The Andersons Pays $915 Million to Stop Waiting on Carbon

The Andersons Pays $915 Million to Stop Waiting on Carbon

There are two Andersons stories being told on the same morning. The first is a clean one: record third-quarter EPS of $1.38 adjusted, up from $0.84, adjusted pretax earnings of $54 million versus $31 million, EBITDA of $101 million versus $78 million, and a company that has lifted trailing-twelve-month adjusted EPS from $2.56 to $6.67 in a year against a stated $7 target exiting 2028. The second is a stock that peaked at $80.87 on July 22 and now trades 31.6% below that, down 19% in ninety trading days in one unbroken slide.

The bridge between the two is this morning's announcement: a $915 million agreement to buy Harvest Own Low Carbon Partners — three ethanol plants, roughly 200 million gallons a year, anchored by North Dakota assets that already sequester carbon or will shortly.

A deal the company spent six quarters telegraphing

The first thing to say is that nobody who has listened to this management team should be surprised by the shape of this transaction, only the size. In November 2025, asked about deploying a coming wave of tax-credit cash, Bill Krueger conceded the point directly: “I do think that you make a good observation that our expected cash flows in the future will allow us to look at larger M&A projects.” — William Krueger, Chief Executive Officer · 2025-11-05 By August 2026, Brian Valentine was blunt about the appetite — “we've been very clear over the last 2 years that we do have a desire as long as the price is correct, that we would like to add more gallons to our fleet.” — Brian Valentine, CFO or Senior Financial Officer · 2026-08-04

What is new is that The Andersons has stopped trying to build its way into carbon capture and started buying it. The company has talked publicly about carbon sequestration for years — Clymers, Indiana has been 'about three years' into a Class VI permit that is still not in hand. Krueger's framing of the pivot is about as candid as it gets: “what we really like about this opportunity is we are in the carbon sequestration game on-site the day after closing.” — William E. Krueger, CEO · 2026-11-04

The strategic logic is genuinely differentiated. Blue Flint uses waste steam from a neighboring power plant and has been sequestering on-site for roughly three years; Dakota Spirit is expected to begin in early 2027. Those two plants, plus a third in Indiana, get the company into the small club of facilities that can produce ethanol with a CI score in the single digits — and, per renewables head Mark Simmons, potentially below zero — which is precisely what the low-carbon fuel markets in the U.S. and Canada pay for. That is not a commodity-gallon story.

What management quietly stopped talking about

Here is the tell. For the last few quarters, the dominant renewables framing on these calls was demand-side: blend rate, voluntary blending, E15, exports, gasoline substitution. That keyword was among the company's strongest risers in the spring and carried real weight through midsummer. In the third-quarter materials it has fallen off a cliff — it is now one of the company's sharpest keyword decliners, and it barely appears in the prepared remarks at all.

In its place: waste steam, Class VI wells, 45Q, low-carbon markets. The bull case has migrated from more ethanol gets blended to the ethanol we make is worth more per gallon because of its carbon intensity. That is a better story in the long run and a more fragile one in the short run, because it leans on 45Z tax credit policy that management itself said in May was probably a 'late summer, early fall' event and which still is not finalized. Meanwhile the tax credit keyword has been de-rating in the company's own keyword history since the second quarter. The market is discounting a policy-dependent cash flow — which is a large part of why a record quarter has produced a 32% drawdown.

The fine print management wants you to read

Two pieces of the deal disclosure deserve more attention than the headline accretion. First, roughly half of the $915 million purchase price — inclusive of working capital — is attributed to expected 45Z and 45Q credit cash flows. Strip that out and The Andersons is paying something like $2.30 per annual gallon for the base operations, against the $1.54 per gallon it paid for the remaining stake in its own ethanol joint venture in 2025. New gallons with carbon capture are worth more; whether they are worth that much more is the question the equity is currently asking.

Second, Krueger went out of his way to warn the sell-side off its own arithmetic:

I would caution anyone that says, well, they are making x on 45 z net EBITDA, and everything else is operational. Because that formula simply will not work. There is a cost to compress the CO2, there is a cost to go downhole, there is a transportation cost for that.

Translated: the $225 million to $250 million of annual EBITDA guided for each of the next three years is not free money layered on top of plant economics. Compression and sequestration are real operating costs that will land in the base bucket.

The balance sheet can carry it — long-term debt to EBITDA of 1.3x today, roughly 2x at closing, well inside a stated sub-2.5x target. But note that this is a company whose effective net cash position was already negative $811 million at the last filing, worsening by 144% year over year, and whose liabilities-to-assets ratio has climbed back to 60.9%. The deal is financed entirely with debt: $300 million on the revolver, $615 million of committed long-term paper. Management expects most of it repaid within five years, which implicitly assumes the tax credits arrive as scheduled.

The quarter the market is actually pricing

Beneath the deal, the operating quarter was a genuine inflection in profitability mix. Gross margin expanded 2.2 points to 7.2%, and operating income rose 171% to $67 million.

But the forward commentary is where the caution lives. Two items stand out. Agribusiness will not repeat last year's trick of pulling first-quarter profits forward — “We will not pull any Q1 profits into Q4” — William E. Krueger, CEO · 2026-11-04 — and the late delayed harvest across Iowa, Nebraska and the Eastern Corn Belt means space income may land later than usual, with farmer selling having slowed sharply after a 70-to-90-cent futures selloff. In renewables, the feedstock merchandising arm faced a genuinely new competitive negative: “our merchandising results were lower year over year on competition from foreign feedstocks and lower demand from bio based diesel plants.” — Brian A. Valentine, CFO · 2026-11-04 That, plus a D6 RIN market that has wobbled on biofuel policy delay, is the near-term bear case management danced around but did not dispute.

The offset is real and it is permanent: the Port of Houston project is operational, a multi-year soybean-meal export build now generating instead of consuming capital, and Clymers debottlenecking adds 30 million gallons by the third quarter of 2027. Post-closing, the fleet reaches roughly 730 million gallons, moving to 760 million — about 40% more volume through an existing merchandising machine.

Where that leaves the equity

At 12.5x trailing net income and roughly 3x gross profit, The Andersons is not being priced as a growth story, and it is not being priced as a crisis either. It is being priced as a commodity processor that has just made its largest bet on a policy-dependent margin, at a moment when that policy is unresolved and its own stock is in a one-directional 17-week decline.

The honest read: the asset quality of this deal is high — waste steam, on-site sequestration, rail access to Canadian low-carbon markets, and a North Dakota corn shed where the company had no presence. The risk is that the market is being asked to underwrite tax code, not corn. Until 45Z is final and those credits are monetized in cash rather than a signed agreement, a record quarter is likely to keep trading like a cyclical one.