Working together towards net zero – Origin Materials to combine with Artius in IPO

In California and New York, two companies are coming together for a match made in heaven to create the first publicly traded pure play carbon negative materials company. Origin Materials and Artius Acquisition Inc., signed a definitive agreement for a business combination – the combined company will be named Origin Materials, will be led by Co-Founder and Co-CEO John Bissell and Co-CEO Rich Riley, and is expected to have an estimated equity value of approximately $1.8 billion.

In today’s Digest, who is Origin Materials, what this means for carbon negative materials, transaction details, reactions from the stakeholders, and more.

Who is Origin?

Origin has been around for a while – founded in 2008, their patented drop-in technology, economics and carbon impact have been validated by third parties, as well as supported by a growing list of major global customers and investors, including Danone, Nestlé Waters, PepsiCo, Mitsubishi Gas Chemical, and AECI. Origin’s technology has been further validated by an ISO-compliant Life Cycle Assessment (LCA) conducted by Deloitte, which concluded that Origin’s products are expected to be carbon negative when produced at commercial scale.

While an estimated 55% of global carbon emissions come from energy generation and transport, the other 45% come from the production of materials for consumer and industrial products. More than ten million barrels of oil per day are used to create materials, in the process releasing massive quantities of new carbon into the atmosphere. Origin’s vision for the future is to replace this oil use with non-food feedstocks and materials, while capturing carbon in the process.

Origin’s patented, breakthrough platform technology can disrupt and decarbonize the materials industry, which represents a ~$1 trillion market opportunity to revolutionize the production of a wide range of end products, including clothing, textiles, plastics, packaging, car parts, tires, carpeting and toys. Derived from non-food sources (wood residue), Origin produces sustainable and recyclable carbon negative materials at a fraction of the cost of other bio-based technologies.  Origin’s technology can make “net zero” possible and support customers in meeting their ESG and decarbonization goals.

In 2017, Danone, Nestlé Waters and Origin launched the NaturALL Bottle Alliance, a research consortium formed to accelerate the development of innovative packaging solutions made with 100% sustainable and renewable resources. PepsiCo joined the NaturAll Bottle Alliance in 2018 to advance the shared goal of creating beverage containers with a significantly reduced carbon footprint.

Transaction Details

Let’s dive into the numbers and transaction details. According to the Origin Materials press release, business combination is expected to fully fund Origin until EBITDA positive and allows Origin to scale and commence commercial production to meet signed customer offtake and capacity reservations of ~$1 billion across a diverse range of industries.

They are funded to scale and commence commercial production – Executing on growth plan with first plant expected to be completed in 2022 and contracted portion of first two commercial plants expected to be 100% sold out in 2022. Full-scale commercial plant expected to be online by 2025.

All Origin stockholders, including the current members of the NaturALL Bottle Alliance, Danone, Nestlé Waters and PepsiCo, will roll 100% of their equity holdings into the new public company.

The transaction reflects an implied equity value of the combined company of approximately $1.8 billion, based on current assumptions. Upon closing, the transaction is expected to provide $925 million of gross proceeds to the company, comprised of Artius’ $725 million of cash held in trust, assuming no redemptions, and a $200 million fully committed PIPE at $10.00 per share anchored by existing and new investors, including investments from Danone, Nestlé Waters, PepsiCo, Mitsubishi Gas Chemical and AECI, as well as certain funds and accounts managed by Sylebra Capital, Senator Investment Group, Electron Capital Partners, BNP Paribas AM Energy Transition Fund and affiliates of Apollo.  The transaction is subject to a minimum cash balance of $525 million in Artius at closing after giving effect to any shareholder redemptions.

Upon closing of the transaction, Boon Sim, Chief Executive Officer of Artius and Charles Drucker, former CEO of WorldPay, Inc. and an Artius Partner, will join Origin’s Board of Directors. Karen Richardson, an Artius Partner, is expected to be nominated to serve as Chairperson of Origin’s Board of Directors.

The Boards of Directors of each of Origin and Artius have unanimously approved the transaction. The transaction will require the approval of the stockholders of both Origin and Artius, and is subject to other customary closing conditions. The transaction is expected to close in the second quarter of 2021. All Origin existing shareholders will roll 100% of their equity holdings into the new public company.

Reaction from the Stakeholders

John Bissell, Co-Founder and Co-CEO of Origin:

“Origin’s vision is a world where carbon-negative products and materials are the rule, not the exception, and where making products helps the climate instead of hurts it. We believe we are uniquely positioned to be the clear category leader based on the simple, yet powerful fact that our technology was built around converting the lowest cost, non-food feedstock into decarbonized, supply chain ready materials. Our disruptive materials make Origin the only company capable of competing on price with petroleum-based materials. We have developed competitively-advantaged technology that is protected in key countries, and we plan to continue advancing our research and development to maintain our global leadership position in carbon negative materials.”

Rich Riley, Co-CEO of Origin:

“This transformative transaction is expected to fully fund our aggressive growth strategy in a massive $1 trillion addressable market that is just beginning to transition from petroleum feedstocks to non-food, renewable feedstocks. Mr. Sim and the Artius team have a proven history of delivering significant long-term shareholder value and we are excited to combine forces as we scale our technology and grow the business. Our rapidly expanding order book sits at $1 billion today and is comprised of offtake agreements (including customer options) and capacity reservations. Our customers are investing in Origin’s carbon negative materials now to reserve capacity in our first plant that is planned to come online in 2022, to be followed by a commercial scale facility in 2025.  Our technology and our products have been evaluated through extensive due diligence and we expect this transaction will allow us to scale up capacity to meet current customers’ needs for cost-competitive sustainable materials, while building additional capacity for meeting new customer demand as we expand into a range of large global end markets.”

Boon Sim, Chief Executive Officer of Artius:

“Origin’s breakthrough technology represents a significant opportunity to scale carbon negative materials in a world that is rapidly transitioning to ‘net zero’ to meet corporate decarbonization goals and climate commitments from countries around the globe. Origin is poised to enable and lead the world’s necessary transition from petroleum-based materials to sustainable materials. We believe change only happens at scale – and that means materials must be made from non-food, renewable resources that are drop-in ready, recyclable and cost-competitive.  Our extensive due diligence confirmed for us that Origin’s technology checks all the boxes necessary to scale and grow fast. Under Origin’s visionary leadership, we believe Origin is a compelling investment opportunity with a validated, disruptive platform technology that is uniquely positioned to decarbonize the materials industry supply chain.”

Bottom Line

Taking biomass and converting it to valuable products while doing so in a carbon net zero method is big on its own, but add this IPO and big plans for commercialization, and relatively soon in the scope of things, makes this news reason for us to take a closer look and see how aiming to achieve “zero” is anything but nothing…it is everything. It’s not an empty “0” but a “0” filled with hope and our future.