Pacific Ethanol to acquire Illinois Corn Processing


June 27, 2017

Pacific Ethanol Inc. (NASDAQ: PEIX) of Sacramento says it is buying Illinois Corn Processing LLC for $76 million, which includes $15 million in working capital.

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

The acquisition adds 90 million gallons per year of production capacity and diversifies the company’s fuel ethanol production with high-value beverage and industrial grade alcohol.

It also will consolidate additional production in Pekin, Illinois with a combined 250 million gallons of production, the company says.

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 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,” says Neil Koehler, Pacific Ethanol’s president and CEO. “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.”

Upon completion of the acquisition, Pacific Ethanol will have nine production facilities with combined annual production capacity of 605 million gallons.

Pacific 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.

“In conjunction with this transaction we are also taking steps to further strengthen our balance sheet and increase our available liquidity,” says Bryon McGregor, Pacific Ethanol’s CFO. “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.”