On May 1, 2012, Bunge Limited (NYSE:BG) and DuPont (NYSE:DD) announced that DuPont would be buying out Bunge's minority stake in joint venture Solae for approximately $440 million. The transaction appears a bit surprising, considering Bunge's agribusiness focus, especially in versatile oilseed production. Yet the departure appears to benefit both parties respectively as the two companies go their separate ways in the divestiture by Bunge.
Bunge announced in its press release that:
"This transaction enables Bunge to redeploy capital into our strategic, core businesses," stated Drew Burke, Chief Financial Officer,Bunge Limited. "Solae has created great value during the past nine years, and is well-positioned for future success."
Solae, now fully owned by DuPont, notes on its website that:
As part of DuPont Nutrition & Health, without the joint venture structure, we can increase the speed of innovation and leverage the partnership with former Danisco to create a singular focus on specialty ingredients. In turn, we will be able to offer more products and solutions to our customers.
Despite a growing market that Solae offered, Bunge's decision to disinvest in its joint venture appears motivated by opportunity in enhancing value of its core businesses across the board. A closer look at Bunge's recent activities offer some very encouraging developments as the company shows signs of repositioning itself towards future growth markets. In many ways, Bunge's recent developments appear opportunistic as they each serve to increase value in their existing product lines and open new markets. Highlighted developments are as follows:
- Bunge Acquires Climate Change Capital. As the world embraces the need for global regulation, the introduction of carbon credits has opened up avenues of additional value for agriculturally-based companies such as Bunge. Also operating as a buyer of such carbon credits and an advisor to other companies, Bunge's control of the advisory services and the sourcing of their own credits serve as synergistic advantages in this developing space.
- Bunge Purchases the Intellectual Property of MCN BioProducts. The acquisition of MCN's intellectual property helps Bunge open a new market from existing product lines. The patents protect a process that extracts an animal feed byproduct without harming oil production through an enzymatic process. Such a process increases the range of value that Bunge's oilseed markets can offer.
- Bunge Forms Joint Venture with Solazyme (SZYM). Solazyme uses biotechnology to convert low-cost sugars into customized high-valued oils. Bunge's establishment of a joint venture with Solazyme offers the unique capability to connect Bunge's sugar division with its oil processing division - a feat that can only be described as a "win-win proposition". The joint venture also synergistically opens a vast market of opportunity in excess of $3 trillion dollars as Solazyme's technology is able to replace and enhance oils derived from petroleum, plants, and animal fats. Most importantly, Solazyme's ability to tailor its oils has lead to increased interest from companies such as Dow Chemical (NYSE:DOW) and Unilever (NYSE:UL). Despite the fact that Dow competes with Solazyme in the realm of developing tailored oils, Dow recently announced an agreement to buy millions of gallons of Solazyme's oils which will be used to develop dielectric fluids that surpass the abilities of their mineral- and plant-based counterparts.
Disclosure: I am long BG, SZYM.