BP To Buy Cellulosic Ethanol Business from Verenium

BP (NYSE: BP) will acquire Verenium Corporation’s (Nasdaq: VRNM) cellulosic biofuels business for $98.3 million, the companies announced Thursday.

The deal includes Verenium’s facilities in Jennings, LA and San Diego, CA.

Verenium will retain its commercial enzyme business, including its biofuels enzymes products and have the right to develop its own lignocellulosic enzyme program. Verenium will also retain select R&D capabilities, as well as rights to access select biofuels technology developed by BP using the technology it is acquiring from Verenium through this agreement.

Carlos A. Riva, President and CEO of Verenium said BP is the right company to make the investment needed to carry the cellulosic technology through to commercialization.

"As a result of this transaction, Verenium will have the resources to grow our commercial enzyme business while maintaining strategic access to the emerging cellulosic ethanol market in a manner that better fits our resources," Riva said.

Under the agreement, BP will become the sole investor in Vercipia Biofuels, a 50-50 joint venture formed by BP and Verenium in February 2009, and will independently manage all of Vercipia’s activities going forward. Similarly, Galaxy Biofuels, a 50-50 joint development company owned by BP and Verenium, will be owned 100% by BP.

This transaction is expected to close in 3Q10.

Verenium currently sells enzymes developed using its R&D capabilities to industrial customers globally for use in markets including biofuels, animal health and oil seed processing.

Since 2006, BP has announced investments of more than $1.5 billion in biofuels research, development and operations, and has announced investments in production facilities in Europe, Brazil and the US. This includes partnerships with other companies to develop the technologies, feedstocks and processes required to produce advanced biofuels, and $500 million over 10 years in the Energy Biosciences Institute (EBI), at which biotechnologists are investigating applications of biotechnology to energy.