Acquisitions build national footprint

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The Lignetics plant in Kootenai was the original production facility for a locally based company that now has manufacturing operations in several states and serves markets across the U.S. (Courtesy photo)

By DAVE GUNTER

Feature correspondent

KOOTENAI — A bad winter is good business for locally based Lignetics. When the snow piles up and temperatures plummet, the local company’s product line of wood pellets, fire logs and fire bricks fly off the shelves of retailers large and small.

Until just a few years ago, however, Lignetics was completely reliant on regional weather patterns in the Pacific Northwest to carry the day.

All that has changed with a strategic series of mergers and acquisitions that have given the company a national footprint and the largest market share of any manufacturer in the residential wood pellet industry.

As of Thursday, when Lignetics announced the addition of four more plants to the fold — located in New Hampshire, New York and Pennsylvania — the roster now includes a total of 13 facilities in nine states.

“What these additional plants do is give us 40 percent market share in the Northeast region,” said company founder Ken Tucker. “We now have markets in the Northwest, Midwest, Northeast and Mid-Atlantic — where the heating needs are.”

Acquisition has been rivaled only by product diversification, as Lignetics seeks to maximize sales potential in these new markets. Complementing the heat-related items such as wood pellets, Pres-To-Logs, fire bricks and fire starter, the company now manufacturers barbecue pellets, animal bedding pellets and shavings and the wood “flour” used to create everything from composite decking to the faux-wood trim pieces inside trucks and automobiles.

It’s a long way from the company’s beginnings on an open field between two former mills in Kootenai. That was back in 1979, when Tucker created the company to provide fuel for one of the largest mining operations in the Silver Valley.

“We built this plant to sell every pellet we made to the Bunker Hill Mine for their smelting process,” said Tucker. “And then they had a mine strike, so we were sitting here with a plant, all dressed up and no business.”

A tough way to come out of the blocks, for certain, but regulatory changes soon favored Lignetics, as the government cracked down on wood stove emissions in the early 1980s, followed by the first pellet stove hitting the market in 1984.

“Now, 99 percent of our business is residential,” the founder said.

Within a decade, the company had purchased the nationally known Pres-To-Log brand, roughly doubling the amount of product coming out of the Kootenai site while using the same raw material for both pellets and fire logs.

When Lignetics got its start, that material — sawdust left over from the mills — was still being shoveled into tipi burners that lit up the night as the “mill waste” was dealt with. But what began as a relatively inexpensive commodity evolved into a sought-after resource as lumber producers realized that even their leftovers could be monetized.

“It’s become expensive — there’s no cheap date,” said Tucker. “And there’s a lot of competition for it.”

Building a national production presence has limited the sales impact of a temperate winter in one region or another, but the cyclical nature of the industry remains intact. That’s especially true in an economic downturn such as the one that hit between 2008-2010, when housing starts tanked and mills shut down due to lack of buyers for lumber. The rest of that equation is easy to figure out — no lumber, no sawdust; no sawdust, no raw material for pellet and fire log production.

Today’s housing market, on the other hand, has the mills humming and, while still pricey, the commodity is readily available. Even so, there are shipping logistics to be considered, according to Tucker, who explained that Lignetics plants source the raw materials from mills in their immediate territories.

“It would be too expensive to ship at a distance,” he said. “Sawdust comes in here at 50 percent moisture, so you’re hauling water.”

Moisture content, which is government regulated, is at 10 percent when production begins, and drops to less than 8 percent for the finished product.

When Tucker’s business got underway nearly 40 years ago, the Kootenai pellet plant was only the second to be opened in the U.S. The first was in Eugene, Ore., which now is owned by Lignetics. Some of the biggest changes over time have been regulatory oversight on fuel quality and plant emissions, as well as the technology used in production.

“When we first started here, there was no such thing as ‘wood pellet manufacturing equipment,’” the founder said. “It was a combination of animal feed, particle board manufacturing and alfalfa pellet-drying equipment — it was a real collage.”

In those early days, the company was knocking our approximately 20,000 tons of wood pellets a year, coupled with another 20,000 tons of Pres-To-Logs when that product was added in 1994.

Last week’s press release on the addition of four new plants stated that “Lignetics is the largest residential wood pellet manufacturing company in the U.S. which post-acquisition has a production capacity of approximately 1,000,000 tons of wood pellets per year.”

When Lignetics was sold to a private equity firm in 2014, Tucker stayed on as CEO for a couple of years before transitioning in the role of merger and acquisition specialist. It’s a job that has kept him busy, particularly over the past two years, which has seen both national expansion and vertical integration add muscle to the Lignetics business model. With seven plants and a shipping business picked up in the last year alone, the company seems to be in control of its own destiny.

“We just closed on buying four more plants, which gives us 13 plants and our own trucking company,” said Tucker.

Nationwide, Lignetics now has more than 500 employees, with about 50 of them working at the facility in Kootenai.

To learn more about the company’s product line and growing list of facilities, visit online at lignetics.com

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