MONTREAL - BioAmber Inc. has signed a non-binding letter of intent with South Korean-based CJ CheilJedang Corp. (CJCJ). Under the terms of the agreement, BioAmber and CJCJ plan to establish a joint venture (JV) in China to produce up to 36,000 metric tons of bio-succinic acid annually and commercialize the output in Asia.

The goal is to competitively produce bio-succinic acid in China and quickly penetrate the world's largest succinic acid market. This can be achieved rapidly, cost effectively and with limited capital investment by retrofitting an existing CJCJ fermentation facility with BioAmber's succinic acid technology. CJCJ would incur all capital costs required to retrofit its fermentation facility, including the capital needed during plant commissioning and startup, and production would begin in the first quarter of 2018. If market demand was to subsequently exceed production capacity, the JV could expand production through debottlenecking or additional investment. The partners would also have a mutual right-of-first-refusal to retrofit additional CJCJ fermentation facilities globally.

CJCJ would own 65% of the JV and BioAmber would own 35%. The JV would pay BioAmber a technology royalty for having access to its bio-succinic acid technology and would pay CJCJ a tolling fee for producing bio-succinic acid on behalf of the JV.  Both partners would be entitled to a share of the profits equal to their respective equity ownership positions.

The proposed JV is subject to certain conditions, including technical and commercial due diligence, with the definitive agreements expected to be signed by July 2017. As part of the letter of intent, BioAmber will be selling CJCJ bio-succinic acid manufactured at its Sarnia, Ontario, plant so that CJCJ can undertake market development in China and South Korea in the first half of 2017.

"While we remain focused on ramping up our Sarnia plant and building a second plant in North America, this JV is an opportunity for BioAmber to accelerate the deployment of its bio-succinic acid technology on a global scale without capital investment," said Jean-Francois Huc, BioAmber's CEO. “This joint venture would allow us to quickly penetrate the Chinese and broader Asian market and accelerate cash flow and earnings for our shareholders. It would also serve as a blueprint for the build-out of additional bio-succinic acid production with very limited capital investment.”

"This JV is an opportunity for CJCJ to leverage BioAmber's unique, low-pH yeast technology and utilize our existing fermentation assets more effectively in order to competitively supply the growing market for bio-succinic acid in Asia," added Dr. Hang Duk Roh, head of CJ CheilJedang BIO.

Fabrice Orecchioni, BioAmber's COO, added, "CJCJ has visited our Sarnia facility, and we have visited their intended plant in China. Both partners are confident that the China plant can be reconfigured to quickly produce bio-succinic acid for a fraction of what it cost us to build our Sarnia facility."