Many of you know of Blue Sun Biodiesel from one of my more popular posts Why I Bought a Jeep where I talk about my decision to buy a Jeep Liberty diesel (which I run on biodiesel) as a cost effective alternative to a hybrid SUV. That article was first published in the Colorado Renewable Energy Society blog, which led Blue Sun cofounder John Long to contact me, I ended up doing due diligence for a client for a private placement with them.
I liked Blue Sun’s business model and management, but had reservations about the price they were asking… evidence for good management, because if they had been offering a price I liked, they probably weren’t asking enough… I’m very cautious when valuing private equity; there’s a lot that can go wrong and no exit if it does. My client decided to make a substantial investment despite my reservations. Events have now proven him correct.
On January 29, Blue Sun announced that they were merging with M-Wave in a move which essentially gives them a back door to a Nasdaq stock market listing. Sarbanes-Oxley, by making conventional routes to going public much more difficult, has made this route much more popular in recent years. Blue Sun shareholders will own 87.5% of the merged company and gain access to a much broader pool of equity to fuel their expansion plans. As the quality leader in biodiesel, they are one of the few stand alone companies that have a chance against agricultural giants such as ADM and Bunge.
Blue Suns’s other advantage over the giants is thier emphasis on quality. As Texas producers know, it’s very important to have biodiesel of consistent quality, and Blue Sun sets the gold standard. Unlike most biodiesels, Blue Sun’s actually reduces NOx emissions (along with particulates, VOCs, etc., and increased lubricity, which reduces maintenance costs like other biodiesels), as well as having a lower cloud point, due to their proprietary additives and use of higher quality oil as feedstock.
As a side note, there was a rumor going around the Colorado Cleantech Initiative last Tuesday night that this was the biggest private equity deal in Colorado history. Jeff Probst, Blue Sun president was there, but he didn’t know for sure how the deal stacked up to previous deals.