Boston, MA 05/20/2014 (wallstreetpr) – CHS Inc (NASDAQ:CHSCP) will include Illinois River Energy into its operation through the complete acquisition of London based Sinav Limited. The deal expects to close by June based on the regulatory approval.
CHS usually markets renewable fuels to energy customers through its 1,400 retail petroleum outlets including 1,000 convenience stores. It also markets dried distillers grains with solubles (DDGS) across the U.S. on behalf of more than 20 ethanol plants.
Acquisition benefit
A. Business expansion
Illinois River Energy, an ethanol plant, situated in a strategic growth area and generated a capacity of 133 million gallons per day. Since 2006, CHS has already been associated with Illinois River Energy to market ethanol to energy customers across the U.S. So, the acquisition will support farmer-owners with additional renewable fuels, expand their grain origination and distillers grain byproducts.
B. Performance enhancement
CHS majorly depends on the performance of the Ag segment as it represents 67% of total revenue in the first half of 2014 (1H2014). But, the factors like volatility in average selling price of grains, lower production volumes, increasing costs of production and marketing affected the year over year growth in revenue and operating earnings of the segment.
But, the growing demands for renewable fuels support growth for the Energy segment. It reported higher revenues of $7.1 billion during 1H2014 due to increase in revenue from renewable marketing and propane as a result of higher sales volumes and increase in average selling price of propane.
Therefore, CHS Inc (NASDAQ:CHSCP) focuses on increasing the production capacity either through acquisition or joint ventures that will help to provide further growth and improve the profitability on a volatile pricing environment.
Conclusion
The acquisition will add value to the global cooperative while diversifying their business across energy, grains and foods. It will help to grow their businesses and support the farmer-owners, energy customers and stakeholders.
