BioFuel Energy Corp. (NASDAQ:BIOF)’s stock price is up more than 50% after announcing that its board of directors has approved a deal that would give David Einhorn’s Greenlight Capital just short of half the company, even though the deal is structured so that Biofuel is the one doing the acquisition.

Greenlight Einhorn BioFuel

Greenlight will sell JBGL but own almost half of BioFuel Energy Corp. (NASDAQ:BIOF)

BioFuel Energy Corp. (NASDAQ:BIOF) has entered into a definitive agreement to acquire the homebuilding/financing company JBGL, currently owned by Greenlight Capital and co-founder Jim Brickman, for $275 million in cash and stock. Biofuel Energy said that the cash portion of the deal will be handled with a $70 million rights offering and a $150 million loan from Greenlight.

Once all the dust has settled, Greenlight will end up with a 49.9% in BioFuel Energy Corp. (NASDAQ:BIOF) and Brickman will end up with 8.4%. Brickman will become CEO of the new company once the transaction has been finalized. The deal is still subject to a majority vote from Biofuels Energy’s stockholders and the successful issuance of $70 million in common stock, but based on the market’s initial reaction to the news, neither of those should be much of a hurdle. The deal is expected to be finalized by this October.

Board acceptance was a major risk holding back BioFuel Energy Corp. (NASDAQ:BIOF) stock

BioFuel Energy Corp. (NASDAQ:BIOF)’s price has jumped twice before on speculation that Einhorn might acquire a big stake in the company, first to more than $7 (after spending months below $3) on March 31 when Einhorn’s offer was originally made public, and then to nearly $9 in mid-April, but the stock price had since drifted back down as investors lost confidence that the board would accept.

“This was a major milestone achieved in terms of my thesis and takes out the biggest uncertainty – which was whether the Board was going to take the deal or not,” says HBC Marquis Partners, LLC portfolio manager Farukh Farooqi, who had been encouraging investors to go long on the stock while its price was depressed. “David Einhorn is a smart investor, will own half this company and we are happy to participate alongside him.”

At the time Farooqi said that BioFuel Energy Corp. (NASDAQ:BIOF)’s stock price could go well into the double digits if the deal went through. Some people are concerned about the effect of so much stock issuance (both directly to Greenlight and Brickman, and to raise cash), but Farooqi thinks investors stand to make money even after stock dilution.