BioFuel Energy Corp. (NASDAQ:BIOF) had surged by over 51% after the bell to $4.76 following the company receiving a preliminary non-binding proposal from Greenlight Capital.
As first reported by ValueWalk, David Einhorn is set to buy 355,000 shares of BIOF at $3.12.
Preliminary non-binding proposal
Greenlight Capital, founded by hedge fund manager David Einhorn, submitted a preliminary non-binding proposal for a possible transaction with BioFuel Energy Corp.
In its proposal, Greenlight Capital indicated that it would purchase the small ethanol company, BioFuel Energy Corp, through a $275 million transaction, which involves cash and equity. In a letter addressed to the biofuel developer’s board, David Einhorn and Jim Brickman of JBGL Funds said the proposal provides an opportunity for the company and its stockholders to acquire an interest in a business with long term equity potential and an attractive portfolio of assets.
Greenlight increases stake to 29%
Greenlight also revealed that it had increased its stake in BioFuel Energy Corp. (NASDAQ:BIOF) to 29%, up from a previous 26.2% stake. The proposal involves one or more newly formed, wholly owned subsidiaries acquiring equity interests of JGBL, a series of real estate entities involved in the purchase and development of land for residential purposes, construction lending and home building operations. JBGL is owned and controlled by Greenlight and James Brickman.
The purchase price of $275 million would be payable in cash and shares. The purchase price and working capital for BioFuel Energy Corp (the “Company”) and its subsidiaries would be funded through a combination of a new debt financing, a rights offering to purchase common stock and the issuance of common stock to Greenlight and the Brickman parties and the Company’s cash on hand.
As far as the debt financing is concerned, immediately prior to the acquisition, BioFuel Energy Corp. (NASDAQ:BIOF) and or one of its subsidiaries will borrow from a new term loan made available by Greenlight and the Brickman Parties. The principal amount would be roughly $150 million carrying interest at 10% fixed per annum.