Lee Edwards says that for a small company like Madison, WI-based Virent, which he leads as president and CEO, partnering with larger businesses can help it do more, faster.
Virent, which is developing biofuels aimed at replacing crude oil, sports an impressive roster of collaborators. It includes Coca-Cola (NYSE: [[ticker:KO]]), Honda (NYSE: [[ticker:HMC]]), and Minnesota-based Cargill, the largest private company in the U.S.
Now comes news that another partner—Tesoro (NYSE: [[ticker:TSO]]), which Virent announced it was teaming up with earlier this year—has agreed to acquire Virent. It will operate as a wholly owned subsidiary of the San Antonio-based petroleum refiner.
“There’s a large capital investment required for [developing] new technologies, in the renewable space in particular,” Edwards says in a phone interview. “Together, we think we can develop a very compelling deployment plan, with Virent’s technology being incorporated and leveraged through Tesoro’s infrastructure.”
That infrastructure includes seven refineries, most of which are in the western U.S. Tesoro’s 2015 revenue was more than $28 billion, its lowest annual total in the past five years, according to data from MarketWatch.
A press release Tesoro issued Tuesday did not disclose financial terms of the deal, which is expected to close later this month.
Edwards says that he expects Virent and its 36 employees will remain in Madison. The company intends to honor all of the commitments it has previously made with customers and partners, he says.
Virent’s technology has a variety of applications. Edwards says one of its leading products is bio-based paraxylene, a plant-derived form of the chemical that can be used to make things such as plastic films and packaging containers, carpeting, shoes, and polyester fabrics for clothes and other textiles. And Virent’s base technology can help produce cleaner and more sustainable versions of liquid transportation fuels—including gasoline, diesel, and jet fuel—that help power automobiles and airplanes.
Becoming part of a bigger company will also help Virent navigate a regulatory landscape that is likely to continue shifting, Edwards says.
That involves policies at both the federal and state level. Many industry observers pay especially close attention to California, Edwards says, where two of Tesoro’s refineries are located. He points to a vote in that state last month that supported extending an effort aimed at decreasing greenhouse gas emissions by 2030 to levels 40 percent lower than what they were in 1990.
“I think that’s going to be really important to be part of,” Edwards says of discussions that involve lawmakers and key energy players like Tesoro. “There are a lot of other states neighboring California that are watching and, in some cases, emulating what California is doing. We want to be in the discussion, as opposed to taking a philosophy that says we’ll just wait and see what happens.”
Edwards says he doesn’t anticipate any significant changes in how Virent operates day-to-day once the deal becomes final.
“Tesoro is clearly aware of the benefits of being nimble and innovative, given this startup’s foundation and how we work,” he says of his company. “What’s important to them is protecting and nurturing it, as opposed to bringing it into the mother ship and making Virent become and act just like Tesoro. We’re going to be able to continue what we’re doing, but now we’ve got some added benefits over our shoulder.”
