Another Ethanol IPO: Highlights from US BioEnergy's S1 Filing

by: Evelyn Rubin

Key details about the US BioEnergy IPO. Proposed ticker: (USBE). All excerpts are from the full SEC filing:

Company Description

We are a rapidly growing producer and marketer of ethanol and distillers grains. Ethanol is a clean-burning, renewable fuel made from agricultural products such as corn. Distillers grains are a co-product of corn-based ethanol that are used as animal feed. We also market ethanol and distillers grains produced by, and provide facilities management and marketing services to, other ethanol producers. We sell ethanol to refining and marketing companies in the U.S., such as Marathon Oil Corporation, BP p.l.c. and Valero Energy Corporation, primarily as a gasoline additive. We currently sell distillers grains to livestock operators in the U.S. We distribute products principally by rail, and we lease approximately 380 rail cars through UBE Ingredients, our wholly-owned subsidiary, and approximately 800 rail cars through UBE Fuels, our marketing joint venture with CHS Inc...

We currently operate one ethanol plant which we acquired in April 2006. We are in the process of expanding this facility, and we have three additional ethanol plants under construction. Upon completion of these initiatives, we will own and operate four plants with a combined ethanol production capacity of 300 million gallons per year, or mmgy. We also have five ethanol plants in development that we believe will have a combined production capacity of 400 mmgy. We believe that our expansion plans will make us one of the largest ethanol producers in the U.S. by the end of 2006.

Key Financial Data: The company was founded in October 2004, and has made a number of acquisitions since its establishment including the acquisition of Platte Valley in April, 2006. It is necessary to look in detail at the company's prospectus in order to get a sense of the complex--albeit short--operating history of the company. The proforma statements indicate that the joint company had $110 million of revenues in 2005, up from zero in 2004, and $9 million in net income for 2005 compared with a 2004 net loss of $54k. 2006 Q1 revenue was $29.8 million (compare with zero revenues in 2005), and net income was $2.5 million ($353k loss in 2005).

Key Competitors

  1. Archer Daniels Midland (NYSE:ADM)
  2. Verasun (VSE)
  3. Aventine (AVR)
  4. Cargill

Notable Issues To Watch For
This is a patchwork company which grew out of an apparent vision to create an ethanol producer, then the absorption of a number of small companies into the parent. By far the most significant of these in terms of revenue contribution was the Platte Valley acquisition completed last quarter. In looking through this S1, it is critical to attempt to decipher the company history section for this company.

Underwriters: UBS, Credit Suisse, Piper Jaffray.

Offering Details: Looking to raise up to $300 million.