STOCKHOLM—Michelin is investing in Swedish tire pyrolysis company Scandinavian Enviro Systems A.B. as part of a move to improve its sustainability portfolio and to help scale up Enviro's "innovative" recycling technology.
The two sides have signed a letter of intent regarding a long-term partnership, through which will acquire Michelin 20 percent of Scandinavian Enviro's shares to become the company's largest shareholder.
The deal with Michelin, disclosed April 15, includes a joint supply agreement between the two companies, and will allow for the scaling up Enviro's pyrolysis technology through a "jointly owned" tire recycling plant.
Michelin said it would bring its "industrial know-how" to the plant's construction project and contribute its technologies in R&D, development and production.
Enviro, Michelin added, will "bring its patented pyrolysis technology, which will produce high-quality products."
Enviro has developed a process using its "proprietary technology" to recover oil, steel and carbon black from end-of-life tires. Michelin did not elaborate on why it considers Enviro's technology innovative.
Michelin said the partnership perfectly complements its "all-sustainable" vision, which aims to use 80 percent sustainable content in its products by 2048.
"After the acquisition of Lehigh Technologies in 2017, ... this is a further proof of Michelin's long-term commitment to recycling and sustainable mobility," Sonia Artinian-Fredou, Michelin's high technology materials business director for services and solutions, said in a statement.
In addition, the two companies will work toward expanding the applications for the materials recovered through the pyrolysis process.
Enviro said it foresees major opportunities for the further refinement of its technology.
"By further developing our technology, we will also be able to recycle other finite and strategic materials, as well as expanding the area of use for the recovered carbon black, so that it can be used for more products," Enviro Systems CEO Thomas Soerensson said in a news release.
Enviro said the partnership would provide it with "significantly improved conditions" for the establishment of its recycling plants globally.
"This collaboration means that we can become established globally in a way that we would never have managed alone," Enviro Chairman Alf Blomqvist said in a statement.
As part of the deal, Enviro will conduct a private placement of $3.25 million; Michelin Ventures S.A.S. will subscribe for 116.2 million shares, equal to 20 percent of Enviro's shares.
The placement, according to Enviro, is expected to be completed by April 29, at the latest.
Based on the companies' agreement, Enviro can collaborate with other tire makers or suppliers to the tire industry until July 31.
A final agreement on the partnership is expected to be signed by mid-year, the company added.
Last September, Scandinavian Enviro established a holding company in the U.S. to facilitate the establishment of co-owned recycling plants in the region. The move is part of the Swedish company's "co-ownership" strategy, under which the firm is pursuing joint venture projects in the U.S. with Treadcraft Ltd. in New York and EE-TDF Cleveland L.L.C. in Texas, both of which have been delayed for a variety of reasons.