RENSSELAER | An Australian investment firm intends to acquire Iroquois Bio-Energy, expanding the firm's reach into the U.S. ethanol industry.
Babcock & Brown Ltd. said it has entered into a definitive agreement to acquire the 40-million-gallon facility, which opened in January to become the first ethanol production plant in Northwest Indiana.
The terms of the agreement were not released. It is expected to close by mid-year.
Iroquois Bio-Energy's design, location and operation complement the firm's existing holdings, Dan Brickman, global leader of Babcock & Brown Biofuels Group, said in a prepared release, according to published reports.
The firm also owns an ethanol plant in Minnesota and has two plants under construction, in Hennepin, Ill., and in Necedah, Wis.
The Iroquois Bio-Energy board of managers has approved the deal, subject to a May 23 vote by unit holders of the limited liability company, board secretary John Bryant said.
Major shareholders already have signed documents saying they would approve the sale, making it likely to close, Bryant said.
The Iroquois board had sought a buyer for several months, and would have preferred to sell the plant last summer, when corn prices were lower, Bryant said.
"At that time corn was still real cheap. Everybody and their brother wanted to build an ethanol plant," Bryant said. "If we could have sold it then it would have been ideal."
Since then, plans for additional ethanol plants in Indiana have been announced, including a 110-million-gallon
VeraSun Energy Corp. facility in nearby Reynolds, Ind.
Babcock and Brown had been one of seven bidders for Iroquois Bio-Energy, winnowed from about 20 initial inquiries after an investment banker was hired by the Iroquois board to seek bids, Bryant said.
The acquisition will be a 100 percent buyout for unit holders, Bryant said.
"Nobody's getting stock. Everybody's getting cash," Bryant said. "The board felt it would enhance unit-holder equity to sell the plant."
All but about 50 of Iroquois Bio-Energy's 286 unit holders are farmers, Bryant said.
Some farmers invested a little money, others more, Bryant said.
"Once they find out their return, most can't say they're not being compensated fairly," Bryant said.
"The other plus is that the plant will still be there and still be buying their corn," he said.
Construction of the $66 million Iroquois Bio-Energy plant got under way in 2005, nearly four years after backers began raising equity to build it.
The plant, with capacity for 40 million gallons yearly of the fuel alternative, is currently producing about 120,000 gallons a day, general manager Keith Gibson said.
New ownership is not expected to change anything at the plant, which employs 34 people, Gibson said.
"The plant will look, feel and smell just like it does now," he said.