The Andersons Inc. and Marathon Petroleum Corp. have merged four ethanol entities with and into a new legal entity, The Andersons Marathon Holdings LLC (TAMH), according to an announcement.
The ethanol facilities involved in the merger are in Albion, Mich.; Clymers, Ind., and Greenville, Ohio — which were all previously jointly owned by The Andersons and Marathon Petroleum — and The Andersons' wholly owned ethanol facility in Denison, Iowa.
Effective Oct. 1, 2019, The Andersons and Marathon Petroleum own 50.1% and 49.9% of TAMH equity, respectively. The transaction will result in the consolidation of TAMH's results into The Andersons' financial statements.
In conjunction with the merger agreement, TAMH has entered into several new long-term services agreements with The Andersons under which The Andersons will continue to operate the four plants, buy corn, market ethanol and other co-products and manage risk for TAMH.
The merger will result in a step-up in the book basis of the Albion, Clymers and Greenville assets and a sizable one-time, non-cash gain to The Andersons in the fourth quarter. The asset step-up will also result in higher depreciation expense, according to the announcement. The amounts of both the gain and the additional depreciation are still being determined.
In addition, the debt previously held by the separate entities was refinanced using a new $200 million TAMH credit facility.
"I am excited about the benefits this merger will provide for our ethanol business," The Andersons president and chief executive officer Pat Bowe said. "It will allow our commercial teams to trade corn, ethanol and [dried distillers grains] freely among the four facilities to achieve optimal profitability and our procurement team to leverage the resulting larger purchasing power. The simplified structure will also make cash management and borrowing more efficient and improve transparency for investors and lenders."
Jim Pirolli, president of The Andersons Ethanol Group, added, "We have enjoyed and benefited from our partnership with Marathon Petroleum in the ethanol business since 2006. "In addition to other benefits, TAMH will provide an excellent platform for future growth."
Founded in Maumee, Ohio, in 1947, The Andersons is a diversified company rooted in agriculture that conducts business across North America in the grain, ethanol, plant nutrient and rail sectors.
Marathon Petroleum is an integrated, downstream energy company headquartered in Findlay, Ohio, that operates the nation’s largest refining system, with a capacity of more than 3 million barrels per day of crude oil across 16 refineries.