Andersons' Full Ethanol Ownership: A Strategic Bet on Renewable Energy and Earnings Growth

The Andersons, Inc. (NYSE: ANDR) has made a bold move to solidify its position in the renewable fuels sector by acquiring the remaining 49.9% stake in The Andersons Marathon Holdings LLC (TAMH) for $425 million. This acquisition, finalized on July 31, 2025, not only doubles the company's financial ownership in the ethanol industry but also aligns with its ambitious $4.30 earnings per share (EPS) target for 2026. By analyzing the financial rationale, operational synergies, and regulatory tailwinds, this article evaluates how the TAMH acquisition positions The Andersons for long-term value creation.

Strategic Rationale: Consolidating Control for Efficiency

The Andersons' ethanol segment, now fully integrated under The Andersons Renewables, LLC, operates four plants with a combined 500 million gallons of annual production capacity. Prior to the acquisition, the company managed these facilities through a joint venture with Marathon Petroleum, retaining only 50.1% ownership. The full acquisition eliminates noncontrolling interests, streamlining decision-making and unlocking operational efficiencies. With no change in management or operational structure, the company avoids integration risks while gaining unrestricted access to TAMH's cash flows.

The financial impact is immediate. In Q2 2025, the Renewables segment reported pretax income of $17 million, with $10 million attributable to The Andersons. While this reflects a decline from $23 million in Q2 2024, the full consolidation of TAMH is expected to reverse this trend. The company projects TAMH's annualized contribution to EPS at $0.70–$0.75, with peak-year potential exceeding $1.00 per share. This aligns with the company's revised 2026 EPS target, which now prioritizes earnings growth over EBITDA metrics.

Financial Synergies and Cost Optimization

The Andersons' liquidity position remains robust, with $351 million in cash as of June 30, 2025, and a debt-to-EBITDA ratio of 1.9x—well below its 2.5x target. The TAMH acquisition was funded using cash reserves and existing credit facilities, preserving financial flexibility. By consolidating TAMH, the company gains full control over cost structures, including procurement, production, and co-product marketing. For instance, the ethanol plants' ability to trade corn, ethanol, and distillers dried grains (DDGs) across locations enhances profitability.

Moreover, the acquisition accelerates tax benefits. The company anticipates 45Z tax credits for low-carbon renewable fuels, which could add $0.10–$0.15 to EPS annually. Additionally, the Clymers, Indiana facility's Class VI well permit for carbon sequestration, if approved, could unlock further tax incentives and reduce emissions costs. These regulatory tailwinds are critical in an industry where policy support drives margins.

Regulatory Tailwinds and Market Positioning

The ethanol industry is poised for growth amid tightening renewable fuel standards (RFS) and the EPA's proposed Renewable Volume Obligations (RVOs). The Andersons' TAMH plants, located in key Midwest markets, are well-positioned to benefit from increased demand for ethanol and carbon credits. For example, the Q2 2025 ethanol board crush (the amount of ethanol blended into gasoline) saw an uptick, driven by summer driving season demand and export activity.

The company's strategic alignment with regulatory trends is evident in its forward-looking initiatives. By securing carbon sequestration permits and optimizing co-product yields, The Andersons is transforming its ethanol operations into a scalable platform for sustainable growth. This positions the company to outperform peers in an industry where margins are increasingly tied to environmental compliance and innovation.

Investment Thesis: A Path to $4.30 EPS by 2026

The Andersons' 2026 EPS target of $4.30 is now underpinned by TAMH's full integration and the anticipated benefits of 45Z tax credits. With TAMH contributing $0.70–$0.75 annually and the company's grain and fertilizer segments stabilizing, the path to the target appears achievable. Additionally, the company's debt capacity and strong cash flow generation provide a buffer against market volatility.

Investors should also consider the broader context: ethanol demand is expected to rise as the U.S. aims to reduce oil dependence and meet climate goals. The Andersons' TAMH acquisition not only strengthens its renewable energy portfolio but also diversifies its revenue streams, reducing reliance on cyclical agricultural markets.

Conclusion: A Strategic Bet with Clear Payoffs

The Andersons' full ownership of TAMH is a calculated move to accelerate earnings growth and solidify its leadership in the renewable fuels sector. By eliminating integration risks, leveraging cost synergies, and capitalizing on regulatory tailwinds, the company is well-positioned to meet its 2026 EPS target. For investors seeking exposure to the green energy transition with a clear financial roadmap, The Andersons offers a compelling case.

Investment Advice: Given the company's strong balance sheet, strategic alignment with regulatory trends, and clear EPS trajectory, The Andersons is a buy for long-term investors focused on renewable energy and earnings growth. Monitor the progress of TAMH's carbon sequestration projects and 45Z credit eligibility for additional catalysts.