BioAmber Inc fka BIOAQ

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June8 rally began day of motion for DIP
There must have been some investor insider knowledge because this rally began at close on June 7 and exploded at opening on June 8 hours ahead of the submission of the signed court motion for approval of interim financing and extension of the stay of proceedings with the ultimate goal of finding a financial or strategic buyer for the Petitioners’ assets. It wouldn't surprise me if there are more leaks that prompt more upward action ahead of next catalysts like the one on Friday. Besides the buyers that could appear on Friday, could the Canadian Government make a financial offer to save all their investment in Sarnia?

This buyout received a lot of interest in a short time and they accepted very quick deadlines for the SISP. Them also accepting shutting down the moment the Monitor fails to receive any LOI by June 29 at 5pm shows their confidence. Logically a 2.5 year old succinct acid plant which is the highest capacity in the world won't be dismantled for liquidation scraps.

October 2017
“I told management that Bioamber is worth more dead than alive.
Certainly someone will come in and potentially buy it. The logical buyer will be Cargill who essentially supplies the yeast technology for this business. Cargill spent hundreds of millions of dollars in developing this yeast. They got Cargill to allow them to use this. Cargill essentially can come in and buy the company. There are a bunch of other players in Asia that could be interested.”
Jerome Hass, portfolio manager at Lightwater Partners speaking on BNN Bloomberg Canada

January 2018
Corporate overview expected strong Q4 2017 revenues and claimed established relationships with CJ, PTTMCC (JV between PTT and Mitsubishi Chemicals), Mitsui, Cargill, Arlanxeo.

February 2018
Last February, Nextant indicated that a few companies investigating potential to produce their products in their Sarnia plant have already approached them. According to Nextant, key potential buyers with strategic interest in these products, and hence the Sarnia asset, include: BASF, DSM, Cargill, Lygos, Genomatica, Myriant / PTT, Deinove, Amyris, Invista, CJ, ADM, Corbion, and Evolva.

June 11, 2018
Generated many interested bidders and NDAs in a short time soon after SISP began. Potential buyers according to court monitor Pwc: DOW, Reverdia, BASF, Myriant / PTTMCC (JV between PTT and Mitsubishi Chemicals), Sumitomo, Mitsui, Exxon Mobil, Sinopec Chemical.

June 18, 2018
BioAmber Receives Favourable Court Ruling and Approval for DIP Financing. “The continuing operations of the Sarnia plant are crucial to maximize as much as possible the price that may be obtained from a buyer or an investor interested in the Sarnia plant. BioAmber has a number of strategic and financial investors evaluating an investment as part of the SISP. We are optimistic that the closing of a transaction will provide our customers long term supply assurance from the Sarnia facility.”

Study: There is an increase in realised returns to equity at the announcement of DIP loan agreements, which is positive and statistically significant. It is also found that DIP financed firms have a reduced probability of liquidation, and shorter time spent under bankruptcy proceedings.
https://onlinelibrary.wiley.com/doi/pdf/10.1111/1468-5957.00398

June 20, 2018
Court monitor beliefs there will be 2-3 buyers according to m0n that heard him via call during latest court hearing tell the judge “we are looking for a buyer” and “we believe there will be 2- 3”

June 21, 2018
In a communication, CFO, Mario Settino seemed optimistic about the buyout process although he could not share details.

June 29, 2018
Non-binding Intent to bid Letters due.

July 31, 2018
Final bidding offers due.

It turns out that there are exactly 3 matches from both lists. The same amount of buyers the monitor beliefs they will get. The matches are: BASF, Myriant, PTT

BASF
Although currently has the potential to manufacture bio-succinic acid, BASF's production capabilities is relatively small compared to other global players. Acquiring BioAmber could transform BASF into a serious contender in the biobased niche.

Myriant
Myriant is currently in the process of evaluating plan to build plants in key geographies across the globe for the production of bio-succunic acids and other high-value, green specialty chemicals in large established markets

PTT MCC
It is a JV between PTT and Mitsubishi Chemicals, was established to research, develop, manufacture and commercialize bio-based polymers. BioAmber could be vertically integrated within its supply chain.

Mitsubishi Chemicals
Mitsubishi Chemicals is currently pursuing organic and acquisition investments in biobased petrochemical alternatives through internal R&D and joint ventures. The firm has already demonstrated proven interest in bio- succinic acid through its partnership with BioAmber.
April 2011: BioAmber Partners with Mitsubishi Chemical in Succinic Acid
Feb 2018: Mitsubishi Chemical Starts Full scale Sales of New Grade of ‘DURABIO’ Bio-based Engineering Plastic for Bottles

It would be interesting to know why Nextant didn't find Mitsui would be a potential buyer and why Pwc didn't include Cargill on the list.

Read more on document bioamber-009_060718.pdf


I agree that if they get more than one bidder, the valuation will increase. When you are calculating the full valuation be aware that the asset numbers the Monitor reports are limited to creditors sake and because other portions are up for negotiation during sale.

Be aware that the Monitor reports asset numbers that pertain to the issue at hand. The Monitor includes more comprehensive numbers that pertain to interested buyers in document bioamber-009_060718.pdf, stating:
“BioA's Company’s assets are comprised of its 30,000 Ton capacity Sarnia production facility, inventory, accounts receivable, trademarks, patents and other intellectual property, tax loss carryforwards (NOL), and other moveable assets.”

Last February, Nexant estimated the value of the Sarnia plant alone as an operating facility to be within the range of US$53.8 - 73 million (70-95 $Canadian). But for creditors considering the DIP, he limited the assets to relevant numbers just to demonstrate the difference in value with the DIP and without it. The court Monitor used the lowest plant valuation (CAN$70) on the DIP report and doesn’t include intangibles, nor forward revenues or other items that a buyer might consider.

Valuation in US$:
After converting into US dollar and using the most recent docs (June13 + Nexant) I get:

3 yr. old Plant $53.8 – $73 averaged at 63.4
Inventory $2.4
Cash $0.4
A/R $1.7

Total Assets: $67.9
Debt: $49
Equity: $18.9
Conservative Value per Share: $0.14

Added buyout deal:
Patents $5+
At least 1yr Forward Revenue $20 from their active order pipeline (some add 2yrs)
Plant at $70+ premium due to more than one bidder

Total Assets: $99.5+
Equity: $50.5
Premium Value per Share: $0.38 +

Additional Considerations
Having an active customer list should also be appraised and added in the sales price.
I won’t include the NOL ($.20) because that would limit bidders to agree on a 49% merger instead. Cash and account receivables can increase from recent succinct acid sales and production.

Companies may also give more value to certain things some of which the Monitor presents like:
New Plant Construction cost: US$141M (2015) Replacement cost of facility: US$175- 185M
Top-line growth of US$4.68M representing a 750% YoY increase between from Q4 2016 to 2017
Increased demand for the product has been seen since oil price ramp up from 30$USD/bbl. in January 2016 to 70$USD/bbl. Today. Some say trademarks, patents and intellectual property is more valuable to some.

Bidding War
Obviously if there is a bidding war among several interested buyers, the sale price can increase. Nextant reported back in February that a few companies investigating potential to produce their products in the Sarnia asset already approached BioAmber. The monitor reported they already have 20 bidders signing NDAs.

“The Monitor, with the help of PwCCF, will continue the ongoing SISP and will work with the Company’s management in preserving enough cash to ensure that the SISP can be concluded. The restructuring plan will help to preserve value for all stakeholders.”