Green Plains Inc. Exits Cattle Business

OMAHA (DTN) -- Green Plains Inc. continues to remake its company, this time exiting a cattle business it entered just six years ago.

The Omaha-based company announced Tuesday the sale of its remaining 50% joint venture in Green Plains Cattle Company LLC to a group of investment funds including AGR Partners and StepStone Group, generating about $80 million in cash.

The sale was the latest major move by Green Plains in the past few years, as the company also has been divesting some from the ethanol business as well.

"With the sale of our remaining ownership in Green Plains Cattle Company, combined with our recent quarterly distribution and earnings bonus from performance of the cattle business, we have added approximately $96 million of liquidity to our balance sheet," Green Plains President and Chief Executive Officer Todd Becker said in a news release.

The sale, Becker said, allows the company to "redeploy capital" to support its long-term objective of building its high-protein ingredients business.

Green Plains entered the cattle feeding industry in June 2014, with the purchase of Supreme Cattle Feeders, a 70,000-head feedlot in Kismet, Kansas.

Green Plains Cattle Company became the fourth-largest cattle feeder in the United States, with a total capacity of more than 355,000 head in six feedlots in Colorado, Kansas and Texas.

"This transaction further streamlines our business to focus on the transformation to a world-class provider of high-value ingredients, which includes the deployment of high-protein technology as a natural line extension to our platform," Becker said.

"The proceeds from the sale and distribution, coupled with our previously announced tax refund and $75 million in protein financing, will add nearly $225 million of liquidity to Green Plains, or over half the remaining amount needed to fund the build-out of high protein technology."

This means a pair of investment firms, AGR Partners and StepStone Group, are now the owners of the fourth-largest collection of cattle feedyards in the U.S. A similar situation happened two years ago when the world's largest cattle feeder, Five Rivers Cattle, was sold to Pinnacle Asset Management.

AGR Partners describes itself as food and agribusiness investment firm based in Davis, California, "that provides capital through non-controlling equity and subordinated debt" for food and agribusiness companies. AGR has investments in almond, peach, wine, seafood, egg, pet food, milling and dairy companies as well.

StepStone is a broader global asset-management company with offices in 15 countries and investments in several different lines of business.

As part of the transaction, the company said Becker will remain on the board of directors of Green Plains Cattle Company for the next year during the transition.

In April 2017, Green Plains purchased from Cargill feedlots in Colorado and Kansas.

The $36.7 million deal included a multi-year agreement for Green Plains to continue supplying cattle from the feedyards in Yuma, Colorado, and Leoti, Kansas, to Cargill's beef processing plants in Fort Morgan, Colorado, and Dodge City, Kansas.

With the purchase, GP subsidiary, Green Plains Cattle Company, expanded its capacity by about 155,000 head, making it the fourth-largest cattle feeder in the country with more than 255,000 head. Prior to the purchase from Cargill, Green Plains owned a 70,000-head feedlot in Kismet, Kansas, and a 30,000-head feedlot near Hereford, Texas.

Green Plains expanded its cattle business at a time when prices were on the rise in 2017.

Green Plains also continues to operate 13 ethanol plants totaling about 1 billion gallons of production capacity. So far, the company has sold four of its plants.

In May 2018, Green Plains announced intention to reposition its assets during the next several years to drive improved margins and returns for its shareholders as part of its Portfolio Optimization Program.

The company's program includes a number of strategic objectives including strategic divestments; reducing or eliminating debt through sales; investing in high-protein process technology at ethanol plants; repurchasing shares with remaining proceeds and freeing cash flow when market conditions are optimal.

Green Plains has retained XMS Capital Partners as the lead adviser and Ocean Park to manage the process of certain assets.

In October 2016, Green Plains acquired California-based Fleischmann's Vinegar Co. for $250 million. Fleischmann's is considered the world's largest manufacturer and marketer of food-grade industrial vinegar.

Fleischmann's has seven manufacturing facilities around the country and Canada with a headquarters office in California. The company focuses on food production with straight vinegar products, condiments, dressings and cooking wines, as well as various industrial applications, including cleaning products.

On a conference call with the media and potential investors, company executives indicated more efforts to convert into food-grade ethanol products, as well as tap into food trends such as organic, non-GMO and all natural.

DTN Ag Policy Editor Chris Clayton contributed to this report.

Todd Neeley can be reached at todd.neeley@dtn.com

Follow him on Twitter @toddneeleyDTN

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