Mergers & Acquisitions

Pacific Ethanol acquires Illinois Corn Processing for USD76 million

Pacific Ethanol acquires Illinois Corn Processing for USD76 million
Photo courtesy of Pacific Ethanol.

Pacific Ethanol, Inc., a leading producer and marketer of low-carbon renewable fuels in the United States headquartered in Sacramento, Calif., has entered into a definitive agreement to acquire Illinois Corn Processing, LLC (ICP) for USD76 million, which includes USD15 million in working capital.

The transaction is expected to close in July 2017, subject to customary and other closing conditions.

ICP is a 90-million-gallon-per-year fuel and industrial alcohol manufacturing, storage and distribution facility adjacent to the Pacific Ethanol Pekin facility and is located on the Illinois River. ICP produces fuel-grade ethanol, beverage and industrial-grade alcohol, dry distillers grain (DDG) and corn oil. The facility has direct access to end-markets via barge, rail, and truck, and expands Pacific Ethanol’s domestic and international distribution channels.

“The acquisition of ICP underscores our commitment to making strategic investments that expand and diversify our production platform, increase revenue, expand our marketing reach and improve our overall profitability. Two-thirds of ICP’s production is currently dedicated to producing high-quality, premium-priced alcohol products for the beverage and industrial markets. The consolidation of the ICP facility with our two Pekin, Ill. plants integrates the Pekin site into a unique combination of technologies and products with a combined operating capacity of 250 million gallons per year,” said Neil Koehler, Pacific Ethanol’s president and CEO.

The acquisition is expected to yield approximately USD3 million in annual cost savings over the first six to 12 months after closing, including economies of scale in purchasing power, managing grain supply and transportation costs for DDG and ethanol.”

“We are excited to integrate ICP’s talented team and high-value assets into our operations. Upon completion of this acquisition, we will have nine production facilities with combined annual production capacity of 605 million gallons, strengthening our position as a leading producer and marketer of low-carbon renewable fuels in the United States,” Koehler added.

Of the USD76 million purchase price, USD30 million will be paid in cash and USD46 million will be paid through the issuance of non-amortising secured promissory notes due 18 months from closing. Pacific Ethanol intends to refinance these seller notes in the near future, and the company is currently engaged in negotiations with CoBank to secure a long-term financing vehicle, which – if consummated – will have terms similar to the existing non-recourse loan at the company’s Pekin facilities.

“In conjunction with this transaction we are also taking steps to further strengthen our balance sheet and increase our available liquidity. We have a commitment from Wells Fargo Bank to expand our borrowing capacity on our Kinergy line of credit facility from USD85 million to USD100 million, reduce the cost of the facility and extend the maturity date for an additional two years. We have also entered into an agreement to issue additional senior secured notes and amend our existing notes to increase the amount by approximately USD14 million, bringing the note total to approximately USD69 million with no material changes to the existing terms,” said Bryon McGregor, Pacific Ethanol CFO.

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