Michelin to hold 90% shareholding in Enviro, Chile joint venture

Further details of Scandinavian Enviro Systems’ cooperation with Michelin have been revealed alongside a formal notice ahead Swedish firm’s EGM on the subject of its strategic partnership with Michelin. They include an overview of: licensing rules, percentage ownership of the two companies Chile recycling joint venture and how much Enviro is investing in that project.

Firstly, building on the news that Enviro and Michelin will be a shared plant for the material recycling of end-of-life vehicle tyres in Chile, Enviro has announced that the facility will be located in Chile and will have an annual recycling capacity of 25,000-30,000 tons. This joint venture will be 10 per cent owned by Enviro and 90 per cent owned by Michelin. Michelin will appoint the Board members of the company, but Enviro is entitled to appoint an observer, who will participate in meetings and receive the same information as the Board members.

Michelin’s obligations under the agreement include responsibility for detailed project design, construction, and deployment of the plant, and ensuring that the materials recycled in the plant are sold in the market and thereby generate revenue for the joint venture. Under the agreement, Michelin also has an obligation to ensure that the jointly owned plant in Chile has access to mining tyres for recycling.

Enviro’s acquisition of shares and injection of other funds to the joint venture is estimated to amount to approximately 20 million Swedish krone (£1.7 million; 2 million euros; US$2.4 million), which values the overall projects at roughly 10 times this figure.

Enviro and Michelin have also signed a pyrolysis technology licensing agreement that extends through to 2035 and entitles Michelin, in addition to the joint plant in Chile, to establish its own recycling plants based on Enviro’s technology in selected countries and to sell recycled products globally. This means Michelin will pay “a predetermined, fixed non-recurring amount and percentage-based…royalties” when it establishes further plants. For its part, Enviro retains the right to establish recycling plants in cooperation with other parties, but Michelin has a time-limited exclusivity to Enviro’s pyrolysis technology in Chile and in respect of mining tyres globally. The fact that the licence gives Michelin exclusive access to Enviro’s mining tyre pyrolysis recycling globally, is a particularly interesting detail and suggests that this is likely to be part of a wider cradle to grave mining strategy in Michelin’s specialty tyre business.