UPDATE 1-Andersons to buy 12 grain elevators from Green Plains

Mon Oct 29, 2012 11:15am EDT

CHICAGO Oct 29 (Reuters) - The Andersons, a diversified agricultural company with the nation's seventh largest grain storage capacity, will buy 12 grain elevators from Green Plains Renewable Energy for $133.1 million, the companies said on Monday.

Ohio-based Andersons struck a deal for seven facilities in northwest Iowa used for elevating, storing and discharging grain and five in western Tennessee, increasing its grain storage capacity by 30 percent. The facilities have a combined grain storage capacity of about 32 million bushels, along with 12,000 tons of nutrient storage and more than 130 employees.

It is the largest acquisition in The Andersons' 65-year history, and comes at a time of accelerating consolidation in the grain industry.

Earlier this month, the buying frenzy intensified with news that U.S. agriculture giant Archer Daniels Midland was making a play for smaller Australian shipper GrainCorp.

Agriculture companies are scrambling to increase their physical assets during intense competition for grains trading power to feed fast-developing countries seeking food security.

Nearly seven months ago, ADM pulled out of the race to buy Viterra, which was eventually bought by No 1 global commodities trader Glencore in a deal worth C$6.2 billion ($6.2 billion then).

In May, Japan's Marubeni bought U.S. grain merchant Gavilon, whose owners included billionaire investor George Soros, highlighting the intensifying competition for a foothold in the North American supply chain.

BIGGER FOOTPRINT

The Andersons' focus remains on the domestic market in the United States, as it adds to holdings that include elevators across the eastern Midwest and nearly 23,000 railcars -- the country's eighth largest private fleet.

"This acquisition is consistent with our strategy of expanding our footprint into high grain production geographies where we can leverage our core capabilities to serve more customers in diverse trade areas," Denny Addis, president of The Andersons grain group, said about the deal with Green Plains.

"It enables us to push further to the west and south, increasing our presence in Iowa and entering Tennessee," he said.

Green Plains, the fourth largest ethanol producer in the United States, is shedding 83 percent of its grain storage capacity with the deal. It also is selling its only two farm agronomy centers to The Andersons.

Once closed, the transaction will add more than $100 million in cash to Green Plains' balance sheet and reduce outstanding debt by more than $113 million, according to the company. The deal is expected to close in the fourth quarter.

"We continually evaluate options to maximize shareholder value and this transaction is about opportunistically realizing that value," said Todd Becker, Green Plains president and chief executive officer. "While we have referred to this as a strategic part of our business, we are by no means exiting U.S. agriculture."

Some ethanol producers faced financial pressures from the worst U.S. drought in more than half a century, which tightened corn supplies and pushed corn prices to record highs.

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