Green Plains, Inc. · NASDAQ:GPRE
Green Plains — Green Plains Renewable Energy — Merger or Acquisition (January 2008)
43 slides from Green Plains's merger presentation, Jan 22, 2008
Slide 1: Great Lakes Coop Proposed Merger With Green Plains Renewable Energy
Great Lakes Coop Proposed Merger With Green Plains Renewable Energy
Slide 2: Agenda
Agenda = General manager's overview = Board’s evaluation of offer from GPRE = GPRE’s perspective = The Plan of Merger and tax implications = Why the board recommends approval = Questions
Slide 3: Meeting Purpose
Meeting Purpose Provide information to the membership Help members make informed decisions Explain balloting process Answer your questions
Slide 4: The Resolutions
The Resolutions = That GLC merge with GPRE pursuant to the Plan of Merger = That the Articles be revised to permit payment of dividends
Slide 5: Manager's Overview
Manager’s Overview = Our analysis of the ethanol industry = Timeline of ethanol’s impact in our area = Growth of ethanol in our trade area
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Slide 15: Manager's Overview
Manager’s Overview = Grain origination discussions with GPRE = Evolution of discussions into eventual merger talks = Merger proposal required involvement of the board
Slide 16: The Board's Analysis
The Board’s Analysis = We were aware of grain origination discussions = We hadn't been considering a sale = GPRE presented a very attractive offer = We considered alternatives
Slide 17: The Board's Analysis
The Board’s Analysis = Concerns involved were addressed by GPRE: = Continuation of all lines of business (soybean marketing, fuel business, etc.) = Continuation of service levels (agronomy, feed business, etc.) = Retention of current staff
Slide 18: The Board's Analysis
The Board’s Analysis = What are the benefits for the members? = How will this affect our employees? = What will the market look like in 5 years? = The board’s responsibility to consider the offer = Concluded that this is best way to get equity value to our members
Slide 19: The Board's Analysis
The Board’s Analysis = Board obtained expert help: « Appraisals of market value of facilities = Preparation of cash flow analysis = Advice from coop’s auditor and lawyer = Board concluded this merger is in the members’ interest and is best available = The members get to make the final determination
Slide 20: Forward Looking Statements
FORWARD LOOKING STATEMENTS The financial projectians contained in this presentation contain forward-looking statements. These projections have been prepared by the Management of the Company and represent its estimate of possible future results of the Company's operations. The assumptions, make predi
Slide 21: GPRE's Perspective
GPRE’s Perspective ABOUT GREEN PLAINS NASDAQ and AMEX: GPRE Local investors, producer board members Shenandoah Plant — 50 million gallons of ethanol per year Superior Plant — 50 million gallons of ethanol per year Essex Elevator — 2.8 million bushel capacity soybean/corn
Slide 22: GPRE's Perspective
GPRE’s Perspective Vertical Integration Strategy « Ethanol value chain: » Agronomy/grain » Ethanol production » Ethanol logistics & marketing « |ntegration increases efficiency, reduces cost and minimizes risk * Scale and scope benefits both companies
Slide 23: GPRE's Perspective
GPRE’s Perspective ADVANTAGES OF COMBINATION = Vertical integration, increased efficiency and economies of scale = Member liquidity = Natural hedge for grain marketing and ethanol production = Public vehicle to facilitate growth of GPRE/GLC’s businesses = Positioned to work directly with producers =
Slide 24: The Plan of Merger
The Plan of Merger = You should have received the registration statement in the mail = |f not, ask for a copy = Read registration statement before voting = This presentation is merely a summary of information in the registration statement
Slide 25: GLC Shareholders Receive
GLC Shareholders Receive = $12.5 million on cash = 551,065 shares of freely-tradable GRPE stock = Represents 7.1% of GPRE stock = GLC’s investments in regional coops
Slide 26: GPRE Shares Increased
GPRE Shares Increased = |nitial Plan of Merger said GLC share- holders to receive 450,840 GPRE shares = GPRE increased this to 551,065 shares on 12/21/2007 = 22% increase in number of shares « Based on $7.5 million of stock at the share price on 12/21/2007
Slide 27: Escrow Account
