VeraSun Energy and US BioEnergy set to merge

Consolidation in the booming biofuel market stepped up a gear last week as renewable fuel specialists VeraSun and US BioEnergy confirmed a "definitive merger agreement".

The proposed all stock deal will see VeraSun pay an 11 per cent premium on US BioEnergy's closing price and was unanimously accepted by the two companies' boards of directors. It is due to close in the first quarter of 2008, pending shareholder approval and other regulatory conditions.

VeraSun chairman, chief executive and president Donald L. Endres said the deal was part of the company’s strategy to "become a large-scale, low-cost ethanol producer".

The company said the deal should result in considerable economies of scale by "improving access to capital and allowing the combined company to leverage technology and operating experience across its entire plant fleet".

Gordon Ommen, US BioEnergy president and chief executive, said that the combined company was on track to become "a global leader in ethanol production" boasting 1.6 billion gallons of ethanol production capacity by the end of 2008.

Underlining the booming market for US biofuel, the company is projected to have a market capitalisation of approximately $1.5bn post merger.