LOS ANGELES - Rentech Inc. has acquired New England Wood Pellet (NEWP), the largest U.S. producer of wood pellets for the U.S. heating market for $45.1 million.
NEWP also has been a repeat target for the U.S. Occupatiional Safety and Health Administration, including being cited for combustible dust and other safety violations at its Jaffrey, NN, plant in December 2012 and March 2013. The 2012 violations stemmed from an October 2011 fire
Rentech (NASDAQ: RTK) said in a statement it will pay $34.5 million in cash and will assume NEWP's cash of $2.4 million and debt of approximately $13 million; 6.1 times NEWP’s 2013 EBITDA. The after-tax return on the acquisition is expected to be in the mid-teens.
“NEWP is the leader in the growing U.S. market for wood pellets used in heating applications. The acquisition brings additional cash flows and profitability to our wood fiber business. In addition, NEWP’s business broadens our product offerings, customer base and geographic markets,” said Rentech president and CEO D. Hunt Ramsbottom.
According to Rentech, approximately 1.5 million tons of wood pellets are used annually in the Northeast United States, with NEWP holding approximately 15% share of the market. NEWP, which is based in Jaffrey, NH, sells its pellets through major retailers including Home Depot, Lowe’s, Tractor Supply and Wal-Mart.
Established in 1992, NEWP operates three wood pellet facilities with a combined annual production capacity of 240,000 tons. 2014 forecasts call for revenues of approximately $44.8 million, operating income of approximately $4.6 million and EBITDA of approximately $7.6 million.
Rentech said it also is developing wood pellet facilities in East Canada to supply pellets to utilities. Incorporated in 1981 and based in Los Angeles, Rentech owns and operates wood fiber processing, wood pellet production and nitrogen fertilizer manufacturing businesses, including 39 facilities in four countries.