Escrow Account = GLC’s regional investments put in escrow = This is primarily patronage refunds GLC has received from large coops (¢.g., LOL) " 8/31/2007 book value = $10,381,285 = Will be converted to cash over many years = Cash received from regional coops in the future deposited into the escrow a
Slide 28: Two Purposes of Escrow
Two Purposes of Escrow = Indemnify GPRE from possible losses from unknown losses. = Distribute remaining cash to Shareholders « Make a lump-sum payment to Small Shareholders equaling their estimated share of the value of the escrow account « Distribute payments to Large Shareholders as money receive
Slide 29: Indemnification Obligation
Indemnification Obligation = GLC indemnifies GPRE from some losses = Examples of potential sources of claims = GLC does not know of any claims = $250,000 deductible = $2 million of maximum claims = Claims must be made within 3 years of Closing
Slide 30: Escrow Administration
Escrow Administration = Bankers Trust, Des Moines is initial Escrow Agent = Shareholders represented by a Shareholder Committee = Kevin Adolf, Bryan Bailey & Darryl Hansen = After GPRE claims are resolved, Shareholder Committee becomes Escrow Agent
Slide 31: Escrow Distributions
Escrow Distributions = No distributions to Shareholders until after claims period has ended = Minimum of 3 years after Closing = First distribution is lump-sum payment to Small Shareholders = Remaining cash distributed over the years to the Large Shareholders
Slide 32: Distributions to Small SHs
Distributions to Small SHs = GLC’'s regional investments will be appraised by an investment banker « Par value of regional investments will be discounted for time value of money, etc. = Appraised value will be adjusted for: - Claims paid to GPRE « Administrative and professional fees * Interest earn
Slide 33: Distributions to Large SHs
Distributions to Large SHs = Will start after lump-sum distributions to small shareholders = Available cash will be distributed pro-rata = Based on par value of GLC stock owned by each Large Shareholder = Distributions expected to continue over many years
Slide 34: Tax Disclaimer
Tax Disclaimer = We will only look at federal and lowa income taxes for individual producers = This is not tax advice = Each Shareholder should consult with his or her own tax advisor
Slide 35: Taxation Overview
Taxation Overview = Merger treated as taxable sale by Shareholders of their GLC stock = Shareholder will recognize capital gain equal to value of assets received over tax basis = Shareholder’s interest in the Escrow Account is treated as a corporate dividend
Slide 36: Capital Gain at Closing
Capital Gain at Closing = Tax basis depends on tax treatment when GLC stock was received « If taxable, basis = par value = If non-taxable, basis = 0 = Cash paid for Common Stock is also basis = Capital gain is long term if stock held more than one year = Maximum federal individual tax rate = 15% = l
Slide 37: Taxation of Escrow
Taxation of Escrow = Transfer treated as a corporate dividend = Each Shareholder treated as receiving pro-rata share of GLC’s regional investments = Value will be set by independent appraisal = Maximum federal individual tax rate = 15% « lowa taxes dividends like all other income
Slide 38: Future Sale of GPRE Stock
Future Sale of GPRE Stock = Capital gain or loss on difference between sale proceeds and market value of GPRE stock on the Closing date = Tax holding period for GPRE stock begins on the Closing date = Must hold freely-tradable stock at least one year to obtain long-term capital gain treatment
Slide 39: Escrow Distributions
Escrow Distributions = |nterest earned in Escrow Account (less expenses) will be taxable income to SHs = Shareholder will have capital gains on excess of cash distributed over basis in Escrow Account = Basis = amount treated as a dividend in 2008 = No capital gains until this basis is recovered
Slide 40: Basis of Board's Decision
Basis of Board’s Decision = Ethanol growth will change the market Coop faces higher risk and higher costs = Major changes would happen without this merger (perhaps more than with merger) Participation in vertical integration = Best way to assure all members receive their coop equity
Slide 41: Break
Break = Stretch your legs = Refreshments available = We will address questions after the break
Slide 42: Common Questions
Common Questions
Slide 43: Questions From The Floor
Questions From The Floor
Green Plains Renewable Energy — Merger or Acquisition (January 2008) on 6ix