Investment banks buy recycler PureCycle, plan to take it public
Two investment banks are buying polypropylene recycler PureCycle Technologies and taking it public in a $1.2 billion deal they said will provide funding for a rapid expansion of the chemical recycling firm.
Roth Capital Partners LLC and Craig Hallum Capital Group LLC announced Nov. 16 that they're buying PureCycle and announced investment plans they said will give it recycling capacity of more than 1.2 billion pounds in five years.
"This transaction represents a key milestone in PureCycle's mission to transform polypropylene into a recyclable and sustainable product," said CEO Mike Otworth.
The announcement from the companies disclosed new investment plans, saying that PureCycle would open a facility in Europe with 107 million pounds of capacity in 2023 and a "cluster" site in the U.S. with five production lines capable of recycling more than 825 million pounds of PP a year.
Along with the company's previously disclosed plans for its first plant — a 107 million pound capacity facility in Ironton, Ohio, that's slated to reach full capacity in 2023 —the partners said PureCycle will have more than 1.2 billion pounds of annual capacity in five years.
PureCycle said in the statement it plans to have 30 commercial lines operating globally by 2030 and 50 lines by 2035.
Otworth said PureCycle believes its technology, which was developed by Procter & Gamble Co. and uses a solvent-based purification process, can return waste PP into virgin-like material. The company said that can overcome some of the traditional challenges with mechanical recycling of polypropylene, like odor.
Only about 1 percent of the more than 160 billion pounds of PP used globally each year is recycled, he said.
John Lipman, managing director for investment banking for Minneapolis-based Craig Hallum Capital, said the two investment banks believe PureCycle's technology gives the firm an advantage over competing processes to recycle PP.
"We believe there's a barrier to entry they have created with this technology," Lipman said.
PureCycle said it expects its first seven manufacturing plants to have earnings before interest, taxes, depreciation and amortization margins above 50 percent in 2024.
Otworth said in a webinar to announce the deal that they believe the current poor recycling rates for PP and the pressures that major consumer product companies face around plastics packaging creates a strong market for recycled PP.
"Our customers are now willing to pay a premium over the price of virgin resin," he said, noting that the company has agreements with a variety of customers, including P&G, L'Oréal, Milliken & Co., Aptar and BMW I Ventures.
Otworth pointed to increasing regulations worldwide aimed at reducing the amount of single-use plastics as a driver for demand.
"Some of these measures are rather punitive in nature," Otworth said. "The big volume users of plastics around the world know they're going to have to take very substantial action to try to increase the amount of recycled plastic they are using while reducing their utilization of single-use plastics."
The companies said that PureCycle will trade on the Nasdaq Capital Market under the ticker symbol PCT and said financial terms for the deal will add about $667 million to PureCycle's balance sheet.
The deal includes issuing about $835 million in new common stock in Roth CH Acquisition Co. Inc., a special purpose investment vehicle created for the transaction, to current PureCycle shareholders.
The deal is expected to close in the first quarter.