Burcon NutraScience has announced plans to submit a formal proposal to acquire the Canadian plant protein processor Merit Functional Foods business, which went into receivership on March 1, 2023.
Burcon, Merit’s technology partner owning a 31.6% share, said in a statement that it remains actively engaged in discussions with PricewaterhouseCoopers, the financially distressed company appointed receiver.
Merit was established in 2019 as a joint venture to enable the next generation of plant-based foods and beverages. In February 2021, after two years of its announcement, the company officially opened its pea and canola protein plant in Winnipeg, deploying Burcon’s patented technology.
Bunge Corporation acquired a 25% stake in mid-2020 to expedite the completion of the protein facility. At the time, Merit also secured a debt financing package of up to $85 million of capital from a syndicate of lenders. It also received funding from Protein Industries Canada in 2021.
A strong and strategic fit
As a global leader in developing functionally and nutritionally valuable plant proteins, Burcon believes it is uniquely positioned to bring the plant protein processor’s business to profitability.
Burcon has an innovation portfolio beyond pea and canola (soy, sunflower, and hemp) that can access new markets, achieving faster growth. Additionally, the company has the process engineering expertise to improve bottom-line performance through production efficiency gains.
Burcon’s chief executive officer Kip Underwood said: “Merit’s facility was designed and built to produce protein ingredients using Burcon’s technologies. Merit’s business is a strong strategic fit for Burcon by providing additional revenue sources, better connection to customers and markets, and direct influence over the manufacture of Burcon’s protein ingredients.”
The impact of Covid
Last December, Merit launched its first “superior quality” certified organic pea protein. Last year, it introduced a protein-based, clean-label solution to replace methylcellulose in food and meat alternative applications. Its proteins have been widely used in alt dairy and meat.
In his LinkedIn post late last week, Merit co-CEO Ryan Bracken said inflationary and COVID-related pressures led to cumulative losses and cash flow deficiencies.
“While our proteins have been formulated into countless products globally, we couldn’t quite get to the level of cashflow needed to operate the business profitably, quick enough. The current external environment is tougher now than ever before on start-ups. We started up prior to understanding the full impact of what Covid could do to our business plan.”