Pacific Ethanol, Inc. (NASDAQ:PEIX), a leading
producer and marketer of low-carbon renewable fuels in the United
States, entered into a definitive agreement to acquire Illinois
Corn Processing, LLC (“ICP”) for $76 million, which includes $15
million in working capital. The transaction is expected to close in
July 2017, subject to customary and other closing conditions.
Pacific Ethanol is hosting an investor conference call today at
1:30pm PT/4:30pm ET to discuss the acquisition. Dial-in details are
included at the end of this release.
ICP Acquisition Highlights
- Adds 90 million gallons per year of production capacity
- Diversifies fuel ethanol production with high-value beverage
and industrial grade alcohol
- Expands export opportunities
- Consolidates additional production in Pekin, Illinois with a
combined 250 million gallons of production
- Immediately accretive to earnings
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.
Neil Koehler, Pacific Ethanol’s president and
CEO, stated: “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,
Illinois plants integrates the Pekin site into a unique combination
of technologies and products with a combined operating capacity of
250 million gallons per year. We expect the acquisition will yield
approximately $3 million in annual cost savings over the first six
to twelve months after closing, including economies of scale in
purchasing power, managing grain supply and transportation costs
for DDG and ethanol.
“ICP has a history of consistent profitability
operating at better than average industry margins. As such, we
expect the ICP acquisition to be immediately accretive to earnings.
To further enhance the plant’s value, we have identified several
improvement initiatives. As we apply the best practices developed
at our plants, we expect to improve yields, increase plant capacity
utilization and continue to enhance ICP’s production processes
through additional capital investments.
“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.”
Acquisition TermsPacific
Ethanol will acquire Illinois Corn Processing, LLC from Illinois
Processing Holdings Inc., a wholly-owned subsidiary of SEACOR
Holdings Inc., and MGPI Processing, Inc. for $76 million, subject
to a customary working capital adjustment. Of the $76 million
purchase price, $30 million will be paid in cash and $46 million
will be paid through the issuance of non-amortizing 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.
Bryon McGregor, Pacific Ethanol’s CFO, stated,
“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 $85
million to $100 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
$14 million, bringing the note total to approximately $69 million
with no material changes to the existing terms.”
Further information on the terms of the ICP
acquisition and the senior secured note transaction can be found in
the company’s Form 8-K filed today with the Securities and Exchange
Commission.
Investor Conference CallThe
company is hosting an investor conference call today, June 27th, at
1:30pm PT/4:30pm ET to discuss the ICP acquisition. The webcast for
the call can be accessed from Pacific Ethanol's website at
www.pacificethanol.com. Alternatively, you may dial the following
number up to ten minutes prior to the scheduled conference call
time: 1-877-847-6066. International callers should dial
1-970-315-0267. The pass code will be 45009885#. If you are unable
to participate on the live call, the webcast will be archived for
replay on Pacific Ethanol's website for one year. In addition, a
telephonic replay will be available two hours after the conclusion
of the call on Tuesday, June 27, 2017 through 11:59 p.m.
Eastern Time on Tuesday, July 4, 2017. To access the replay, please
dial 1-855-859-2056. International callers should dial
1-404-537-3406. The pass code will be 45009885#.
About Pacific Ethanol,
Inc.Pacific Ethanol, Inc. (PEIX) is the leading producer
and marketer of low-carbon renewable fuels in the Western United
States. With the addition of four Midwestern ethanol plants in July
2015, Pacific Ethanol more than doubled the scale of its
operations, entered new markets, and expanded its mission to
advance its position as an industry leader in the production and
marketing of low carbon renewable fuels. Pacific Ethanol owns and
operates eight ethanol production facilities, four in the Western
states of California, Oregon and Idaho, and four in the Midwestern
states of Illinois and Nebraska. The plants have a combined
production capacity of 515 million gallons per year, produce over
one million tons per year of ethanol co-products – on a dry matter
basis – such as wet and dry distillers grains, wet and dry corn
gluten feed, condensed distillers solubles, corn gluten meal, corn
germ, corn oil, distillers yeast and CO2. Pacific Ethanol markets
and distributes ethanol and co-products domestically and
internationally. Pacific Ethanol’s subsidiary, Kinergy Marketing
LLC, markets all ethanol for Pacific Ethanol’s plants as well as
for third parties, approaching one billion gallons of ethanol
marketed annually based on historical volumes. Pacific Ethanol’s
subsidiary, Pacific Ag. Products LLC, markets wet and dry
distillers grains. For more information please visit
www.pacificethanol.com.
