Under the terms of the agreement, Renewable Energy Group will pay Sanimax approximately $11 million in cash and will issue 500,000 shares of its common stock in exchange for the biorefinery and related assets.
Renewable Energy Group will also pay Sanimax up to an additional $5 million in cash over a period of up to seven years after closing based on the volume of biodiesel produced at the plant, which will be re-named REG Madison, LLC.
Sanimax operates a grease processing facility at the same location, although that facility is not part of the acquisition. Closing of the transaction is subject to customary closing conditions.
“With growing biomass-based diesel volumes in the U.S., REG is continuing its growth as well,” said Daniel Oh, Renewable Energy Group's president and CEO.
“This plant will add to our network of lower-cost, lower-carbon intensity, multi-feedstock biorefineries. Having a dependable feedstock supplier co-located next door should provide an opportunity for additional cost savings and logistical advantages. We have done business with Sanimax and the Couture family for many years and look forward to a continuing prosperous relationship," Oh said.
The biorefinery is located just north of Madison, Wisconsin and began production in 2007. It produces biodiesel from lower cost feedstocks including yellow grease, rendered animal fats, and inedible corn oil in addition to refined vegetable oils.
The facility has both truck and rail capabilities.
“This agreement is in line with our business plan to improve focus on our core businesses,” said Martin Couture, Sanimax’s president and CEO. “We are pleased that our biodiesel employees will have an opportunity to pursue their career with an industry leader. This is a reflection of the excellent work they have achieved over the past several years. Sanimax looks forward to continuing its excellent business relationship with REG as a shareholder and a reliable feedstock supplier.”
Upon closing of the transaction, Renewable Energy Group will have 11 active biomass-based diesel refineries in seven states. There are currently three in Iowa, two in Illinois, two in Texas, and one each in Louisiana, Minnesota, Washington and Wisconsin.
They have a combined production capacity of 452 million gallons.
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