REG completes Syntroleum acquisition

June 3, 2014 | Jim Lane

Partial view of the Dynamic Fuels plant in Geismar, Louisiana

Largest US biodiesel producer set to control 75 Mgy Dynamic Fuels renewable diesel plant; follows on from LS9 acquisition.

In Iowa, Renewable Energy Group announced that its wholly-owned subsidiary, REG Synthetic Fuels, LLC, has closed its acquisition of substantially all of the assets of Syntroleum Corporation.

Syntroleum advised REG earlier Tuesday that a majority of its shareholders had voted to approve the asset sale to REG. Shortly after the Syntroleum stockholders’ meeting, officials from the two companies completed the transaction, which included the issuance of 3,493,613 shares of REG common stock to Syntroleum.

The acquisition follows the news in January that REG acquired LS9 for a purchase price of up to $61.5 million, consisting of up front and earnout payments, in stock and cash. Most of the LS9 team, including the entire R&D leadership group, joined the newly named REG Life Sciences, LLC, which will operate out of LS9’s headquarters in South San Francisco, CA. Under the terms of the agreement between REG and LS9, REG paid $15.3 million in cash and issued 2.2 million shares of REG common stock (valued at approximately $24.7 million based on a trading average for REG stock) at closing. In addition, REG may pay up to $21.5 million in cash and/or shares of REG common stock consideration for achievement of certain milestones over the next five years related to the development and commercialization of products from LS9’s technology. LS9 is a cornerstone investment for REG Life Sciences, which also plans to develop adjacent and complementary fermentation technologies.

All about LS9 here in our 5-Minute Guide to their technology and story.

More about Syntroleum

Syntroleum pioneered renewable diesel fuel and Fischer-Tropsch gas-to-liquids technologies and built a large IP portfolio, including 186 patents issued or pending, which REG will now own.

Most of the employees at Syntroleum’s Tulsa headquarters will join REG as part of the newly formed REG Synthetic Fuels.

Dynamic Fuels at the heart of the matter

The assets acquired from Syntroleum include a 50% ownership interest in Dynamic Fuels, which owns a 75 million gallon per year nameplate capacity renewable diesel biorefinery located in Geismar, Louisiana. REG has a separate pending agreement with Tyson Foods to acquire the remaining interests in Dynamic Fuels.

In May, Renewable Energy Group reached an agreement with Tyson Foods, Inc. to acquire Tyson’s 50% ownership position in Dynamic Fuels. Completion of the transaction with Tyson Foods, which was contingent upon the closing of REG’s December 2013 announced agreement to acquire substantially all of the assets of Syntroleum Corporation , will give REG full ownership of Dynamic Fuels and its 75-million gallon per year nameplate capacity renewable diesel biorefinery in Geismar, Louisiana. Tyson and Syntroleum formed Dynamic Fuels in 2007 as a 50/50 joint venture. The Geismar facility, completed in 2010, was the first large scale renewable diesel biorefinery built in the U.S.

We reported earlier that the $150 million plant has been idle since November 2012 and costs each owner $1 million per month to sit in standby mode. Originally expected to produce 75 million gallons of renewable fuel per year from low grade chicken fat, the plant has lost an estimated $20 million in potential sales while the owners disputed restart conditions.

Reaction from REG

“We are very pleased to bring new advanced biofuel technologies into the REG portfolio of products that will expand our biomass-based diesel business and launch us into new customer segments,” said Daniel J. Oh, Renewable Energy Group, Inc. President and Chief Executive Officer. “We welcome the newest members of our team in Tulsa to REG Synthetic Fuels.”

Headquartered in Ames, Iowa, REG owns and operates nine active biorefineries in five states and distributes biodiesel through a national network of distribution terminals.

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