Justice Sirikah

Valero Energy Corporation (NYSE: VLO) Successfully Bids to Buyout Verasun Energy Corporation’s (OTC BB: VSUNQ) Assets

by Justice Sirikah March 20, 2009
San Antonio-based Valero Energy Corporation (NYSE: VLO), through its subsidiary Valero Renewable Fuels, has come to the rescue of the bottoming out U.S alternative energy market with the largest biofuel buyout on record. On Tuesday at an auction in Wilmington, the United States Bankruptcy Court for the District of Delaware okayed the oil baron’s bid to purchase seven distillery facilities and a development site owned by the bankrupt Verasun Energy Corporation (OTC BB: VSUNQ). The two parties agreed to close the transaction by April this year.
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  The petroleum refiner is reported to have elevated the initial bidding offer of $0.50 to $0.61 per gallon, to upstage its closest rival Archer Daniels Midland (NYSE: ADM) and secured the right to acquire 7 plants and one site under development from Verasun. Valued at a bargain price of $477 million altogether, the facilities are capable of a combined yearly capacity of 780 million gallons of ethanol. This marks Valero’s first ethanol production enterprise.

  The assets consist of production facilities in Charles City, Fort Dodge and Hartley, Iowa; Aurora, S.D; Welcome, Minn; Albion, Nebraska; and Albert City, Iowa; including a site undergoing development in Reynolds, Indiana.

  In October of 2008, Verasun and 24 of its subsidiaries had filed petitions for relief under Chapter 11 of the U.S Bankruptcy Code. This was a subsequent development to significant losses posted by the company for the third quarter of 2008, largely blamed on a 58 percent rise in corn prices during the first half of the same year, and partly on a general dampening demand of ethanol. In order to stay afloat since then, Verasun had gone through rounds of lay-offs as well as suspension of operations, until the company finally decided to sell its assets as a last resort.

  Guided by this big buy, Valero’s stock has been going up and by the time the market closed on Thursday, it had hit a three week-high of $19.43, while the share price of Verasun continued on a flimsy $0.02 for the third consecutive week.
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Resources:
1. http://www.valero.com/
2. http://www.verasun.com/

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