VeraSun Assets Generate Interest

Corn ethanol took a big hit with the fall of South Dakota’s VeraSun Energy (s VSUNQ), which filed for bankruptcy last month. But there’s at least one company out there that sees promise in those refineries. VeraSun announced late yesterday that it received interest from an unnamed third party for substantially all of its assets. The financial terms of the offer were not disclosed.
Although consolidation can be expected in any industry in these turbulent economic times, the ethanol market is particularly ripe for such activity. With the ongoing food vs. fuel debate, and a tough market for ethanol overall, it could be a difficult time for any biofuel company going forward. One Omaha investment banker predicts that the current roster of 16 bankrupt ethanol plants will grow to as many as 40 by early next year. According to the DesMoines Register, Mark Lakers, a principal at Ag & Food Associates, sees consolidation ahead, saying that the industry is being squeezed by falling prices and volatile markets.
Poet, the No. 1 ethanol producer in the U.S., said it sees opportunity in the industry, telling the Associated Press this week that it’s in buyout talks with a number of ethanol companies. Poet, a VeraSun competitor and South Dakota neighbor, did not mention VeraSun as a possible target, but CEO Jeff Broin was quoted as saying that he’s examining “entire company opportunities.”

When we asked Poet if it was pursuing VeraSun’s assets, Nathan Schock, a spokesman for the company, told us via email, “We’re in serious discussions with a couple of ethanol producers, but due to confidentiality agreements we can’t disclose names or locations.”
While corn ethanol feels the crunch, next-generation cellulosic ethanol has been seeing some significant growth. Last week, SunEthanol pulled in a $25 million Series B round and changed its moniker to Qteros, after its Q microbe technology. VeraSun was a previous investor in SunEthanol but did not participate in this round, although it still holds a stake in the newly renamed company.
Coskata, another cellulosic ethanol startup, also made some news last week, announcing a deal to work with U.S. Sugar on building a production plant in Florida. The two companies plan to build a 100 million gallon per year facility that will convert leftover sugar cane into ethanol.
As for VeraSun’s secret admirer, VeraSun said it plans to pursue the indication of interest. But this might not be the end of the road for VeraSun — the company said the bid is subject to significant conditions, but did not detail those conditions, and it also plans to look at any other proposals that come its way. Not that VeraSun has the final say on any potential deal. It would also need to pass muster with VeraSun’s creditors, as well as the bankruptcy court judge.