Biorefining company Green Plains (NASDAQ:GPRE) has agreed to merge with Green Plains Partners LP (NASDAQ:GPP). GPP was formed by GPRE to provide fuel storage and transportation services. Now, the latter will acquire all publicly held common units of the former that it does not already own in exchange for a combination of its common shares and cash. The announcement has sent GPP shares nearly 16% higher in the morning session today.
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Under the agreement, each outstanding unit of GPP (which GPRE does not already own) will be converted into the right to receive 0.405 shares of GPRE stock, alongside $2 in cash and unpaid distributions from the end of the last quarter.
Excluding the unpaid distribution amount, the transaction implies a consideration of $16.59 for each GPP common unit as of September 15. The deal is expected to simplify GPRE’s corporate structure, lower SG&A expenses, and result in near-term earnings and cash flow accretion. Further, the combined entity is also expected to enjoy improved credit quality.
The transaction has been approved by the Boards of both parties and is expected to close in the fourth quarter of this year. GPRE currently owns a 48.8% limited partner interest and a 2% general partner interest in GPP.
What Is the Target Price for GPRE?
With today’s price gains, GPP shares have surged nearly 24.2% year-to-date. Meanwhile, the Street sees 17.3% potential upside in GPRE stock based on an average price target of $39.
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