Oxford Catalysts acquire Velocys

has announced the acquisition of US-based

from Battelle Memorial Institute for £21.4m, £3.1m of which will be in cash.

Velocys was formed in 2001 to commercialise microchannel technology for the production of synthetic fuels and commodity chemicals. Velocys microchannels are used in chemical processors to enable precise temperature control during the Fischer-Tropsch process, a technology that produces second-generation biofuels from agricultural waste.

To work efficiently, microchannel reactors require a catalyst with a high level of activity to boost fluid conversion rates. Velocys and Oxford Catalysts have been working together since May 2007 to test Oxford Catalysts’ Fischer-Tropsch (FT) design which has shown to be 15 times more productive than conventional fixed bed catalysts.

Both companies have a portfolio of applications but have focused their efforts on improving the FT process for producing synthetic fuels. By combining their expertise, the directors hope that time to market will be accelerated and cost of commercialisation reduced.

Dr Pierre Jungels, non-executive chairman of Oxford Catalysts, said: ‘The combination of Oxford Catalysts and Velocys creates a powerful player in the fast emerging market for small-scale synthetic fuels production. There is a natural fit between the two companies' technologies which will enable us to meet the strong demand for smaller scale applications of FT, namely from captured flare gas, stranded gas reserves and biomass.’

To fund the cash element of the acquisition Oxford Catalysts intends to raise approximately £10.3m via a conditional, non pre-emptive institutional placement. The transaction will require approval by shareholders of Oxford Catalysts at a general meeting of the company on November 19.