The air district filed a lawsuit in August 2005 against Modesto Tallow requesting the plant be shut down due to repeated violations of air-pollution control requirements. The legal action resulted in a stipulated court judgment filed in December in Stanislaus County Superior Court.
The judgment is a direct result of the air district’s commitment to finding a firm, long-term resolution to the situation. Under the terms of the settlement, Modesto Tallow:
• agrees to immediately cease processing raw animal matter and surrender its air district permits for the animal processing portion of the facility;
• may continue processing chicken feathers until May 3, 2006, and agrees to install additional control equipment;
• may operate a transfer station at the facility until December 31, 2006, but agrees to limit the amounts and types of materials it can transfer;
• agrees to a permanent injunction prohibiting it from violating its air district permits and district rules; and
• agrees to permanently close the facility and cease all operations by December 31, 2006.
Modesto Tallow has been at its current location since 1917, when the area was primarily agricultural land. Over time, and over objections from Modesto Tallow, homes and schools were built around the plant. Residents have long complained about odors emitting from the plant, although the company has spent nearly $1 million on odor equipment upgrades over the years, according to Bill Shirley, Pascal Enterprises, parent company of Modesto Tallow.
The closure of the plant is raising concerns about animal carcass disposal by California’s dairy farmers in the region. While there are other renderers in the area, including Darling International and Baker Commodities, Michael Marsh, chief executive officer of the Western United Dairymen (WUD) said the cost of disposing deadstock could rise if other rendering companies do not have excess capacity. California does not allow burial or burning of dead animals.
“They [animals] have to be disposed of in some fashion, and Modesto Tallow, of course, has provided an outlet for those products for years,” Marsh commented. WUD Vice President Ray Souza agreed. “It’s going to create some issues…these types of plants play a crucial role in our operations.”
Despite being allowed to operate on a limited basis, Shirley said the plant is no longer processing any material. Deadstock trucks and routes have been sold to another renderer and plans for the facility and land have not yet been finalized.
Texas Renderer Makes Buy
Darling International, Inc., announced just before Christmas that its board of directors unanimously approved a purchase agreement to acquire National By-Products, LLC, for cash and stock valued at approximately $141 million. Subject to customary closing conditions, the sale is targeted for completion around March 31, 2006.
“We have worked hard and are very excited about the benefits that the strategic combination of our two companies will create,” said Darling’s Chairman and Chief Executive Officer Randall Stuewe. “Darling’s acquisition of National By-Products represents a major step forward in our strategy to deliver value to our stockholders by growing our revenue, diversifying our raw material supplies, and creating a larger platform to grow our restaurant services segment.”
Mark Myers, president, National By-Products, is equally as pleased with the decision.
“I think it’s a positive move for National By-Products as well as Darling,” he commented. “In order to grow our business, we felt this was a good opportunity. Joining the two companies allows us to be stronger.”
Headquartered in Irving, TX, Darling is the largest publicly traded rendering company, with $320 million in revenues in fiscal year (FY) 2004. The company was formed in 1882 when a Chicago family named Darling joined forces with the meatpacking firm of Swift and Company to find markets for waste fat, bones, and other by-products. Three years later, the Darlings separated from the meatpacking part of the business to concentrate on rendering operations and expanding the company. Today, Darling operates more than 30 plants across the United States and exports approximately 30 percent of its production.
Founded in 1933, National By-Products is one of the United States’ top five independent renderers, with 42 facilities throughout the Midwest, including 14 large-scale production facilities. Based in Des Moines, IA, the company operates a fleet of 450 trucks, has 750 employees at its facilities, and reported $200 million in revenues in FY 04. National By-Products also brings with it a strong balance sheet with minimal working capital debt and an experienced senior leadership team.
Both companies collect and recycle used cooking oil and animal by-products from livestock producers, turning the raw material into products used in the animal feed and oleochemical industries.
Under the terms of the agreement, National By-Products unit holders will receive $70.5 million in cash and an amount of Darling common shares equal to 20 percent of the company’s outstanding common shares on a fully diluted basis upon completion of the transaction, approximately 16.3 million shares.
Newsline - February 2006 Render