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United States : GREEN PLAINS agreed $36.7m in asset purchase deal to buy cattle-feeding operations of CARGILL.

The NASDAQ-listed Green Plains Inc., on Wednesday has made an announcement on the settlement of a deal with Cargill to buy certain businesses of the latter.

The company, a diversified commodity-processing firm engaged in the business of ethanol production, grain handling and storage, a cattle feedlot, vinegar production, and commodity marketing and logistics services, has disclosed that its subsidiary Green Plains Cattle Company has signed the asset purchase agreement for the acquisition of two cattle-feeding business divisions from Cargill for an amount of $36.7 million, exclusive of working capital.

The newly settled deal, covering the feed yards in Leoti, Kan. and Yuma, Colo., will insert capacity of 155,000 head to the company's operations. Green Plains Cattle Company, once it accomplishes the acquisition of the assets, will have overall capacity of over 255,000 head, ensuring a fourth rank in the national list of cattle-feeding operation.

In addition, Green Plains Cattle Company, under the terms of the agreement, will settle a long-term supply deal with Cargill Meat Solutions to make provisions for a consistent supply of cattle from the locations in Leoti and Yuma, plus the companys operational feedlot in Kismet, Kan. This deal will facilitate the two sides with access to right kind of flexibility and financial avenues.

The Green Plains President &CEO Todd Becker observed, "The growth of Green Plains Cattle achieves one of our strategic initiatives of further diversifying our income streams and investing in adjacent businesses. This purchase also aligns with our overall strategy to meet growing global protein demand in downstream markets that take advantage of our supply chain, production platform and commodity management expertise."

Becker further stated, "A key component of the acquisition is the long-term agreement with Cargill under which Green Plains Cattle will be a strategic supplier of their beef-packing demand."

The existing cattle-feeding activities of Green Plains Cattle Company comprised of a 70,000 head operation close to Kismet, Kan. and a 30,000 head operation near Hereford, Texas.

The Green Plains boss further said, "One of the inherent benefits of this transaction is the scale of internal demand for our co-products produced at company-owned ethanol plants. Our cattle business will now consume more than 300 thousand tons of dried distillers grains and 40 million pounds of corn oil annually."

Becker added, "The ability to effectively control our feed supply cost provides our cattle business with a strategic operating advantage resulting in more predictable and stable cattle-feeding margins while enhancing Green Plains' knowledge of ration dynamics. Since our entry into cattle feeding a few years ago, the meat and protein market fundamentals have remained favorable and the business has been accretive to Green Plains' earnings."

The cattle-feeding operations in Leoti and Yuma involving around 1,900 acres of area have supporting infrastructure and feed storage assets, with locations close to the strategic meat packers.

It is expected that the deal, subject to fulfillment of customary closing conditions and receipt of regulatory nods, will be accomplished in the next 30 days, and there is also anticipation that the transaction will be accretive to the current years earnings.

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Publication:Mena Report
Date:Apr 29, 2017
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