Origin is latest to go public through merger

Another green chemistry company is going public via a special purpose acquisition company (SPAC) takeover. California-based Origin Materials is being purchased by the blank check firm Artius in a deal that values Origin’s equity at $1.8 billion.

Origin, which was formed in 2008, is developing a process that treats a lignocellulosic feedstock, such as wood chips, with hydrochloric acid. The acid catalyzes the hydrolysis and dehydration of cellulose and hemicellulose. A resulting alcohol reacts with the acid to form chloromethyl furfural (CMF).

“We really see CMF and furans in general as platform molecules that you can look at across the whole chemicals and materials industry,” says John Bissell, the company’s cofounder.

The biggest application might be packaging. A series of reactions, in which the HCl is recovered, transforms CMF into p-xylene, a precursor to terephthalic acid, a raw material for the packaging polymer polyethylene terephthalate (PET).

This biobased route to PET has drawn the interest of beverage makers such as Pepsi, Danone, and Nestle. They have formed partnerships with Origin, which has already booked more than $1 billion in offtake agreements for its future output.

Origin’s technology also makes hydrothermal carbon, which it will sell as a raw material for carbon black and activated carbon. Minor products of the process include furfural and levulinic acid.

The company has been running the process at pilot scale since 2014. It is building a plant in Sarnia, Ontario, that’s set to open in 2022 with the ability to process 25,000 metric tons of feedstock per year.

When the SPAC deal is completed in the second quarter, Origin will trade on the NASDAQ exchange under the ticker symbol ORGN and have $900 million on its balance sheet to fund expansions.

The company is planning another plant by 2025 that will process as much as 1 million t of feedstock per year. It wants to build three more plants by 2029.

SPAC deals, in which investors raise money in an initial public offering (IPO) and use the proceeds to buy private companies, are taking off. Earlier this year, the biopolymer maker Danimer Scientific merged with a SPAC in a transaction that valued it at about $890 million. Late last year, the polypropylene recycling company PureCycle Technologies made a deal with a blank check firm that gave it a value of $1.2 billion.

According to David Ethridge, head of IPO services for the consulting firm PwC, 59 companies went public with SPACs in 2019, in transactions worth $12 billion. Last year, there were 248 SPAC transactions valued at $76 billion. And already this year, 162 SPAC deals have been signed worth $44 billion.

“This rocket that we were all on in 2020 just turned on the afterboosters, and it is just incredible,” Ethridge says.

For start-ups looking to raise money, SPACs can be a quicker route for needed funding than persuading investors and banks, Ethridge says. “In many respects, you’ve fast-forwarded the capital they would have liked to have raised 7 years from now or 5 years from now through a regular-way IPO to now,” he says.

However, writing in the Harvard Law School Forum on Corporate Governance, Stanford University professor law Michael Klausner and others note reasons to be cautious about SPACs. SPACs tend to dilute investors’ initial investments. Moreover, some sponsors are inexperienced, and their SPACs tend not to perform as well as those managed by people with private equity or large company experience.