners.

With the acquisition, SGBio boosts its proprietary knowledge, now having access to a full suite of higher performance technologies utilized in the production of bio-chemicals. The robustness and flexibility of the microorganisms have been proven at scale, demonstrating high productivity levels, which considerably reduce risk.

SGBio will have exclusive access to the technology for South America. But we may see interesting licensing agreements from elsewhere around the world. Stay tuned on this channel for more on that, but with petroleum prices in the tank, probably nothing soon.

And, not entirely a surprise that GranBio is a partner with Solvay — since they are the leading aggregator of cellulosic biomass for the production of higher-value fuels and chemicals from biomass. Cobalt’s technology embraced cellulosic feedstocks from the start — it’s ability to convert C5 sugars was a differentiator from companies like Butamax and Gevo that were focused on C6 sugars such as dextrose (corn sugar).

If there was anything that drove consistent interest in Cobalt, it was the high process yields of n-butanol, compared to ethanol and acetone, in this souped-up ABE fermentation that was originally pioneered via clostridium by Chaim Weitzman back in the dark days of World War One, when Britain found itself short on acetone for weapons.

Plus, Cobalt had built up a vast database of micro-organisms so that a solution that can be tailored a specific cellulosic feedstock. So, both the higher yields and the cellulosic sugars were attractive to many.

About SGBio

SGBio is a joint venture between GranBio and Rhodia – a Solvay Group company – in which each holds a 50% stake.  The company was formed in October 2014 with a focus on the production and marketing of bio n-butanol, a chemical compound used in particular in the manufacture of paints and solvents.  The industrial process will be second generation, using sugarcane straw and bagasse to produce cellulosic sugars that are converted to the final product

This strategy also includes the improvement of the strains acquired, which will be carried out by the company’s R&D team.  The goal is to create a platform that allows the incorporation of a large variety of biomass sources and the development of other products.

So that’s Cobalt the technology, what happened to Cobalt the company?

Clearly, Cobalt was backed by its investors to succeed through a strong strategic acquisition at a critical success milestone — or, IPO — not, an asset sale when the money ran out, but while substantial value still was inside the technology. What happened?

In a general way, the oil price crash happened. This slide from Cobalt back in 2011 showed how clearly they were betting on beating petroleum prices, how critical it was to their independence.

Sort of like coal not seeing natgas coming along, Cobalt didn’t see shale oil coming along at the same time that a slowdown in China took heat out of the petroleum demand side.

As former Cobalt CEO Bob Mayer noted in presenting this slide at ABLC a few years back, it comes down to having a strong competitive response to those competitive responses.

In this case, there was nothing in Cobalt’s quiver to fight off the tsunamis on the demand side (China) and on the supply side (shale oil). They were sunk by the Perfect Storm, which turns out to have been the one true Black Swan – the undirected, unpredictable, unwanted and unloved convergence of factors that have challenged a generation of technologies.

From a storm we seek shelter, in a time of want we seek the support of true friends. In SGBio, Cobalt may have just found both.

Reaction from the partners

”This acquisition of technology brings about a consistent and important step towards the establishment of industrial n-butanol and acetone production from biomass, which is one of the company’s strategic objectives,” says Márcia Cunha, CEO of SGBio.

“SGBio has significantly strengthened its position for its entry into the bio-butanol and bio-acetone markets, with this leap in knowledge, which was essential to the company’s current and future plans for the expansion in the biomass-based biochemical industry,” says José Matias, CEO Solvay Coatis Business.

“With this deal, we have reinforced our commitment to the development of the biotechnology industry, bringing knowledge to Brazil that is at the frontier of science and which will make a green route possible to one of the main raw materials in the chemical industry,” says Bernardo Gradin, CEO of Granbio.

More about Cobalt and it’s technology here, in our 5-Minute Guide.

More about GranBio and it’s technology here, in our 5-Minute Guide

More about GranBio and its technology here, in our 8-Slide Guide.