Analysis: With Oceansix Agreement Signed, Alkemy Faces a Bright Future

Alkemy Solutions (TSXV: AKMY) is an environmental technology company based in Israel that has developed an innovative plastic recycling process addressing uneconomic parts of the plastic recycling sector. Alkemy’s solution is unique in that its dynamic one-step waste-to-product process does not require separate recycling and production plants which allow the company to reduce the cost of recycled plastic. With its innovative technology, Alkemy is addressing a significant global environmental challenge and the company has global ambitions as a result. The company recently announced the acquisition of Oceansix which represents a significant step towards realizing its global ambitions. This acquisition has a number of noteworthy implications for investors.

Oceansix, a plastics recycling innovator:

Oceansix is a German-based company focused on developing innovative technologies and product solutions with a focus on game-changing ways to recycle post-consumer plastic waste. The company is a spinoff from Cabka, a global leader in transforming hard-to-recycle plastic waste into reusable pallets. Cabka is currently in discussions with Euronext-listed Dutch Star Companies about a potential business combination. Oceansix is being sold to Alkemy by Mr Gat Ramon, the visionary founder and managing director of Cabka.

The acquisition agreement has been structured around milestone equity issuances to Mr Ramon based upon the establishment of operational manufacturing sites outside of Israel, as well as periodic sales targets utilizing Oceansix’s technology. Not only does this incentivize the Oceansix team to perform, and the establishment of a productive partnership with Mr Ramon, it’s also a prudent deal structure that mitigates against the acquisition risks for Alkemy.

A strategic acquisition

The Oceansix acquisition is a significant step forward for Alkemy for two key reasons.

Firstly, it provides Israel-based Alkemy with a foothold in mainland Europe, one of the world’s largest plastic recycling markets at a time when the EU has set a target for plastic packaging recycling of 50% by 2025. This target signals plastic recycling is at the core of the EU’s shift towards a more circular economy and implies significant growth for the plastic recycling sector in the coming years. Alkemy management recognizes the significance of the opportunity. They plan to leverage Oceansix’s market position by establishing a number of production centers in Europe.

And secondly, there is a number of synergies expected from combining Alkemy and Oceansix, particularly in their combined intellectual property. The plastic recycling industry depends on innovative solutions which address the logistical and economic challenges inherent in recycling, so the acquisition is a significant opportunity to bring together the research and development learnings of two emerging sector leaders. Alkemy management plan to conduct R&D on additional profitable product lines which emerge from the combined group’s intellectual property.

Positioned to grow

The combined Alkemy-Oceansix group is positioned to become a global market leader in the development, production and sale of recycled plastic products utilizing post-consumer and post-industrial plastics. By leveraging the combined group’s intellectual property strengths and Oceansix’s strong position in Europe, Alkemy is accelerating its global expansion at a time when demand for innovative and economic plastic recycling solutions is structurally growing. The company is positioned for strong growth as a result.