Murphy USA Inc.'s deal to sell its ethanol plant in Hereford, Texas, for $93.8 million is part of the company's plans to shed its noncore assets, Chief Executive Officer Andrew Clyde said Tuesday.
Murphy USA, of El Dorado, announced this week that it will sell the ethanol plant to Green Plains Inc., a Nebraska commodity-processing company. The transaction is expected to close this month.
Murphy USA has been working to divest some of the assets it received when it separated from Murphy Oil Corp. two years ago.
These assets, which include another ethanol plant in North Dakota that the company sold for $173 million in 2013, don't fit with Murphy USA's retail gasoline business, Clyde said.
"It just requires a different set of capabilities and assets, and we were not looking to grow that so we deemed those noncore assets," Clyde said about the Hereford plant.
Murphy USA also has a remaining crude oil pipeline that the company is selling, Clyde said.
He said the company has sought transactions for the assets that are good for employees and get the most value for shareholders.
The Hereford plant had previously been placed on the market but Murphy USA received "lowball offers" in the range of $10 million, reflecting operational problems the facility had, so the company implemented a turnaround plan to improve yields and increase its competitiveness, Clyde said.
"It was very much worthwhile to do that," he said, pointing to Murphy USA's resulting agreement with Green Plains.
Under the deal, $78.5 million was for the ethanol production plant, which has an annual capacity of about 100 million gallons, and the balance for working capital, which includes corn, ethanol, and other parts and inventories.
Employees at the Hereford plant are expected to continue working for Green Plains when the sale is completed, said Green Plains spokesman Jim Stark.
The Hereford facility is the second ethanol plant Green Plains has bought in a week. Green Plains said Oct. 26 that the company acquired a plant in Hopewell, Va., from Future Fuels LLP.
Green Plains said the advantage of the Hereford plant is its location near cattle feed yards.
"The Hereford facility has many strategic and financial advantages over other destination plants because of its location, leading to both export and domestic market opportunities for ethanol and distillers grains," said Todd Becker, president and chief executive officer of Green Plains, in a prepared statement.
Murphy USA will release its 2015 third-quarter financial results today after markets close. Shares of the company rose 10 cents Tuesday to close at $62.30 on the New York Stock Exchange.
Business on 11/04/2015