FARGO -- CHS Inc. is purchasing the PICO Northstar Hallock LLC plant in Hallock, Minn., for $127 million, effective in the third quarter of this year.
CHS is Fortune 100 company based in St. Paul.
The plant was completed in 2012 for about $165 million, with PICO Holdings owning 87.7 percent and Northstar Founders LLC owning 12.3 percent. It had been intermittently profitable, according to PICO quarterly public filings. In February, PICO filings indicated intent to seek strategic alternatives for the plant, so industry sources say the deal was not entirely a surprise.
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Industry sources say canola crush margins have been reduced by a host of difficulties, including challenging crop problems in Canada that boosted the cost of canola seed for processing, as well as delays in the U.S. Environmental Protection Agency issuing favorable fuel mandates.
Neil Juhnke, who had been the company's president, declined to comment except to say the CHS ownership should be positive.
"I'm excited about the transition and the future of the Hallock plant -- an endorsement of the vision that the founders started with," he says.
Juhnke declined to comment on whether he would be staying on with the company. Ted Mitchell, a PICO Holdings spokesman, was not immediately available to comment on how much of the company's workforce would be retained by the new owners. Annette Degnan, a CHS spokesperson, also was not immediately available.
The plant employs about 50 people, sources say.
Todd Johnson of Hallock, chairman of Northstar Founders, says by "quick math, it doesn't look real good" for his investor group. Northstar Founders has roughly 100 members -- some farmers, some local business people, and plant executives. He says he isn't clear how or when any cash might flow back to the initial investors. Johnson's family owns farmland, is in the trucking business and is a retail oil distributor.
Johnson says CHS is a "reputable ag company, probably big enough to handle this," and is a "fine company" to operate the plant.
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Local vision changed
In the initial stages of development, the plant was going to be called Northstar Bioenergy, but then became Northstar Agri Industries LLC before PICO Holdings became involved in construction and planning in 2010.
The plant initially was built to handle 1,000 tons of canola per day, and expanded to 1,400 tons a day. The original plan was to have local ownership and management, but as the company got a few years into the process, it realized it didn't have the resources for a project of that size.
"PICO came along -- a larger, mother company, to carry the water," but it didn't work out as expected because markets didn't cooperate, Johnson says.
"As minority owners, we've had nothing to say on how the plant has been operated since 2010," Johnson says, noting he's been getting news of the sale mostly through PICO's public announcements, as the general public does. Johnson says he has been aware of the company's efforts to sell the plant and had heard several "ag giants" were looking at it.
