The cash burn at Tulsa-based Syntroleum Corp. could soon be over as Iowa-based Renewable Energy Group Inc. announced plans to acquire the Tulsa-based energy company, pending shareholder approval. Syntroleum is a 50% partner with Tyson Foods in a large diesel fuel production plant in Louisiana.
Renewable Energy has agreed to buy substantially all of Syntroleum’s assets and assume all the material debt as well. The terms call for Syntroleum to receive 3.976 million shares of REGI common stock worth an estimated $42 million.
“Today’s announcement marks the culmination of our comprehensive process to review Syntroleum’s strategic alternatives to enhance shareholder value,” said Syntroleum President and CEO, Gary Roth. “We are extremely pleased to have found a great partner to provide our stockholders with the opportunity to participate in a company with significant upside potential.”
Shares of Syntroleum closed Tuesday (Dec. 17) at $2.46, down 12 cents. Following the announce of the buyout shares soared 52.44% to $3.75 in aftermarket trading.
Aside from the 101 patents Syntroleum has acquired for its Fischer-Tropsch gas-to-liquids and renewable diesel fuel technologies the past few years the firm has been heavily involved in a joint venture with Tyson Foods. These two partners each own a 50% interest in Dynamic Fuels, a 75-million gallon renewable diesel production facility in Geismar, La., which has been inactive for the past year.
Tyson Foods CEO Donnie Smith told The City Wire earlier this year that the plant would likely remain idle as long as its partner was shopping its interest. He said Tyson would be willing to work with a new partner if one is presented. Tyson did not immediately return a request for comment regarding the pending buyout by Renewable Energy Group.
Each month the Geismar plant sits idle the cash burn is roughly $1 million for each partner. Aside from the monthly cash burn, Syntroleum execs estimate the venture has lost out on roughly $20 million in potential sales since July because the partners can’t reach amicable restart terms.
REGI owns and operates eight active biodiesel refineries in four states with a combined production capacity of 257 million gallons. The firm also distributes biodiesel through a national network.
“Combining Syntroleum’s renewable and synthetic fuel technologies with REG’s expertise in biodiesel production, sales, marketing and logistics should be a positive outcome for investors in both companies,” said Daniel Oh, CEO of Renewable Energy Group. “This will help us grow our advanced biofuel business, enhance our intellectual property portfolio, expand our geographic footprint and launch REG into new customer segments.”
He added that the 50%-ownership in Dynamic Fuels represents an attractive entry for his firm in the renewable diesel sector.
Syntroleum’s board of directors unanimously approved the deal and recommends that its shareholders also vote in favor of the acquisition when presented a ballot.
Executives with Syntroleum will discuss the deal in more detail during its annual meeting of stockholders, which will take place at 2 p.m. on Dec. 18, 2013. The meeting will be held via live webcast. A link to a digital archive of the annual meeting webcast will be available on Syntroleum’s website 24 hours after the annual meeting has concluded.
Renewable Energy Group shares closed at $10.56, down 5 cents, but rose to $10.81 in after market trading following the announcement.
The City Wire will update this story as more details become available.