If the plan is approved by YA Global Investments, the companies' senior creditor, GS CleanTech will transfer its GS AgriFuels stock into a new wholly owned private subsidiary, which will then merge with GS AgriFuels, making it a private company by the end of February.
The plan also calls for other GS AgriFuels shareholders to be bought out at 50 cents per share -- more than double Wednesday's closing price of 21 cents per share.
The move is part of a restructuring effort in which the parent company, previously GreenShift Corp., has transferred all its assets -- including majority stakes in GS AgriFuels, GS Energy Corp., GS EnviroServices and GS Ethanol Technologies -- to its subsidiary, GS CleanTech, which will then change its name back to Greenshift in January (see press releases here and here).
Kevin Kreisler, chairman of both GS CleanTech and GS AgriFuels, said the point of taking GS AgriFuels private is to concentrate all of GS CleanTech's biofuel business into one public company.
"We've been burning too much cash at the corporate level administering multiple public entities," said Ed Carroll, chief financial officer for GS AgriFuels.
GS AgriFuels, which markets its products under the Mean Green BioFuels brand, has developed a gasification process that it claims can yield more ethanol from the same bushels of corn at a lower cost. The idea is to use all of the corn -- including the cellulosic parts, which other processes convert into cattle feed -- for the fuel, and to turn part of the resulting synthetic gas to run the plant.
GS Agrifuels also has technology to extract oil from the corn before it is processed into ethanol and to turn that oil into biodiesel, for more diversification and further profit, and is developing a bioreactor that turns carbon dioxide into fuel using algae.
In November, the company bought NextGen Fuel, which makes biodiesel-process equipment that it claims can produce more biodiesel from the same raw material, using less energy. And in October, GS Agrifuels took a 10-percent stake in ZeroPoint Clean Tech, which is developing technology to gasify biomass. It also is pursuing algae-growing technology for biodiesel.
But the company, which had previously planned to build a commercial-scale cellulosic pilot plant this year, has suffered from the same dampened atmosphere as the rest of the biofuel industry.
On Thursday, GS AgriFuels shares were trading at 32 cents per share, far below their 52-week peak of $7 per share on Jan. 26 -- although the price was up 52.4 percent from the close of 21 cents per share Wednesday.
Biofuel companies have seen their margins squeezed in the past few months as prices for the crops used to make the fuels have gone up while biofuels prices have gone down (see Ethanol Margins Suffer and Ethanol's Tough Times Continue). And Europe's biodiesel drive is hitting similar obstacles, according to The Wall Street Journal.
Entrepreneurs are trying different approaches for dealing with the hungry period.
A number of biofuel companies have canceled proposed plants (see Ethanol Margins Suffer, Biofuels Get Funding as an Ethanol Plant Gets Canceled, E3 Plant Craps Out, Another Ethanol Plant Gets Canceled and Biofuel Forecast Buoys a Bit).
Xethanol Corp. (AMEX: XNL) last week announced it was diversifying into other renewable sectors, including wind power,solarpower, energy storage, energy infrastructure, energy efficiency, waste recycling, agricultural processes and biomass gasification for electricity production.
And Imperium Renewables ousted its CEO, former Microsoft manager Martin Tobias, last week (see Imperium CEO Leaves Amid Biofuel Profit Pressures).