Martek announced plans to for restructuring earlier in the year in order to bring cots savings to the business. A company spokesperson explained that the company has been renegotiating its long-term sole source supply agreements with infant formula manufacturers for DHA and ARA.
Since the original contracts were signed with the likes of MeadJohnson date as far back as 2002, the company has made advances in production efficiency. The new prices negotiated with customers do still require it to restructure operations to take out unnecessary costs however.
Surplus to requirements
The spokesperson said that Martek has not been doing the majority of its manufacturing in Winchester for some time. Its headquarters are in Columbia, Maryland, but it has other R&D and manufacturing facilities in Colorado, and South Carolina.
The sale to Alltech includes most of the land, buildings and equipment, including production-scale fermentation and recovery equipment, but crucially it does not include any rights to Martek strains, patents or other IP. Moreover, Alltech will not be able to produce any omega-3 or omega-6 polyunsaturated fatty acids at the site for the next decade.
Martek is keeping around 50 employees based at Winchester, however, mostly in R&D and innovation. Limited production capacity is being retained as a back up.
The transaction is expected to close by 30 November and Alltech will pay around $14m over the next 4 years.
The company has not said how much it expects to save as a result of selling Winchester assets, but non-cash charges of $28-32m will be recorded in Q4.
Martek originally had a staff of 95 at Winchester, but started the separation process with 45 of them earlier this year. Employee separation costs amount to around $1m.
As to whether Alltech will be able to create new jobs, the spokesperson said: “That would be the hope. It would be a good thing for the region is Alltech grows the business.”