US bio-fuel producer Pacific Ethanol acquires rival Aventine for $190 mn
01 January 2015
Pacific Ethanol Inc, the leading producer of bio-fuels in Western US, has agreed to buy rival Aventine Renewable Energy Holdings Inc, for approximately $190 million in an all-stock deal, aiming to expand its business to the Midwest and Eastern regions of the country.
The acquisition will more than double Pacific Ethanol's annual production capacity and establish the company as the fifth- largest ethanol producer in the US.
Under the all-stock deal, Pacific Ethanol will issue 17.75 million new shares in exchange for all the outstanding shares of Aventine. That would value the deal at around $190 million, excluding Aventine's debt of around $135 million.
Pacific Ethanol's CEO Neil Koehler said: "With this transaction, Pacific Ethanol strengthens its unique production and marketing advantages by diversifying into two additional discrete markets and connecting its western markets with Aventine's Midwest and eastern markets for low-carbon renewable fuels."
Sacramento, California-based Pacific Ethanol is a leading producer and marketer of low-carbon renewable fuels in western US. The company serves oil and gasoline marketers who blend ethanol into gasoline. The company also markets co-products, including nutritional animal feed.
Pacific Ethanol operates and manages four ethanol production facilities located in Oregon, Idaho, and California, which have a combined annual production capacity of 200 million gallons.
Pekin, Illinois-based Aventine produces ethanol and related by-products. The products are distributed to leading energy and food companies in the US and around the world.
Aventine has a total ethanol production capacity of 315 million gallons per year comprising 160 million gallons from its plant in Pekin, Illinois and 155 million gallons from the facilities in Aurora, Nebraska.
The combined entity will have an annual production capacity of 515 million gallons of ethanol and together with Pacific Ethanol's marketing business, aims to sell of over 800 million gallons annually.
"The merger offers a rare opportunity to combine the experience, market presence and diversification that Aventine brings with our industry leadership in Western US markets,'' Koehler said.
''It will complement our existing business as we balance assets across new regional markets, expand our footprint for the production and marketing of low-carbon renewable fuels, diversify our technology and increase our mix of co-products," he added.
The deal is expected to close in the second quarter of 2015, subject to regulatory approvals and customary closing conditions. Further to the closing, Aventine will operate as a wholly-owned subsidiary of Pacific Ethanol.
The merger, when completed, is expected to be immediately accretive to earnings with expected synergies in ethanol operation and marketing.
On completion, Pacific Ethanol shareholders will own approximately 58 per cent of the combined entity while Aventine will hold the remaining 42 per cent.
Further to the merger news, shares in Aventine jumped 34 per cent to $12.10 while Pacific Ethanol stock fell 3.6 per cent to $10.33 yesterday in New York.