SAN FRANCISCO – Corbion NV executives should consider taking the company private or selling it, according to a letter from San Francisco-based Inclusive Capital Partners to Mathieu Vrijsen, chair of the supervisory board at Amsterdam-based Corbion. Inclusive Capital Partners has acquired 10% of the outstanding shares of Corbion over the past two years.
“As a private business or part of a bigger company, Corbion would be freed from scrutiny of its financials by competitors and customers, alleviated of the growing costs associated with a public listing and empowered with greater flexibility around capital allocation,” Inclusive Capital Partners said. “Management would similarly be relieved of the time and energy required of quarterly reporting cycles and the constraints associated with public market ‘short-term-ism.’ To that end, we strongly urge the board to engage advisers for a comprehensive review and openly explore interest from partners who can help Corbion deliver an impact for all stakeholders.”
Inclusive Capital Partners calculated Corbion has invested over €1 billion ($1.1 billion) in capital expenditures and investments in associated/joint ventures since 2015. Yet Corbion’s shares are near five-year lows and have underperformed the Amsterdam AEX index by more than 80% over the five years, according to Inclusive Capital Partners.
“Corbion’s portfolio is best analyzed through the lens of a sum-of-the parts analysis, which we believe points to a fundamental value of nearly €30 ($33) relative to the company’s (about) €17 current share price,” Inclusive Capital Partners said. “We believe Corbion’s complexity relative to its size serves as a significant impediment to thoughtful piece-by-piece evaluations of its various value drivers.”
Inclusive Capital Partners noted “malaise, concern and apathy” among Corbion public shareholders.
“While there will be updates in January 2024 on costs, capital spend, the emulsifier sale, polylactic acid and algae, this agenda was previewed in the third-quarter earnings call with dismissiveness,” Inclusive Capital Partners said.
Corbion on Dec. 14 responded that it is preparing a restructuring program that it will begin to implement in 2024. The program includes a review to improve operating expenses, capital program and working capital. The review will examine Corion’s position in polylactic acid (PLA), the development of an algae ingredients’ road map for 2025-30 and a continued focus on its high-growth, high-value biomedical business. Corbion will present its plans on Jan. 31, 2024.
“The supervisory board and management of Corbion value open dialogue with shareholders and welcome their constructive input,” Corbion said. “We have engaged, and will continue to engage, with Inclusive in a manner consistent with that approach. We remain focused on delivering long-term value to our shareholders and stakeholders, will continue to take actions to achieve that objective and will consider Inclusive’s suggestions.”
Corbion could grow through its algae business, a gypsum-free lactic acid facility being constructed in Thailand and medical biopolymers, according to Inclusive Capital Partners.
“Corbion’s role in replacing fossil fuels in food preservatives and packaging, and the role of its burgeoning algae solution to address human and ocean health, may be better pursued, we believe, with a different capital and ownership structure,” Inclusive Capital Partners said.
Corbion acquired TerraVia Holdings, Inc. in 2017 to develop an algae-based omega-3 fatty acid alternative to fish oil-based omega-3 fatty acids. A second manufacturing plant could be a path for the business to achieve EBITDA margins of over 20%, according to Inclusive Capital Partners.
“It is key to long-term stakeholder value — the ocean, the employees and the shareholders — that management lay out and execute a clear plan to finance the growth of the algae business,” Inclusive Capital Partners aid.
The facility in Thailand should be completed this year. The unique technology, lower costs of local sugar feedstock and Corbion’s global production network should lower production costs by about 20%, according to Inclusive Capital partners.
In medical biopolymers, Corbion, through its lactic acid, is “uniquely positioned” to supply industries with exacting requirements such as semiconductors and biomedical products.
“While Corbion has been supplying the biomedical industry since the 1960s, the business has seen impressive commercial traction over the last several years as reflected in revenue growth of more than 50% over the course of 2021 and 2022,” Inclusive Capital Partners said.
Inclusive Capital Partners added Corbion looks to be a strategic asset as the global flavors, fragrances and ingredient industry has consolidated. Inclusive Capital Partners pointed to IFF acquiring DuPont’s Nutrition & Biosciences business, DSM acquiring Firmenich and Novozymes’ pending combination with Chr. Hansen.
“To that end, we note that recent precedent transactions carried valuations well in excess of where Corbion is valued today,” Inclusive Capital Partners said.
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