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Dakota Ethanol takes step toward merger
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By ELISA SAND, Staff Reporter
| 06/11/2007 |
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Dakota near Wentworth, which is managed by Scott Mundt, recently announced the signing of a non-binding letter of intent that would merge the locallly owned ethanol plant with an Iowa company. (Submitted photo)
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The Lake Area Corn Processors (board of directors for Dakota Ethanol), Dakota Ethanol and Countryside Renewable Energy, Inc. recently announced the signing of a non-binding letter of intent to merge Dakota Ethanol with Countryside.
Countryside is a privately owned Iowa company formed in 2006 by John Pappajohn. The goal of the company is to "enable independent ethanol producers to achieve long-term success by forming a single, sustainable, public company with the strength and stability to prosper in a rapidly evolving renewable fuels marketplace."
The goal for Countryside is to become the nation's largest farmer-owned producer of ethanol.
Scott Mundt, general manager for Dakota Ethanol, said there are benefits to consolidation, including geographic diversification and spreading financial risk throughout a larger group.
"If we become part of a bigger effort, it's more advantageous to finance debt," he said.
Mundt stressed that the letter of intent was both non-binding and not equivalent to a sale.
"What's happening is not a sale, but a merger," he said, "an effort where Dakota Ethanol could eventually become part of a group of ethanol plants that would form a larger company."
Any official action, he said, will require a vote by the investors in Dakota Ethanol.
"We have a long way to go," he said. "If and when there's more information, a proxy is prepared where investors will get more information."
Mundt said that if the merger comes to pass, instead of being an investor in one plant, members of Dakota Ethanol would have an investment in several plants.
Mundt said preliminary discussions have been taking place with Countryside since early last year. Pappajohn is a well-known venture capitalist, Mundt said, and his reputation is what drew Dakota Ethanol toward continuing discussions.
Countryside is looking to negotiate agreements with other plants to come together and be a part of a larger ethanol company, Mundt said.
Lisa Richardson, executive director of the South Dakota Corn Growers, said that consolidation in the industry has been predicted by ethanol officials and other industry watchers for several years.
"This is an opportunity for farmer-owned plants to come together," she said.
Dakota Ethanol annually produces 48 million gallons of ethanol. It was constructed near Wentworth in 2001 and had revenues in 2006 of $103.9 million.
Brian Woldt, a Dakota Ethanol board member, said that Dakota Ethanol was a leader in the ethanol industry when it started eight years ago, but the board also knew that its members are always looking to move forward.
"We have entered into this process with Countryside to become part of a larger ethanol production organization, which we believe will help us improve profitability, our competitive position and our long-term prospects," he said.
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