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VeraSun, US BioEnergy to Merge

Two ethanol producers said Thursday that they're joining forces, as VeraSun Energy (VSE) set plans to acquire US BioEnergy (USBE).

Under the merger agreement, VeraSun will issue 0.81 shares for each share of US BioEnergy. The existing VeraSun shares will remain intact and will represent around 60% of the combined stock outstanding after the merger.

Based on VeraSun's Wednesday finish at $10.64, each US BioEnergy share is being valued at roughly $8.62, 59 cents above its last close. Recently, US BioEnergy was up 62 cents, or 7.7%, to $8.65. VeraSun was gaining 30 cents to $10.94.

According to US BioEnergy's most recent quarterly report, filed with the Securities and Exchange Commission Nov. 13, the company had an average of 72.9 million shares outstanding on a diluted basis for the three months ended Sept. 30. Based on a calculation using that number, US BioEnergy's equity would be worth around $628.4 million.

The Associated Press said the St. Paul, Minn.-based US BioEnergy had 79.6 million shares out as of Oct. 31, valuing the takeover at $686.2 million.

The boards of both companies have cleared the deal, which should close during the first quarter. VeraSun Chairman, CEO and President Donald Endres will remain CEO of the combined company, and US BioEnergy President and CEO Gordon Ommen will serve as chairman.

Brookings, S.D.-based VeraSun expects the merger to add to earnings in the first full fiscal year of combined operations. By the end of 2008, the joined company predicts a total ethanol production capacity of more than 1.6 billion gallons a year.

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