- Pharma and biotech giant Bayer has increased its investment in low-carbon oilseed producer CoverCress to take a 65% majority stake.
- The remaining 35% of CoverCress will remain with agribusiness Bunge and energy company Chevron U.S.A., according to a shareholders agreement signed by the two companies and Bayer.
- The deal will enable CoverCress to further commercialize its namesake winter oilseed product into a cover crop that can provide lower carbon fuel feedstock to the renewable fuel industry while also bringing farmers another source of revenue during the growing season.
Why it matters:
The deal marks an exit for CoverCress’s founders and early investors, who include Innova Memphis, Middleland Capital, Fulcrum Global Capital, Prelude Ventures, St. Louis Arch Angels, REG Ventures — the subsidiary of US biodiesel producer Renewable Energy Group (REG), and Prolog Ventures. It’s unclear what the valuation was — the company’s last Series B1 round closed on $8 million.
While cover cropping is still relatively rare in the US, it’s on the rise and the government wants to double cover crop acreage to 30 million acres by 2030 under a new Department of Agriculture (USDA) conservation program. Given there’s about 250 million acres of cropland in the US, there’s still a long way to grow from there.
The benefits of planting CoverCress go beyond the well-documented ability to improve soil health and reduce erosion by keeping land planted in the off-season; CoverCress is also a cash crop.
Derived from pennycress, a plant native to North America, and thanks to some CRISPR-based gene-editing, CoverCress has multiple uses. Oil extracted from the plant’s grain can be made into a lower carbon renewable diesel; it can also be used as high-protein meal for animal feed. Both uses can bring additional revenue to farmers’ coffers while also providing carbon sequestration benefits.
Bayer, Bunge, and Chevron have all previously invested CoverCress and helped the company get “buy-in” from the entire “farm-to-fuel” supply chain. Via its Leaps by Bayer investment arm, Bayer has enabled CoverCress to do more developments around gene-editing technologies. Bunge and Chevron, meanwhile, have supported the process of turning oilseed into renewable diesel.
The collaboration between all three companies stands to give CoverCress the resources needed to further develop and commercialize its product. The timing of the deal couldn’t be more appropriate. Recent heatwaves in parts of the world along with calls for greater food security have increased the urgency for new crop solutions.