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Over at seeking alpha, a particularly good summation of Darling, its current status, and its future prospects was published today. It pays particular attention to the recent spate of acquisitions and what those may portend moving forward. It also discussed the recent pull back in share price that seems to be largely based on the EPA’s recent decision regarding biofuel mandates – with this wise bit that we should all remember when thinking about darling: Overall, too much focus is being placed on the biodiesel segment at the expense of the more diversified, stable, and growing rendering into feed business.

Diamond Green Diesel is an important part of the DAR story – but it isn’t the only part. Market overreactions are sometimes an opportunity…

I recall the first earnings report that came after the Griffin acquisition – though it should have been anticipated given that DAR had doubled in size by bolting on a profitable company, the large increase in EPS caused a rather nice spike in the share price (we have not looked back since). It would not surprise me if the additions of Terra, Rothsay, and Vion to the bottom line result in similar jumps in EPS and a similar dumbfounded reaction from the street…. Should be interesting (and hopefully profitable) to watch.

I remain somewhat concerned about the cost/financing of the acquisitions, but I believe in the long term prospects of DAR.

Other good bits from the article:

The US livestock sector processes more than 150 million head of cattle, calves, hogs, and sheep and more than 55 billion pounds of poultry annually. In addition to human consumption, the meat processing industry produces a significant amount of by-products that are transformed into approximately 20 billion pounds of feed and industrial products in the form of various types of fats and proteins.

Darling has just 13% of total raw material market share which means they have significant room to grow. The industry has evolved over the last decade into a shared-risk procurement model as pricing protocols have reduced exposure to commodity price fluctuation and also provide a floor in margins. US meat production (in lbs.) has been a steady but slow grower over the last decade at +1.13% per year according to the USDA. Darling has grown its share of the business both through acquisitions and organically.


And

In 2010, Darling bought Griffin Industries Inc., a provider of value-added rendering, bakery feed, and cooking oil recycling services and is the precursor to the current form of the company. This acquisition for $840 million significantly increased the size (roughly doubled it) and scope of the company and made it the number one independent food by-products recycler. There was little overlap in collection point facilities and the purchase helped round out the geographic footprint of Darling. The combination also created a more diversified supply chain in the operations.

Effective August 26, 2013, Darling acquired all of the shares of Terra Holdings Company, for $121.4 million in cash. Terra will increase the company's rendering portfolio by adding to the existing rendering businesses that collect grease while adding an industrial residuals business as a new line of service for the company's rendering raw material suppliers within the rendering segment.

Darling purchased Rothsay, a division of Maple Leaf Foods, on October 28th, 2013 for CAD$645 million and significantly expanding the company's reach in Canada while creating North America's largest provider of independent rendering and recycling services. Rothsay had six rendering plants in Manitoba, Ontario, Quebec and Nova Scotia and also a biodiesel operation in Quebec. Rothsay had EBITDA of CAD$85 million in each of the prior two years.

In early October 2013, Darling purchased Vion Ingredients, a division of Vion Holding for the sizeable price of $2.2 billion. Vion Ingredients is a renderer of animal by-products into a variety of end products serving the pharmaceuticals, food, feed, pet food, fertilizer, and bio-energy markets. In fiscal 2012, revenues were $1.6 billion while EBITDA was approximately $200 million. The company is financing the purchase with a combination of bank debt, public debt, and equity. They expect the transaction to be immediately accretive to earnings per share before synergies and one-time charges- always a key statement to look for in acquisition announcements by management.


It is well worth your time to read the whole thing – then buy a few shares of DAR…

Greg
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http://seekingalpha.com/article/1871251-darling-internationa...

and...the link i forgot to include in the original post.
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