23 March 2021 - In late February 2021, Ajinomoto Co. Inc. subsidiary Ajinomoto Animal Nutrition Group, Inc. (AANG) and France’s METabolic EXplorer (METEX) disclosed that they were in exclusive negotiations regarding the sale of AANG’s entire equity stake in Ajinomoto Animal Nutrition Europe S.A.S. (AANE).
In an interview last week, we discussed the significance of the sale from Ajinomoto Co.’s point of view with Masami Kashiwakura, President of AANG. For today’s interview, Feedinfo spoke to the President of METEX’s industrial subsidiary METEX NØØVISTA, Antoine Darbois, about the future of the AANE Amiens production site.
METEX is a French biological chemistry company that specialises in developing manufacturing bioprocesses for bio-based compounds. METEX, previously known for developing technology for the fermentative production of methionine before selling it to Evonik in late 2016 for €45m, is planning to start commercial production of feed-grade butyric acid in Carling Saint-Avold (Moselle department) in H2 2021, via its industrial subsidiary METEX NØØVISTA.
METEX claims that METEX NØØVISTA and AANE together will become the largest integrated European maker of naturally derived functional ingredients produced by fermentation. METEX NØØVISTA has a production capacity of 6,000 tonnes/year of PDO (1-3 propanediol) and butyric acid at Carling Saint-Avold. AANE’s facility at Amiens has a production capacity of around 100,000 tonnes/year of lysine HCl and liquid lysine, according to Feedinfo’s Delphi analytics service. Tryptophan (7,500 tonnes/year), valine, and other specialty amino acids are also produced at the site.
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METEX has already communicated that its industrial plan for Amiens is to introduce its new specialty products there. The first investment decision for the site is expected to be made before the end of 2021 to industrialise natural glycolic acid. This investment is estimated at approximately €25m and will be carried out once the engineering studies are completed. Future of Amino Acids Production in Amiens We asked Darbois what the company has in store for the feed-grade amino acid units, notably lysine. |
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Antoine Darbois“In the short-term, there is no doubt that the lysine production lines will continue to face volatility and stiff Asian competition. However, the lysine produced in Amiens has specific values and fits European market expectations. Amiens’ lysine cost position is among the most interesting in the EMEA market,” he stated.
AANE discontinued the production of threonine in early 2018, and today Ajinomoto Animal Nutrition’s threonine sold in Europe is sourced from China.
Commenting further, Darbois added: “We have no plans to resume threonine production in Amiens in the short-term. And we have no plans either to reduce lysine capacity in Amiens in the short-term, given the market conditions and the capacity that was freed up by the threonine discontinuation.”
Longer-term, given that METEX’s business model is geared to high-end technologies, Darbois knows that METEX will have to offset its exposure to the volatility in amino acid prices.
“We know that lysine volatility is here to stay. We are no fools. So we will need to address this issue as we have excess production capacity in Amiens,” he said. “We will offset that exposure to volatility by increasing production of high-margin amino acids and other products such as natural glycolic acid for use in cosmetics.”
“We have no long-term plans either to resume threonine production in Amiens, only in the very unlikely scenario that the market warrants having a Europe-based producer,” Darbois added. “Our plan for lysine over the long-term is maintaining a solid production volume.”
AANE, in the past five years, has increased its production of valine and introduced the manufacturing of isoleucine, leucine and arginine. The Amiens plant was accelerating the development of these new amino acids under a flexible production system. With METEX at the helm, these specialty amino acids will continue to be a high priority. Darbois argued that AANE’s cost competitiveness for these products and the exclusive licences it has in place for them, as well as for their customised solutions in the EMEA region, give a lot of scope.
“We will increase the production of specialty amino acids in Amiens,” he said. “And in terms of capacities for these products, we do not foresee any issues at this time. If ever we meet bottlenecks, we will invest where required.”
Why METEX Thinks AANE is a Good Fit
According to Darbois, animal nutrition has always been and will continue to be a key priority for METEX.
“We have been developing processes that rely on fermentation of natural and renewable feedstock. 100% natural is a strong value proposition in the animal nutrition sector today and we want to be a key player in functional ingredients,” he said. “We were looking for large fermentation capacity. So, when we learned that AANE was for sale, we saw it as a perfect fit.”
Asked what will become of the approximately 320 employees who work at AANE and how the integration process with METEX (a smaller company with approximately 70 staff) will proceed, Darbois stated that METEX has committed to keeping all AANE employees for at least two years and that Amiens will continue to be managed by the local team.
“We’ve known AANE for many years, which will make the integration easier,” he commented. “We have two truly complementary organisations with no overlaps or redundant positions. METEX mainly has R&D resources while AANE is a large industrial and commercial organisation with fewer R&D resources.”
Asked what the main reasons were for Ajinomoto chosing to sell AANE to METEX and not another company, Darbois was unable to divulge their exact criteria but did share his thoughts on the competitive process Ajinomoto put in place to divest AANE – one that took into account the economic value and sustainability of the project and would maintain the level of employment at the Amiens site.
“The credible buyer needed e. coli bacteria and R&D expertise. There aren’t that many companies out there with that expertise. Other candidates could have probably been competitor fermentation companies or startups with fermentation knowhow. But other companies with already under-used capacities would not necessarily require the large capacity in Amiens. Companies from outside the sector or financial investors could have been likely candidates too but they do not have the fermentation expertise,” Darbois said.
Questions are being asked in the industry about the price paid by METEX for AANE (€15m), which is seen as very low. However, the METEX NØØVISTA President simply pointed out that the price is just the result of the competitive process Ajinomoto put in place and takes into account the intrinsic value of AANE.
“It’s interesting to know that the price also reflects the high level of risk associated with the commoditised amino acids [lysine] produced in Amiens,” he commented.
Ajinomoto’s Y13 billion (approx. €100 m) write-offs also mean that METEX will acquire AANE free of debt.
However, for Darbois, what the market has failed to factor in regarding this divestment price is that METEX has invested approximately €100m in R&D over the years, and from a METEX shareholder perspective, those years of investment are seen as part of the price to acquire the extra fermentation capacity that was required.
Financial Robustness
“We have a proven track record of financing each of our development steps,” Darbois went on to say. “The €45m of proceeds from the sale of the l-methionine process to Evonik in 2016 was one step. This was followed by the 2018 deal with Bpifrance for the creation of the PDO and butyric acid joint venture METEX NØØVISTA.”
METEX invested a total of €24.15m, while Bpifrance's SPI investment fund invested €19.75m, giving them stakes, respectively, of 55% and 45% in METEX NØØVISTA. METEX and SPI said they would invest, respectively, €17.15m and €19.75m in three instalments over a two-year period to cover the €37m required for the project's first phase. The financing required to adapt the site for the first industrial biochemical unit (building, utilities, studies) was provided by project stakeholders such as the Total group, the French state, the Greater East region and the Communauté d'Agglomération de Saint-Avold Synergie.
In June 2020, METEX, after requesting a State Guaranteed Loan (PGE) in the context of the COVID-19 crisis, obtained €6.2m. This amount reinforced METEX’s cash flow, which had already benefited from a €7.3m fundraising in February 2020. This loan may be amortised over a period of up to five years and allows METEX to continue its activities and, where appropriate, deal with the financial consequences of the delay in the development of its projects caused by the health crisis.
Darbois added: “And now AANE, with its fixed assets, inventories, working assets and cash flow from operations driven by demand for AANE’s amino acids, opens up new financial options for METEX and makes us even more confident in finding additional funding.”
