Stout was engaged by a publicly traded agriculture company to determine the fair market value of four ethanol production facilities for general planning and financing purposes associated with a proposed joint venture agreement. Furthermore, Stout was engaged to determine the fair value of related machinery and equipment and real estate assets to satisfy financial reporting requirements.
The facilities, which collectively produce almost 500 million gallons of ethanol annually, also produce, market, and sell ethanol, distillers dried grains (DDGs), corn oil, carbon dioxide, and other ancillary co-products. While the traditional approaches to valuation were employed (i.e., Discounted Cash Flow Method, Guideline Public Company Method, M&A Method, and Adjusted Book Value Method), we included unique industry-specific pricing multiples based on production capacity in our application of the market approaches used to determine the fair market value of each facility.
In addition, we leveraged the work performed by Stout personal and real property teams in order to derive asset-based values for the facilities, which we compared with the other indications of value to ensure that the underlying cash flows of each facility could support their fixed asset base. This required extensive cooperation and communication between each Stout team in order to achieve the best possible outcome for the client. Ultimately, our conclusions were accepted by both joint venture partners and leveraged to support 1) consolidation accounting associated with the transaction and 2) specifically as it relates to the fixed assets, financing decisions made in conjunction with the transaction.