Future of palm oil hidden in US IPO
US company Solazyme has nearly doubled the estimates of funds raised from its planned initial placement offering (IPO) on the NASDAQ Stock Exchange, up to USD184 million. Should its shares reach the mid-point of the estimated price range of USD15-17 per share, it will value the algae fuel and product maker at USD1 billion.
And why should any of this be of interest to Asian investors? Well, should you have interests in the palm oil industry, Solazyme is aiming to put you out of business.
The increased estimates of the company's IPO valuation not only reflects the market's appreciation of how good the company is at manipulating algae to provide sustainable solutions for the power and food industry, but also provides it with a formidable war-chest for research.
While Solazyme has generally received most publicity about its designer algae grown in fermentation tanks without sunlight and fed with sugar to make an extractable fuel oil (although its sales are relatively small), it's in the sectors of biochemistry, cosmetics and food, that there is most excitement.
For companies like Sime Darby or Sinar Mas it was the little-noticed investment last year by corporate giant Unilever in Solazyme which should have started alarm bells ringing. It joined others in the series D financing round as a strategic investor, although the amount invested has been kept confidential.
"Unilever has been working closely together with Solazyme for two years now and this investment will help us to broaden our partnership in new application areas. It will also help us to plan for how future developments in Solazyme's technology platform will contribute to Unilever's supply options and assist us in our sustainability vision," Phil Giesler, Innovation Director at Unilever Corporate Ventures commented at the time.
The key phrase in his official statement is "sustainability vision". In fact while Unilever is hoping to to leverage all sorts of solutions from its link-up with Solazyme, its main interest has been an algae derivative that will replace palm oil in its foodstuffs and cosmetics.
It's a little late for Sinar Mas to worry about this, since Unilever stopped doing all business with the Indonesian environmental rogue conglomerate in 2009. Following pressure from Greenpeace surrounding deforestation and animal extinction issues practised by Sinar Mas and its subsidiaries in producing palm oil, Unilever joined Nestle in publicly announcing their business relationship was over. And it's beginning to discover that genuinely sustainable business practices can pay dividends.
Unilever is also the world's largest consumer of palm oil. While it currently gets supplies from 'sustainable' sources, the company evidently sees the writing on the wall for palm oil amongst its richer customers in the west and would like to find a replacement.
While this is good news for green campaigners, although it may be some time off, whatever cuts to demand Unilever and its competitors may make, replacement customers for Malaysia and Indonesian palm oil are likely to come from China and India.
Ethical consumer issues are still way off in these states.