The blueprint changed.
Agriculture technology startup CoverCress, of Creve Coeur, hadn't planned to seek an exit until around 2025, CEO Mike DeCamp said, but a deal came sooner than originally expected.
On Monday, Germany-based pharmaceutical and agriculture giant Bayer said it entered into a shareholders’ agreement to acquire a 65% ownership stake in the St. Louis startup. It's a deal that comes before CoverCress has fully launched its product, a newly created cash crop for farmers, but follows a milestone agreement in recent months that propelled the commercial fortunes of CoverCress’ crop.
“We had no idea it would all evolve this quickly. It was a very pleasant surprise,” DeCamp said.
CoverCress, founded in 2013, has developed a rotational, oilseed cash crop to provide winter and spring soil cover between corn harvest and soybean planting. It says its crop, based on the native plant pennycress, will produce low carbon intensity oil used to produce fuels. The crop can also generate revenue as animal feed and high-protein meal, it says.
After conducting a soft launch of its crop, planting it on several hundred acres in 2021, CoverCress earlier this year announced it entered a long-term commercial partnership with Chesterfield-based agribusiness Bunge (NYSE: BG) that involves processing grain from its crop to develop renewable fuels. That deal came shortly after Bunge and energy giant Chevron Corp. (NYSE: CVX) formed a joint venture focused on using crops to create low-carbon renewable fuel sources. Bunge became an investor in CoverCress in 2021, leading its $8 million Series B-1 funding round.
The commercial deal inked earlier this year with Bunge marked a turning point for CoverCress, giving its crop both validation and a major commercial vector that could attract a buyer, several years ahead of its initial timeframe for an exit.
“Although we have not yet earned our first dollar — we’re pre-revenue — to have a dedicated customer under a committed contract like the (Bunge) off-take agreement, it creates a lot of value. The board made the decision to explore opportunities for an exit now instead of further down the road,” DeCamp said.
CoverCress worked with Newport Beach, California-based financial adviser Roth Capital Partners LLC to identify potential acquirers of the startup. It found its new majority owner in a longtime shareholder: Bayer (formerly Monsanto), whose corporate venture arm, Leaps by Bayer, has been an investor in CoverCress since 2015. CoverCress also has a team that consists of several expats from Monsanto, including DeCamp and founder and Executive Chairman Jerry Steiner. Bayer, which bought St. Louis-based agtech company Monsanto in 2018, has its Crop Science Division headquartered in Creve Coeur.
In addition to Bayer, other owners of CoverCress will include Bunge and Chevron, which will control the remaining 35% ownership stake not held by Bayer.
Bayer’s acquisition marks a major win for several local investors who had backed the company since its early days. While financials of the deal were not disclosed, DeCamp said it's a favorable outcome for its investors.
“I can tell you this was a home run for everybody that invested early in the company,” DeCamp said.
Local investors who have funded CoverCress include BioGenerator, St. Louis Arch Angels, Hermann Cos., Prolog Ventures, Cultivation Capital, Missouri Technology Corp., Yield Lab and the St. Louis County Port Authority.
“Make no mistake, the economics of this deal are fantastic. We were really happy with our return,” said Charlie Bolten, senior managing director of BioGenerator Ventures and former chairman of CoverCress.
BioGenerator, the startup investment and creation arm of local innovation hub BioSTL, helped launch CoverCress. Vijay Chauhan, then an entrepreneur in residence at BioGenerator, served as its first CEO. BioGenerator also provided CoverCress' first institutional capital and was a lead investor in several financing rounds for the startup.
Bolten said BioGenerator will use its return for investment in CoverCress to focus on creating other companies in the region.
“As great as the return is, we’ll spend it in one year building the next generation of companies," he said.
With its backing from local investors and support from high-profile local firms like Bayer and Bunge, Bolten and others said CoverCress offers a template on how St. Louis’ innovation economy can leverage its own assets to build cutting-edge companies.
“The end result with Bayer, Bunge and CoverCress all building this company in St. Louis is exactly what our city needs,” said Rick Holton Jr., chief operating officer of Hermann Cos.
Moving forward, CoverCress will remain an independent company and hopes this fall to grow its crop on 10,000 acres for its full commercial launch. The crop will be harvested in late spring of 2023 for its first customer, who will use its grain as an ingredient in feed pellets for broiler chickens, the company said.
As it launches its commercial operations, CoverCress also is expanding its local footprint. It recently tripled its lab space inside BRDG Park, located on the campus of the Donald Danforth Plant Science Center, and plans to expand its nearby headquarters at 1249 N. Warson Road by taking over warehouse space that is contiguous to its current footprint, DeCamp said.
The firms behind the deal
- Roth Capital Partners LLC - Financial adviser for CoverCress
- Faegre Drinker Biddle & Reath LLP - Legal counsel for CoverCress
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