A next-generation bioplastics company Danimer Scientific (DNMR) has inked a deal to acquire Novomer, a biodegradable polymer producer, in a cash deal valued at $152 million. The transaction, which awaits certain approvals, is likely to close in the third quarter of this year.
Novomer is focused on the development of conversion technology to provide transformable, functional, and low net carbon inputs for producing polyhydroxyalkanoate (PHA)-based resins and other biodegradable materials. The company’s cost-effective polymers and chemicals include poly(3-hydroxypropionate) (“p(3HP)”), a type of PHA, which can be sourced from renewable or non-renewable feedstocks.
Danimer, the developer and producer of biodegradable plastics, expects Novomer’s technology and materials to complement its resins. Additionally, the deal is likely to facilitate lower-cost biodegradable products and benefit customers, the company said. Specifically, the company considers Novomer’s p(3HP) to be highly compatible with its inputs, and believes it can be integrated as an element in certain Danimer resins.
Therefore, the deal is likely to reduce Danimer’s capital expenditures and augment the expected overall volume of the finished product.
Danimer CEO Stephen E. Croskrey said, “This is an important acquisition for Danimer that advances our strategy of providing biodegradable solutions to the plastics industry to help solve the global plastic waste crisis.” (See Danimer stock charts on TipRanks)
The stock has picked up a rating from one analyst in the past three months. Jefferies analyst Laurence Alexander reiterated a Buy rating and a price target of $42 (126.2% upside potential) on the stock more than a month ago.
The bullish stance followed the analyst’s visit to a company facility, where the operating managers highlighted the importance of tailoring products according to customer specifications. Furthermore, he noted that while there had been a bottleneck in production, it lasted for only two weeks, and the company was back on track for full operating rates by the end of 2021.
Alexander said, “We expect the payback to be in quarters, not years.”
He added, “Danimer expects the combination of initial production experience and the opportunity to design facilities from the ground up to deliver a ~25% improvement in both COGS and capex efficiency by the middle of the decade, whereas more structural productivity efforts and economies of scale should deliver ~50% savings longer-term (we estimate by 2035-2040).”
According to the new TipRanks’ Risk Factors tool, the Danimer stock is at risk mainly from two factors: Finance and Corporate, and Regulatory & Legal, which contribute 49% and 18%, respectively, to the total risk for the stock. Within the Finance and Corporate risk category, DNMR has 25 risks, details of which can be found on the TipRanks website.
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