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995Statements and
information contained in this communication that refer to or
include the Pacific Ethanol’s estimated or anticipated future
results, including estimated synergies, or other non-historical
expressions of fact are forward-looking statements that reflect
Pacific Ethanol’s current perspective of existing trends and
information as of the date of the communication. Forward looking
statements generally will be accompanied by words such as
“anticipate,” “believe,” “plan,” “could,” “should,” “estimate,”
“expect,” “forecast,” “outlook,” “guidance,” “intend,” “may,”
“might,” “will,” “possible,” “potential,” “predict,” “project,” or
other similar words, phrases or expressions. Such forward-looking
statements include, but are not limited to, statements about the
benefits of the acquisition of ICP, including future financial and
operating results, Pacific Ethanol’s objectives, expectations and
intentions and the expected timing of completion of the
transaction; and statements about the contemplated CoBank, Wells
Fargo and senior secured note financing transactions. It is
important to note that Pacific Ethanol’s goals, plans, objectives,
expectations and intentions are not predictions of actual
performance. Actual results may differ materially from Pacific
Ethanol’s current expectations depending upon a number of factors
affecting Pacific Ethanol’s business, ICP’s business and the risks
associated with acquisition transactions. These factors also
include, among others, the inherent uncertainty associated with
financial projections; successful closing of the ICP acquisition;
subsequent integration of the ICP acquisition and the ability to
recognize the anticipated synergies and benefits of the ICP
acquisition; the risk that a condition to closing of the ICP
acquisition may not be satisfied on a timely basis or at all; the
failure of the proposed transaction to close for any other reason;
risks relating to the incurrence of debt in the ICP acquisition;
continued demand for Pacific Ethanol's and ICP's products; the
impact of competitive products and pricing; the risks and
uncertainties normally incident to the ethanol production and
marketing industries; the risks and uncertainties normally incident
to the alcohol, distillers grain and corn oil production and
marketing industries; ICP continuing to operate profitably; changes
in generally accepted accounting principles; successful compliance
with governmental regulations applicable to Pacific Ethanol's and
ICP’s facilities, products and/or businesses; changes in the laws
and regulations; changes in tax laws or interpretations that could
increase Pacific Ethanol's consolidated tax liabilities; the loss
of key senior management or staff; successful refinancing of the
seller notes; successful negotiation and closing of the CoBank
facility, the Wells Fargo facility and Pacific Ethanol’s additional
senior secured notes; and other events, factors and risks
previously and from time to time disclosed in Pacific Ethanol’s
filings with the Securities and Exchange Commission including, but
not limited to, those factors set forth in the “Risk Factors”
section contained in Pacific Ethanol’s Form 10-Q filed with the
Securities and Exchange Commission on May 10, 2017 and from time to
time in Pacific Ethanol's other investor communications. Except as
expressly required by law, Pacific Ethanol disclaims any intent or
obligation to update or revise these forward-looking
statements.
Company IR Contact:
Pacific Ethanol, Inc.
916-403-2755
Investorrelations@pacificethanol.com
IR Agency Contact:
Becky Herrick
LHA
415-433-3777
Media Contact:
Paul Koehler
Pacific Ethanol, Inc.
916-403-2790
paulk@pacificethanol.com
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