Valero Energy offers bid to buy VeraSun assets

By Bryan Sims | February 04, 2009
Web exclusive posted Feb. 9, 2009, at 11:22 a.m. CST

South Dakota-based ethanol producer and marketer VeraSun Energy Corp. has signed an agreement in bankruptcy court with Valero Energy Corp. to sell some of its assets to the Texas-based oil refiner for $280 million, in addition to the value of inventory and certain pre-paid expenses.

"Given current difficult industry conditions and continued constrained credit markets, we believe that commencing a sale process is in the best interest of company stakeholders," said Don Endres, VeraSun's chief executive officer.

Under the agreement, Valero would acquire VeraSun's production facilities in Aurora, S.D.; Charles City, Fort Dodge and Hartley, Iowa; and Welcome, Minn. VeraSun said it would also put up for sale a development site in Reynolds, Ind.

VeraSun has also received expressions of interest in assets other than those that it proposed to sell to Valero, but it hasn't negotiated a definitive agreement on those other assets.

Having entered into an agreement with Valero, VeraSun is now required to hold an auction to determine if other bidders will offer more favorable terms than Valero's bid. This is known as a "stalking horse" bid.

Interested bidders must submit their proposals by March 13. An auction, if necessary, would be held March 16, according to VeraSun. The company said it expects to complete the asset sales by March 31 or early in the second quarter of 2009, subject to court approval, as well as regulatory clearances and other customary closing conditions. VeraSun said it "believes it has sufficient liquidity to maintain its production facilities and workforce through the anticipated conclusion of the sale process."

Rothschild Inc. is serving as VeraSun's financial advisor on the Valero transaction and will be managing the sale process. Credit Suisse is acting as Valero's financial advisor.

"We continue to be optimistic about the long-term viability of the renewable fuels industry," Endres said. "Ethanol is a valuable, clean, high-octane, low-carbon fuel that is reducing America's reliance on foreign oil, creating jobs and stimulating the economy."