SK global chemical to acquire 10 per cent equity stake in JV partner Loop Industries
Loop Industries announced that it intends to form a strategic partnership with SK global chemical Co. Ltd. , a subsidiary of South Korea’s SK Group to accelerate the commercialization of Loop’s PET plastic and polyester fibre manufacturing technology throughout Asia.
Loop’s patented technology has been invented to upcycle PET waste into virgin-quality PET using low heat and no added pressure. This low energy process is claimed to allow Loop to eliminate contaminants, such as dyes, additives, and other impurities, preventing otherwise unrecyclable materials like coloured and contaminated plastics or textiles from ending up in landfills and natural areas.
Joint venture partnership
Loop and SKGC intend to form a joint venture with exclusivity to build sustainable PET plastic and polyester fibre manufacturing facilities throughout Asia, making it a key market in terms of plastic manufacturing, consumption and waste. Under the terms of the Memorandum of Understanding (“MOU”) for the proposed joint venture, SK global chemical will own 51 per cent of the joint venture and Loop will own 49 percent. Loop will also receive a recurring annual royalty fee as a percentage of revenue from each facility for the use of its technology.
SKGC has issued a separate press release discussing Loop’s technology and SKGC’s objectives for the joint venture. As stated in SKCG’s press release, initial discussions between the partners contemplate beginning preparation on a first facility located in South Korea in the first half of 2022 and the construction of four facilities in Asia by 2030, with projected combined consumption of waste PET plastic and polyester fibre amounting to approximately 400,000t.
Once fully operational, these four facilities could claim an annual savings of 632,100 metric tons of CO2, which is the equivalent of more than 2.5 billion kilometers driven by an average passenger vehicle or ~270 million liters of gasoline consumed.
Strategic equity investment
In addition, Loop and SKGC have concluded a definitive agreement for SKGC to become a strategic investor in Loop. SKGC will purchase 4,714,813 new treasury common shares of Loop at a price of $12 per share, for total consideration of $56.5 million. Loop intends to use these proceeds toward the funding of its planned Infinite Loop manufacturing facility at its recently acquired site in Bécancour, Québec.
SKGC is also being granted options to acquire an additional 461,298 common shares at $11 per share within the next 12 months, 4,714,813 common shares at a price of $15 per share, within the next 3 years, and a further 2,357,407 shares at $20 per share, conditional upon the timing of construction of the first Asian manufacturing facility. SKGC is being granted a seat on Loop’s Board of Directors and as such is expected to provide valued input into the continuing development of Loop’s global commercialization strategy.
Closing of the strategic equity investment is as soon as practical and no later than 90 days from announcement.
