Ocean Park: 2019 ethanol mergers and acquisitions below average

By Matt Thompson | March 20, 2020

Last year’s low margins impacted mergers and acquisitions in North America’s ethanol industry, according to a report released by Ocean Park. The report said that the total North American ethanol capacity bought and sold during 2019 was the second lowest in five years.

Those sales included four plants, only two of which were operating, with a combined capacity of 226 MMgy, the report says. The transactions included Federated Co-operatives’ purchase of Terra Grain Fuels’ plant in Belle Plaine, Saskatchewan; Attis Industries’ purchase of the Sunoco plant in Fulton, New York; and Glacial Lakes Energy’s acquisition of two Advanced BioEnergy plants in South Dakota.

“Low margins prompted strategic buyers to delay or curtail [merger and acquisition] activity,” the report says. “This buyers’ market drove down valuations.”

Jamey Cline, business development director at Christianson, PLLP said measuring mergers and acquisitions can provide a macroeconomic view of an industry. He also said that for the ethanol industry, last year’s decrease in the number of mergers and acquisitions may not be indicative of the low margin environment, but that buyers and sellers assign different value to assets. “Prices for assets are very low now; there is a large discount versus historical comparables,” he said. “Managers and boards of directors may feel that their assets will gain considerable value as conditions come back to ‘normal,’ or the industry improves over the next few months/years.”

According to the report, one transaction—Advanced BioEnergy’s sale to Glacial Lakes Energy—had a valuation of 55 cents per gallon, while the five-year average was 72 cents per gallon. In addition, the report says “Ocean Park tracked several broken sales processes” in 2019.