BG Bunge Global SA

ADM Polymer Corporation, a unit of Archer Daniels Midland Company (ADM), has decided to part its biodegradeable plastics joint venture with Metabolix Inc., called Telles LLC, effective February 8, 2012. The joint venture was formed in July 2006.

The joint venture, Telles, produces bio-based plastics, called Mirel, using Metabolix’s fermentation technology at Archer Daniels’ integrated corn processing complex facility in Clinton, Iowa. The Mirel plastics produced are used in plastic utensils and lids, as approved by Food and Drug Administration (FDA).

Archer Daniels’ decision to exit the commercial alliance came after an analysis of its business portfolio, which resulted in identifying uncertainty on projected capital and production costs, as well as the rate of market adoption for its bio-plastics business with Metabolix. The company said this uncertainty would in turn lead to uncertain returns for ADM.

Archer Daniels said it will carry out the dissolution in accordance with the terms established in the commercial alliance agreement with Metabolix. Per the terms, ADM Polymer is entitled to provide PHA fermentation services for Metabolix during a three-year period following termination.

Following the break-up, Metabolix will get back the ownership of all the technology used in the joint venture, while Archer Daniels will retain the ownership of the Clinton facility in Iowa where Mirel is produced. The company continues to evaluate alternate commercially viable uses for the fermentation assets in Clinton.

Archer Daniels said its second quarter results will record a one-time pre-tax charge of $300-$360 million due to its decision to exit the joint venture. The company expects the cash portion of the charge to not exceed $5 million.

The company is also focused on evaluating the impact of its decision on its employees involved in the joint venture. The company currently has 90 full-time employees working at the Clinton polymer plant and a small group of people supporting the Telles sales and marketing efforts in Europe.

Illinois-based Archer Daniels, one of the leading food processing companies in the world, processes oilseeds, corn, wheat, cocoa, and other foodstuffs, and is a leading manufacturer of vegetable oil, protein meal, corn sweeteners, flour, biodiesel, ethanol, and other value-added food and feed ingredients.

Archer Daniels, which competes with Bunge Limited (BG) and Corn Products International Inc. (CPO), currently has a Zacks #2 Rank, implying a short-term Buy rating on the stock. However, the company retains a long-term Underperform recommendation.

 
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