Now on Broadway: LanzaTech’s $2.2B SPAC merger takes the advanced bioeconomy’s biggest hit to an even bigger stage

In Illinois, news arrived that LanzaTech will go public in a merger with the NASDAQ-traded blank check firm AMCI Acquisition Corp II. The deal is reported to value the company at $2.2 billion.

The transaction is expected to raise gross proceeds of approximately $275 million, comprised of AMCI’s $150 million of cash held in trust (assuming no redemptions by AMCI’s public stockholders) and a committed common equity PIPE of approximately $125 million, at $10.00 per share, by investors AMCI, ArcelorMittal, BASF, K1W1, Khosla Ventures, Mitsui & Co., LTD., New Zealand Superannuation Fund, Oxy Low Carbon Ventures LLC, Primetals Technologies, SHV Energy and Trafigura.  Ultimately, the stock will trade as LNZA, and LanzaTech stockholders will roll 100% of their equity holdings into common stock of the new public combined company in exchange for their LanzaTech shares.  The transaction is expected to close in Q3 2022.

LanzaTech, which for many years was voted the #1 in the 50 Hottest Companies in the Bioeconomy, developed bacteria that, initially, could convert carbon monoxide (such as found in steel mill off-gases) into ethanol., It subsequently has developed technology to make a much wider range of industrial chemicals such as polypropylene, and more recently has made significant advances through partnerships with companies such as Twelve to access CO2 as a feedstock. It has become known around the world as a leader in the capture and use of “second chance carbon” and thereby has become perhaps the best known Circular Economy company in the world,. Over 50 chemicals have already been demonstrated, including continuous production of acetone and isopropyl alcohol at pilot scale.

Both LanzaTech CEO Jennifer Holmgren and LanzaJet CEO Jimmy Samartzis will be on stage next week at ABLC 2022 in Washington DC, March 16-18. 

The AMCI back story

AMCI Acquisition Corp II was formed for the purpose of effecting a merger with a business focused on decarbonizing the heavy industrial complex and transitioning the global energy mix to a lower carbon footprint. More on AMCI here.

The LanzaTech backstory

In a complex partnership, we reported in November that LanzaTech will provide its gas fermentation expertise to make ethanol from the input gas streams and parties will license the LanzaJet ATJ technology to convert the ethanol to electrofuels. Vattenfall will investigate fossil free electricity supply, hydrogen production and carbon dioxide recovery. Shell will investigate fuel production, logistics and be the electrofuel buyer. SAS will participate as a potential buyer. The technology, was developed by LanzaTech and the U.S Department of Energy’s Pacific Northwest National Laboratory. The ambition is to commission the new production facility sometime between 2026 and 2027 near Forsmark on Sweden’s east coast.

Last week we reported that Twelve and LanzaTech transformed CO2 emissions into ethanol as a part of an ongoing research and development partnership. In Fall 2021, Twelve and LanzaTech also announced plans to develop polypropylene from CO2 with a grant from Impact Squared. This work will see Twelve converting CO2 to CO, which will in turn be converted by LanzaTech’s proprietary microbe to isopropyl alcohol (IPA). Finally, TotalEnergies, based on its alcohols dehydration knowhow (AtolTM), will dehydrate it into propylene which will be polymerized into polypropylene with the same technical characteristics as its fossil counterparts.

In December we reported that ArcelorMittal made a $30 million investment in carbon recycling company, LanzaTech through its XCarb innovation fund, the fourth investment the company has made through the fund since its launch in March 2021.The investment further expanded ArcelorMittal’s relationship with LanzaTech, which commenced in 2015 when the Company first announced plans to utilize LanzaTech’s carbon capture and re-use technology at its plant in Ghent, Belgium. The €180 million Carbalyst plant – ArcelorMittal’s flagship carbon capture and re-use technology project – is currently under construction, with commissioning expected before the end of 2022. Also known as the Steelanol project, funding has been obtained from various sources, including from the European Union’s Horizon 2020 program and the European Investment Bank.

