Sinatra Bio: Ol’ Brew Eyes is Back

December 11, 2016 |

bd-ts-121216-sinatra-cover-smLast week, a company with the unlikely name of Synata Bio was the winning bidder in the race to acquire the former Abengoa Bioenergy cellulosic plant in Hugoton, with a bid of $48.5M, which you might regard as “three coins in the fountain”. They beat out a bid from Shell you might regard as “two coins in the fountain”.

But it’s really Sinatra Bio, if you think about it.

Ol’ Brew eyes is back — you see, Synata Bio is the old Coskata fermentation technology, making a comeback worthy of the Chairman of the Board, and though you might think their strategy and path to scale has been a case of ‘somethin’ stupid,’ and that these guys have been strangers in the night for all too long, but it’s not so.

Sure, regrets, they’ve had a few, from time to time bit off more than they could chew; the record shows they took the blows, and they’re doing it their way.

The Hugoton cellulosic biofuels plant

The Hugoton cellulosic biofuels plant

Bottom line, Abengoa Bioenergy Biomass of Kansas closed the sale of its cellulosic ethanol plant located in Hugoton, Kansas under the US Bankruptcy Code. Ocean Park was the sell-side advisor to Abengoa. This follows from our report from last week that the Bankruptcy Court overseeing Abengoa had approved the sale. More on that here.

Meanwhile, Synata Bio reported a $41.5M Reg D financing last week, presumably to fund the sale. The offering originally had a $47M target and by December 9th the company had raised $41.5M from an unnamed investor.

The assets and the deal

The assets are comprised of the 25 MGPY cellulosic ethanol biorefinery with an integrated, co-located biomass-to-electric-power 21 MW cogeneration plant.

It was a complex financing train, in the end, staring with debtor-in-possession financing out of the Abengoa bankruptcy — and a sales process that began with more than 200 potential parties in the sales process, leading to the stalking-horse bid by Shell a few weeks ago of $36M, and Synata Bio’s prevailing bid, which was nearly double that of the stalking horse bid.

Synata Bio submitted a $27.05 million qualified bid on Nov. 18, so when both companies went to auction on Nov. 21, Shell stopped at $40.75 million in cash value, leaving Synata Bio the winner. The deal that includes the plant, equipment, intellectual property for the production process and 400 acres is set to close on Dec. 5.

Why $40.75M for Shell require a bid of $48.5M for Synata Bio to top it? As Ocean Park Advisors Mark Fisler explained to The Digest, “Shell’s bid had greater value than just the cash portion.  They were also fully indemnifying the estate from any future settlement with the DOE as set forth in the back-up bid filed with the court and the indemnification had value.  Thus, the spread between Synata’s bid and Shell’s was not as wide as the cash portion would lead you to conclude.”

The Kouba angle

What’s Jay Kouba mixed up in all this for? He’s listed as a Synata Bio director. Last, we saw, he was knee deep into developing Trelys. Presumably it’s the natgas-to-higher value angle.

More on Trelys, by the way, here in The Three Microb-eteers: Methanogens, methanotrophs, acetogens and knallgas bacteria, here.

The Synata story

As we reported in the Digest in January, Synata Bio is the company that acquired the assets to the old Coskata technology — a high efficiency gas-to-liquids technology — and the company is based in Warrenville, Illinois.

Synata filed a Red D form with the Securities & Exchange Commission, detailing a $10 million investment, which sources have identified as coming from True North Venture Partners. Sure enough, True North partners Matthew Ahearn and Steve Kloos are listed as directors of the firm, along with Kouba. Kloos is currently serving as Synata’s president.

The company’s low-cost process converts a wide variety of abundant feedstocks, such as natural gas, biomass, MSW, and industrial gases into drop-in fuels and chemicals. Synata Bio deploys a simple and novel technology for converting synthesis gas to products by combining proprietary biocatalysts with proven and scalable fermentation design. This single step process is a robust technology platform with high carbon utilization and energy efficiency.

All the Way back from natgas to bio?

Well, it wouldn’t exactly be wicked witchcraft. But Coskata had lately been focused, via gas fermentation, on converting natural gas to fuels. But I wouldn’t be bewitched, bothered and bewildered if I were you.

You see, the Abengoa location is replete with natgas, everywhere. It’s gas heaven, there are more gas pipelines than corn fields. We took a photo not too long ago, just to illustrate.

Plenty of oil & gas activity in the Hugoton area

Plenty of oil & gas activity in the Hugoton area

So let’s not wave the “Back to bio” flag just yet — although the company employs biotechnology in is gas fermentation process — it can be expected to continue to pursue a natgas-based strategy.

However, there may be more than fuels in Synata Bio’s future. We wrote in January that, given low oil prices, Synata Bio may steer that technology towards attractive opportunities in chemicals. Possibly acetic acid, propanol or n-butanol.

Also, we wrote in July that:

Sources have also told The Digest the as much as “half of the old Coskata scientific staff” have been hired on by Synata Bio to continue the company’s research. Sources also indicated that Synata acquired the Coskata technology.

“We believe that repositioning the plant into the hands of a company like Synata Bio is positive for the advanced biofuels industry,” added John Campbell, another Ocean Park managing director.

The Bottom Line

Ol’ Brew Eyes is back, but let’s not crack out the “Biomass Rules” flag just yet. It could well be that the Abengoa plant become the biggest scaled combination of fossil and bio. Yet, when they look back on it, they might say  that when methane and biotech met, it was a very good year.

Or they might be saying right now, fervently, prayerfully, Luck be a Lady Tonight.

 

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