Green Plains Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated September 6, 2019, details a strategic transaction by Green Plains Inc. (GPRE) involving its wholly-owned subsidiary, Green Plains Cattle Company LLC (GPCC). The report covers the formation of a joint venture and the sale of a significant equity stake in GPCC to external investors.
Key Financial Metrics and Transaction Details
- Transaction Value: Green Plains sold an aggregate of 50% of the membership interests in GPCC to TGAM Agribusiness Fund Holdings-B LP and StepStone Atlantic Fund, L.P. for approximately $77.2 million in cash, subject to post-closing adjustments.
- Transaction Date: The transaction closed on September 6, 2019, with an effective date of September 1, 2019.
- Debt Financing: GPCC entered into an amended and restated senior secured asset-based revolving credit facility led by Bank of the West and ING Capital LLC. Additionally, a $10.0 million promissory note was issued between Green Plains and StepStone to fund part of the transaction, due for cash settlement by September 20, 2019.
- Accounting Treatment: Green Plains will no longer consolidate GPCC. Instead, it will account for its remaining 50% interest using the equity method, recognizing its proportionate share of earnings on a separate line item in the consolidated statement of operations.
Material Changes Versus Prior Period
The primary material change is the shift in ownership structure of GPCC from a wholly-owned subsidiary to a 50/50 joint venture. This alters the consolidation of GPCC's assets, liabilities, and operating results from the parent company's balance sheet. Furthermore, the credit agreement for GPCC was amended to revise the "change in control" definition, now triggered if Green Plains owns less than 35% of GPCC, down from the previous threshold of less than 100%.
Outlook, Governance, and Risks
- Governance: Green Plains retains the right to designate two Managers to the GPCC Board of Managers (or two-fifths if the board size increases). TGAM and StepStone each designate one Manager. A majority of Managers constitutes a quorum.
- Operations: GPCC will manage day-to-day cattle feed yard operations, while Green Plains will provide administrative services under a Shared Services Agreement.
- Capital Contributions: Future capital contributions are to be funded by the parties in accordance with their percentage interests, subject to mutual agreement.
- Financial Statements: Unaudited pro forma condensed consolidated financial statements are required to be filed separately within the time required by Form 8-K and are not included in this text.
Key Facts for Investor Verification
- Verify the final post-closing adjustment amount to the $77.2 million purchase price.
- Review the upcoming pro forma financial statements to assess the impact of deconsolidating GPCC on Green Plains' leverage and liquidity ratios.
- Confirm the terms of the Shared Services Agreement to understand ongoing revenue streams or cost allocations between Green Plains and GPCC.
- Monitor the settlement of the $10.0 million promissory note by the September 20, 2019 deadline.