Last November, we reported that LanzaTech, Total and L’Oréal premiered the world’s first sustainable packaging made from captured and recycled carbon emissions. The successful conversion process takes place in three steps  LanzaTech captures industrial carbon emissions and converts them into ethanol using a unique biological process. Total and its partner Axens convert the ethanol into ethylene before polymerizing it into polyethylene. L’Oréal uses this polyethylene to produce packaging with the same quality and properties as conventional polyethylene. And, put this into the mix: the DOE awarded a grant to a LanzaTech, Inentec, Waste Management, Lululemon consortium, to convert gasified wastes to MEG. Plus, we saw that Mibelle will be using ethanol in their cleaning products.

On the Investor and customer front

LanzaTech has a large list of blue-chip customers, investors and partners including ArcelorMittal, BASF, CITIC Capital, Coty, IndianOil Company, K1W1, Khosla Ventures, Lululemon, Mitsui & Co., LTD., New Zealand Superannuation Fund, Primetals Technologies, Qiming Ventures, Sekisui, Sinopec, Suncor Energy, Unilever, and Virgin Atlantic. 

LanzaTech has steadily been broadening its base of investors, both in terms of sectors and geographically. Last April, we reported that Sinopec Capital announced investment in LanzaTech with a focus on promoting direct production of chemicals from waste carbon.

Back in late 2019, we reported that Novo Holdings made a $72 million investment in LanzaTech’s Series E financing, and Senior Director Anders Bendsen Spohr joined the LanzaTech board. Novo — the parent of both Novo Norsk and Novozymes — is best known for making investments in the therapeutics and pharma side of the bioeconomy. Novo Holdings’ investment expanded expand LanzaTech’s carbon recycling platform and enable LanzaTech to accelerate the commercialization of Carbon Smart products allowing consumers to choose where the carbon in their products comes from, recycled carbon or fossil carbon.

Three LanzaTech  projects on the way

1. Project Orchid: The pilot at Freedom Pines which will focus on optimizing CO2 + H2 to ethanol.

2. Project Lotus: The small commercial project with SkyNRG which will use added H2 to convert the CO2 in a raw biogas stream to ethanol enabling conversion of the methane (via syn gas) and the CO2.

3. Project AtmosFuel: A feasibility study in partnership with Carbon Engineering to evaluate directly capturing CO2 from the air and converting it to sustainable aviation fuel

The LanzaTech backstory, in slides

Recycling CO2: The Digest’s 2021 Multi-Slide Guide to LanzaTech is here.  

The Bottom Line

It’s not the most unexpected news of the century that LanzaTech was working on its public company options and that the SPAC merger frenzy would bring many potential partners to the LT door. Having said that, there’s been quite a cool-off in SPAC activity, and to be honest, this one looks a little less cash-rich than some of the others, such as the Ginkgo SPAC merger. On the plus side, LanzaTech has ability to raise monstrous amounts of cash from a broad and global investor base of heavyweights. Plus, LanzaTech is going to come to market which a much more robust list of industrial achievements than any other company to come to the market since the REG IPO some ten years ago. LanzaTech remains a fast-moving development company but it is far from a development-stage company. It’s industrial processes for making ethanol from steel mill off-gas are proven beyond a doubt. Ahead is more scale-up and more advances into the higher-value, higher-margin world of industrial chemicals — most of which to date has been development-scale work. LT probably didn’t need a SPAC merger for its near-term ambitions in fuels, but to work on the 50 chemicals that have been so far demonstrated, that requires a broader base and supply of expansion capital than the continual road-show process of capital raising that is the lot of fast-expanding private companies. 

It’s a signature moment for the Off-Broadway world of the advanced bioeconomy— it’s biggest, longest-running hit has transferred to Broadway and the world is about to see what it can do.