Biofuels Business - August, 2011 - (Page 14)

F E AT U R E Making G iven today’s market conditions, opportunities abound for the sale and/or restructuring of ethanol plants and equipment. Credit markets continue to be tight, economies of scale are important, crush spreads are ﬂuctuating and there is continuing uncertainty with respect to policy issues, said Brad Kruse with BrownWinick law ﬁrm, during the International Fuel Ethanol Workshop & Expo (FEW) this June in Indianapolis, Indiana, U.S. Those factors increase the potential for consolidation within the ethanol industry. Overall merger and acquisition activity hit bottom during the recession in the ﬁrst quarter of 2009, but there was improvement through 2010 and so far in 2011, said Dean Edstrom, partner with Lindquist & Vennum.This year it appears that national merger and acquisition activity will be mixed with higher deal volume but continued economic weakness, he said. Equity capital markets are stronger and debt capital is available again, he said. Strategic buyers, those already involved in the industry in which they are looking to make an acquisition, have re-entered the market. Potential strategic buyers have an estimated $1.7 trillion in cash resources. Valuations are rising and there is competition among buyers, which will mean higher prices to sellers. Within the ethanol industry, plant valuations were high during the period of the development boom when acquirors 14 Preparing biofuels plants, equipment for auction, merger or acquisition by Susan Reidy such as U.S. Bioenergy and VeraSun Energy sought to build major companies in the industry, Edstrom said. After the crash in valuations, reﬁners such as Valero and Flint Hills acquired plants that had gone into bankruptcy or been surrendered to lenders. Today, various factors affect valuation in the ethanol industry, Edstrom said, including the volatility of crude and gasoline prices, volatility of corn prices and availability of alternative feedstocks. Political factors such as uncertainty regarding continuance of subsidies, the status of quotas, emissions standards and land use issues also are relevant. For ethanol, the bottom line results are unpredictable and it may be difﬁcult for buyers and sellers to agree on valuations, Edstrom said. Three kinds of deals continue to be likely: acquisitions by major players in the industry; combination of similar companies; and purchases by foreign buyers. Major players include ethanol companies such as POET and Green Plains Renewable Energy, commodity giants such as Archer Daniels Midland and Cargill, and petroleum reﬁners. These companies have signiﬁcant ﬁnancial resources, can take out existing debt August 2011 I BIOFUELS BUSINESS I www.BioFuelsBusiness.com http://www.BioFuelsBusiness.com

Table of Contents for the Digital Edition of Biofuels Business - August, 2011

Biofuels Business - August, 2011
CONTENTS
Growing in a recession
CALENDAR OF EVENTS
BIOFUELS BUSINESS NEWS
BIOFUELS MARKET REVIEW - Wheat
COUNTRY FOCUS - Focus on Costa Rica
FEATURE - Making the Deal
PRODUCTS & EQUIPMENT
SUPPLIER NEWS
AD INDEX

Biofuels Business - August, 2011