Why Shares of Green Plains Partners Just Hit a 52-Week High

What happened

Shares of Green Plains Partners (GPP) surged by double-digit percentages this morning to 52-week highs after its ethanol producer and parent company, Green Plains (GPRE 1.13%), announced an agreement to acquire the remaining stake in the partnership in a stock-and-cash deal. Green Plains Partners stock was trading 17% higher as of 11:20 a.m. ET Monday.

So what

Green Plains will acquire all the remaining shares (or units) of Green Plains Partners that it doesn't already own in a deal expected to close in the fourth quarter of 2023. As of Dec. 31, 2022, Green Plains owned a 50.8% stake in the partnership.

As per the terms of the agreement, each shareholder in Green Plains Partners will receive 0.405 shares in Green Plains and $2 in cash for every unit they own. That means Green Plains is offering roughly $15.69 for every unit of the partnership as of Sept. 15, representing a premium of 20% to the closing price of May 3, a day before Green Plains first proposed the merger. Not surprisingly, Green Plains Partners shares soared today and hit a 52-week high of $16.22 per share, as of this writing.

That aside, shareholders in Green Plains Partners will also receive an amount of cash equal to unpaid distributions (or dividends), calculated from the end of the last quarter when a distribution was declared to the date of closing the deal, without interest.

Now what

Green Plains Partners is a master limited partnership that was formed in early 2015 primarily to act as the logistics provider for parent Green Plains and provide it with ethanol storage, marketing, and distribution services.

Green Plains is one the largest producers of ethanol in North America. It calls itself a biorefining company now that it's moving from just ethanol production to converting renewable crops like corn into value-added ingredients such as low-carbon transportation biofuels, high-protein food for pets and cattle, and alcohols for use in cleaners and disinfectants.

The merger, therefore, appears to be a move to become vertically integrated as Green Plains will acquire the partnership's entire portfolio of ethanol and fuel storage terminals and transportation assets. In 2022, Green Plains generated roughly $3.6 billion in revenue, up about 29% over 2021. Its net loss, however, rose nearly 93% to $127 million.