VeraSun Energy and US BioEnergy announce merger: form world’s largest ethanol producer

VeraSun Energy (VSE) and US BioEnergy Corp. (USBE) today announced they have entered into a definitive merger agreement. The merger is expected to close during the first quarter of 2008, pending approvals.

The deal, in which USBE shareholders will receive approximately $680 million of VeraSun stock, will create the world’s largest ethanol producer, with a planned capacity of 1.6 billion gallons by the end of 2008, based on scheduled plant openings.

“We’ll be publishing a detailed note tomorrow with our thoughts on the deal,” said Pavel Molchanov, analyst for Raymond James, “but certainly this is one of the most bullish datapoints we’ve seen in the ethanol space this year. Although the transaction multiples are not high, VSE is making its second big bet (following the ASAlliances deal in the summer) on the ethanol market’s rebound. The combined company will rival ADM when it comes to production capacity, reaching market share of about 15% by year-end 2008.

“This won’t turn around investor perceptions of the ethanol space, said Molchanov, “but it’s one of the few drivers we’ve seen that could begin to do that.”

The combined companies will benefit from economies of scale in operations and finance, and bring access to VeraSun’s advanced investments and technologies to US BioEnergy’s shareholders.

VeraSun CEO Donald L. Endres will remain CEO of the combined company, and US BioEnergy CEO Gordon Ommen will serve as chairman following the closing of the merger. VeraSun Senior Vice President and Chief Financial Officer Danny C. Herron will become president of the combined company.

The combined entity will retain the VeraSun name and trade under VeraSun’s existing NYSE ticker symbol, VSE.

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