ATCHISON, KAS. — MGP Ingredients, Inc. has entered into a joint venture agreement with SEACOR Energy, Inc.’s affiliate, Illinois Corn Processing Holdings, Inc., to reactivate distillery operations at MGPI’s facility in Pekin, Ill. According to MGPI, the Pekin facility, which has been idle since the company discontinued operations in February, will be owned and operated by a separate entity called Illinois Corn Processing, L.L.C. and initially will be dedicated to the production of alcohol for beverage, industrial and fuel applications. Production is expected to begin in the near future.
Under terms of the joint venture, SEACOR Energy paid MGPI $15 million for a 50% stake in Illinois Corn Processing, L.L.C. The two companies have agreed to a profit sharing arrangement related to the manufacturing, marketing and sales of the various alcohol products.
MGPI will be responsible for marketing beverage and food grade industrial alcohol produced at the facility, while SEACOR Energy will market the facility’s fuel grade alcohol.
MGPI said it will record charges of approximately $2.3 million in the second quarter of the company’s current fiscal year related to the formation of the joint venture.
"Proceeds from the sale of a 50% stake in the Pekin facility to SEACOR will be used to reduce debt," said John Speirs, chairman of MGPI’s board of directors. "Upon completion, total MGPI net debt will stand at approximately $15 million versus the net debt of $38 million that we had at the end of the first quarter of our current fiscal year and $60 million at the end of the first quarter of the prior fiscal year. With the completion of MGPI’s transformation with this joint venture, the company emerges more focused, more profitable and with a significantly improved balance sheet."
Mr. Speirs added the joint venture completes MGPI’s transformation from a commodity manufacturer of chemicals to a value-added ingredients supplier to the packaged goods industry.
The benefits of the joint venture are wide ranging, Mr. Speirs said, including increasing the company’s available capacity of beverage and food grade alcohol ingredients to a level that is approximately 50% higher on an annualized basis than capacity during the current fiscal year’s first quarter, and allowing the company to take advantage of significantly increased demand for alcohol for use in sanitizing products as the result of H1N1 concerns.
Randy Schrick, a 36-year veteran with MGPI who has been vice-president of engineering since June, has been named president of Illinois Corn Processing. From 1982 to 1984, he was plant manager in Pekin and then spent eight years as vice-president and general manager of the Pekin facility.
MGPI purchased the Pekin facility from the former American Distilling Company in 1980. Since then, the facility has undergone extensive upgrades and for many years had also been utilized for the production of commodity wheat starch and commodity vital wheat gluten, the basic protein component of wheat flour. In November 2008, MGPI ceased starch and protein production in Pekin, concentrating its focus on the manufacturing of specialty, value-added starches and proteins at its Atchison facility.
MGPI said it has plans to resume starch and protein production in Pekin either through its own accord or through the new joint venture with SEACOR Energy.