Marrone Bio Innovations Inc. (NASDAQ:MBII) delivered a news feast on Thursday, unveiling a transformative acquisition in the seed-and-soil-treatment market, together with a $36.6 million financing facility with existing investors, and posted strong second quarter results.
The firm, an international leader in sustainable bioprotection and plant health solutions, has signed a definitive purchase agreement to acquire Pro Farm Technologies OY, a deal which will increase its market share and global platform in the $4.6 billion seed-and-soil-treatment market.
Marrone Bio said the Pro Fam acquisition will add proprietary nutrient and biostimulant technology and products for seed and foliar treatments to its portfolio and will also give the company a significant opportunity to leverage an expanded global distribution network for all of its products.
The company expects to benefit from partial-year sales in 2019 as a result of the transaction and, with historical gross margins significantly higher than Marrone Bio’s current product portfolio average, the Pro Farm acquisition is expected to be accretive to net income and cash flow from operations in 2020.
Marrone Bio chairman, Bob Woods commented: “This acquisition is an example of the kind of transformative investments that we seek to grow Marrone Bio from a product, crop and geographic perspective, and to do so in a way that can immediately accelerate our revenue growth and margin expansion.”
“We believe acquisitions like Pro Farm will allow us to cost-effectively expand our global scale, and significantly escalate our growth trajectory,” he added.
Pro Farm is being acquired for an agreed enterprise value of $31.8 million, including a combination of $6.2 million cash and 12.7 million shares of Marrone Bio stock to be paid to Pro Farm’s equity holders, debt holders and advisors upon the closing of the transaction, expected in the third quarter of 2019, subject to satisfaction of customary conditions.
There is also the opportunity for potential payment of a total of up to $7.5 million of additional shares of stock deliverable from 2021 through 2024 based on the achievement of agreed commercial milestones.
Marrone Bio Chief Executive Officer Dr. Pam Marrone said: “Today’s announcement is a critical step in our strategic objective to build a platform company that leverages our scientific, manufacturing and commercial expertise through new agricultural solutions.
“We believe we have the technology, talent and financial support to achieve our goal of creating a biological ag inputs company of major scope and scale.”
Financing facility with existing investors
Separately today, Marrone Bio also said that it has established a $36.6 million financing facility with existing investors Ospraie Ag Science LLC, Ardsley Partners Renewable Energy Fund, L.P., and Ivan Saval through a right for the firm to call the exercise of the investors’ outstanding warrants at $1.00 per share.
It said new warrants to purchase shares at a higher exercise price of $1.75 will be issued on a one-for-one basis along with every called share under the outstanding warrants.
The company expects to draw upon the facility only as needed, and may draw on the facility at any time the company’s stock trades above $1.00 per share.
It said it has issued an initial $10 million drawdown, which is scheduled to complete by early September 2019.
In addition to using a portion of the drawn funds for the acquisition of Pro Farm, any resulting cash raised is anticipated to be sufficient to fund the current operating plan to a breakeven level, as well as fund near-term strategic alternatives.
Marrone Bio chairman Bob Woods said: “With the ability to call the exercise of existing warrants at its election, the Company is assured of the funds it needs to make strategic moves for the foreseeable future through a cost-effective vehicle.”
Dwight Anderson, founder of Ospraie Management LLC, an affiliate of the largest shareholder of Marrone Bio, commented: “Our participation in the warrant exercise facility strongly signals our belief in the growth potential of Marrone Bio in the burgeoning biostimulant market.”
“There are immediate opportunities to create a more powerful global commercial platform with greater long-term strategic alternatives. We think it is critical for Marrone Bio to participate in such opportunities, and thus our support for ensuring the Company has the ability to fund and fuel that growth,” Anderson added.
Record second quarter revenues
Rounding off the Thursday trio of releases, Marone Bio also reported second quarter 2019 results showing its revenue increased by 22% to $7.0 million, up from $5.8 million in the second quarter of 2018.
The record second-quarter sales reflected the company’s continued growth in the seasonally smaller specialty markets for trees, fruits, nuts, vegetables and vines.
It said significant uptake in various nuts, strawberries, tomatoes and wine grapes was driven by the company’s BioUnite strategy, which offers growers unique combinations of bio-based crop protection products with chemical options in their integrated pest management programs.
Revenue growth was led by foliar applications of the Venerate, Grandevo and Regalia product families for insect and fungal disease control, respectively, the company added.
Gross margins in the second quarter improved by 710 basis points to 54.4% as a result of a favorable product mix.
The group’s operating expenses were $10.2 million in the period, up from $7.2 million in the second quarter of 2018 driven primarily by additional legal, accounting and acquisition-related expenses.
Planned investments in strategic research and development programs and employee-related expenses also led to the higher level of spending, it added.
The net loss for the second quarter of 2019 was $6.8 million, or $0.06 per share, compared with a net loss of $4.9 million, or $0.04 per share, for the same period in 2018.
The company said cash used in operations was $3.0 million in the second quarter of 2019, a 42% decrease from the cash used in operations in the second quarter of 2018, primarily from a more favorable working capital position.
First half revenues jump too
Revenues for the first half of 2019 also reached a record at $15.7 million, up 56% year-on-year, as gross margins reached 56.0%.
The net loss in the first half was $10.7 million, or $0.10 per share, down from a net loss of $10.1 million, or $0.11 per share, in the same period in 2018.
On a comparative basis, the first half of 2018 included a non-recurring net benefit of $1.8 million to other income related to the company’s comprehensive financing and debt restructuring transactions.
Dr. Pam Marrone commented: “We see a clear path forward to leverage our scientific, manufacturing and commercial expertise into a global platform of biologically based crop protection and crop stimulant products.”
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