MGP's majority interest to be purchased
March 1, 2006
In mid-February, Lakota, Iowa-based Midwest Grain Processors LLC (MGP) announced the signing of a contingent purchase agreement with an Australian-based investment group calling itself Global Ethanol, according to MGP Board Chairman Dave Nelson. If approved and finalized, Global Ethanol will purchase 60 percent ownership of MGP, representing a controlling interest in the ethanol production company with the slogan, "Ethanol … and more."
"Global Ethanol is a brand new company with a lot of equity behind them," Nelson told EPM. "They've delved in wind energy and ethanol in Australia, but they decided that they couldn't wait for the Australian ethanol market to get going, so they got involved here in the U.S." Nelson said Global Ethanol is made up of some fairly big ethanol players well known to the industry, but he couldn't specify names at this time.
According to Nelson, the first step in solidifying the purchase agreement has already been completed, in that MGP received an independent opinion stating that Global Ethanol's business proposition to MGP's current owners is fair. The opinion was given Feb. 22 by investment banking firm Duff & Phelps LLC.
"We're currently sending a letter to our membership so they don't have to hear everything from the media," Nelson said. MGP's current owners are MGP Cooperative, a farmer-owned co-op with nearly 1,300 farmer members in 11 Midwestern states; and Great Lakes Ethanol LLC in Riga, Mich., an ethanol plant under construction with more than 300 members, 98 percent of which are Michigan farmers. Together, MGP Cooperative and Great Lakes Ethanol own approximately 97 percent of MGP.
"In two weeks (around mid-March), we'll have a disclosure statement disclosing the deal," Nelson continued. "After that, we'll have two or three meetings in Iowa, Illinois and Michigan—where most of our current members live—and then we'll have a vote." A simple majority vote is needed from the company's current owners to approve the acquisition. The vote is expected toward the end of March.
"If it's a favorable vote at the end of March, the deal would be complete by April 3," Nelson told EPM. "We'd be getting cash to our current owners by July 1." Nelson said he couldn't disclose how much Global Ethanol offered to pay for the controlling interest in MGP.
According to Nelson, talks between MGP and Global Ethanol initially began back in September. "We talked about philosophies and strategic plans," Nelson recalled. "Around the first of the year, talks had gotten more heated. They got to know who we are, and we got to know more about who they are. We started talking more about a deal. Then, around the first of February, they came to us with an offer, and we had to shut down trading of the co-op shares."
Aggressive expansion plans for MGP's facilities await the acquisition's approval. MGP's Lakota, Iowa, production facility just recently completed a major expansion project that doubled the plant's capacity to 100 Mmgy. Also, Great Lakes Ethanol plans to come on line with a nameplate production capacity of 57 MMgy in December. If the deal goes through, MGP plans to immediately double capacity at both sites. "We will start the air permitting process at Lakota and Riga, and get ready to expand," Nelson said. "If the acquisition is successful, we'll be breaking ground in Lakota this fall." MGP would expand production capacity in Lakota by building a second 100 MMgy plant right next to its current facility, according to Nelson. "And as soon as Riga gets operating, we'll start expanding that to 100 MMgy also," he said.
Global Ethanol has also expressed interest in purchasing Southwest Ethanol, which has been approved to build a 60 MMgy ethanol plant near McCook, Neb., but was lacking funds to break ground, according to Nelson. Again, provided the acquisition gets approved, MGP would like to break ground at the McCook site this summer.
With these expansions virtually on the drawing boards already, and through inevitable future acquisitions, buyouts or mergers, Nelson stated that MGP is placing its ethanol production target at the 1 billion gallon mark by 2012.
"Global Ethanol is a brand new company with a lot of equity behind them," Nelson told EPM. "They've delved in wind energy and ethanol in Australia, but they decided that they couldn't wait for the Australian ethanol market to get going, so they got involved here in the U.S." Nelson said Global Ethanol is made up of some fairly big ethanol players well known to the industry, but he couldn't specify names at this time.
According to Nelson, the first step in solidifying the purchase agreement has already been completed, in that MGP received an independent opinion stating that Global Ethanol's business proposition to MGP's current owners is fair. The opinion was given Feb. 22 by investment banking firm Duff & Phelps LLC.
"We're currently sending a letter to our membership so they don't have to hear everything from the media," Nelson said. MGP's current owners are MGP Cooperative, a farmer-owned co-op with nearly 1,300 farmer members in 11 Midwestern states; and Great Lakes Ethanol LLC in Riga, Mich., an ethanol plant under construction with more than 300 members, 98 percent of which are Michigan farmers. Together, MGP Cooperative and Great Lakes Ethanol own approximately 97 percent of MGP.
"In two weeks (around mid-March), we'll have a disclosure statement disclosing the deal," Nelson continued. "After that, we'll have two or three meetings in Iowa, Illinois and Michigan—where most of our current members live—and then we'll have a vote." A simple majority vote is needed from the company's current owners to approve the acquisition. The vote is expected toward the end of March.
"If it's a favorable vote at the end of March, the deal would be complete by April 3," Nelson told EPM. "We'd be getting cash to our current owners by July 1." Nelson said he couldn't disclose how much Global Ethanol offered to pay for the controlling interest in MGP.
According to Nelson, talks between MGP and Global Ethanol initially began back in September. "We talked about philosophies and strategic plans," Nelson recalled. "Around the first of the year, talks had gotten more heated. They got to know who we are, and we got to know more about who they are. We started talking more about a deal. Then, around the first of February, they came to us with an offer, and we had to shut down trading of the co-op shares."
Aggressive expansion plans for MGP's facilities await the acquisition's approval. MGP's Lakota, Iowa, production facility just recently completed a major expansion project that doubled the plant's capacity to 100 Mmgy. Also, Great Lakes Ethanol plans to come on line with a nameplate production capacity of 57 MMgy in December. If the deal goes through, MGP plans to immediately double capacity at both sites. "We will start the air permitting process at Lakota and Riga, and get ready to expand," Nelson said. "If the acquisition is successful, we'll be breaking ground in Lakota this fall." MGP would expand production capacity in Lakota by building a second 100 MMgy plant right next to its current facility, according to Nelson. "And as soon as Riga gets operating, we'll start expanding that to 100 MMgy also," he said.
Global Ethanol has also expressed interest in purchasing Southwest Ethanol, which has been approved to build a 60 MMgy ethanol plant near McCook, Neb., but was lacking funds to break ground, according to Nelson. Again, provided the acquisition gets approved, MGP would like to break ground at the McCook site this summer.
With these expansions virtually on the drawing boards already, and through inevitable future acquisitions, buyouts or mergers, Nelson stated that MGP is placing its ethanol production target at the 1 billion gallon mark by 2012.
Advertisement
Advertisement
Upcoming Events
