Green Plains sells a share of its cattle company
Green Plains Inc., based in Omaha, Neb., completed the sale of 50 percent of Green Plains Cattle Company for $77 million to AGR Partners, TGAM Agribusiness Fund Holdings-B LP and StepStone Atlantic Fund LP s. The transaction was signed on Sept. 6, 2019, with an effective date of Sept. 1, 2019.
Green Plains is a commodity processing company, and is known as the largest ethanol company in Nebraska, with plants in Minnesota, Iowa, Tennessee and Texas.
They have formed a joint venture to own and operate Green Plains Cattle Company LLC.
The company is the fourth largest cattle feeder in the United States with total capacity of more than 355,000 head of cattle across six feedlots in Kansas, Colorado and Texas.
“The completion of this transaction also has a positive impact on our balance sheet by adding $77 million of cash and deconsolidating working capital debt associated with our cattle business which totaled approximately $335 million at the end of the second quarter,” said Todd Becker, president and CEO of Green Plains Inc. “We have significantly reduced our debt over the past year and between this transaction and paying off our $500 million term loan, we are now back to a net debt positive position against our convertible bonds.”
Green Plains Cattle Company strives to have a production model representing a unique, cross-industry approach coupled with an unwavering commitment to customer satisfaction while remaining committed to the principles of sustainability, quality assurance, animal welfare and responsible business practices.
“We are excited about completing this transaction and the quality of investment partners who have aligned with us for the continued growth of Green Plains Cattle Company. This further validates the quality of the business we have built over the last several years, and allows us to form new relationships with long term investors,” Becker said. “This strategic partnership demonstrates our ongoing commitment to unlocking value for our shareholders.”
A first quarter production slow-down impacted the company’s financial performance, with a strong balance sheet being a priority along with reducing operating expenses the sale was important for financial stability reasons. “Green Plains is a publicly traded company and investors don’t like to see all the debt on the balance sheet. By selling half and creating its own company, we were able to move the debt off our main balance sheet, with the debt staying on the partnership. Together we are looking to grow our cattle operations,” said Jim Stark, executive vice president – investor and media relations. “Cattle feeding has its cycles; right now we are in a low cycle. When we bought our first feedyard in 2014 it was just coming out of a low cycle. Right now we are seeing feeding margins improve as progress is made with trade and exports.”
“Green Plains Cattle Company has developed a solid reputation in the cattle feeding industry and our management team and employees are excited to be part of this new venture,” said Joel Jarnagin, president and chief executive officer of Green Plains Cattle Company. “We are very optimistic for what the future holds and look forward to a successful long-term relationship as we continue to grow the business.”
“AGR is pleased to partner with Green Plains and to work with Joel and the dynamic team he has assembled at Green Plains Cattle Company,” said Daniel Masters, managing director of AGR Partners. “We look forward to being a supportive partner in the continued growth of Green Plains Cattle Company.”
Even with new partners the management team will stay the same with Joel Jarnagin becoming president and CEO of the new company. The new partners will hold a majority on the board of directors.
Considering all the flooding in Nebraska and surrounding states this year, the vice-president is optimistic about the new corn crop. “We are in decent shape, considering the acres planted and the yield. We are hoping the frost holds off and with current markets farmers are being hesitant to sell new crop corn,” Stark said.
• Green Plains Inc. is a diversified commodity-processing business with operations that include corn processing, grain handling and storage and commodity marketing and logistics services. The company is one of the leading corn processors in the world and, through its adjacent businesses, is focused on the production of high-protein feed ingredients and export growth opportunities.
• AGR Partners is an investment firm based in Davis, Calif., and Chicago dedicated to backing strong food company and agribusiness teams through long-term investments of non-controlling equity or subordinated debt to facilitate late-stage growth, strategic acquisitions, full buyouts and ownership transitions.
• StepStone Group is a global private markets firm providing customized investment and advisory solutions to some of the most sophisticated investors in the world. StepStone prudently integrates fund, secondaries and co-investments across private equity, real estate, private debt, infrastructure and real assets (including agriculture and timber). ❖