Prominent U.S. ethanol maker VeraSun (NYSE: VSE [1]) today announced plans to acquire three ethanol plants from ASAlliances Biofuels for $725 million.

The three facilities are each expected to produce 110 million gallons per year, and are located in Albion, Nebraska, Bloomingburg, Ohio, and Linden, Indiana.

The acquisition is expected to close in 30 to 45 days.

The company is funding the deal through $200 million of equity, $250 million of cash and $275 million in project financing.

The Linden facility is to begin startup operations this month, followed by Albion in the fourth quarter and Bloomingburg by the end of first quarter 2008.

The acquisition will increase VeraSun's production capacity to approximately one billion gallons by the end of 2008.

Poet [2], formerly Broin Companies, recently began asserting an annual production capacity over one billion gallons, claiming title as the second largest ethanol producer in the U.S.—a distinction VeraSun itself once used.

Integrated agricultural powerhouse Archer Daniels Midland [3] (ADM) is the leading American producer.

VeraSun says it acquired the new plants "at a cost similar to that of building new facilities," said Don Endres, VeraSun Chairman and CEO.

VeraSun currently has 340 million gallons a year of production capacity from facilities in Aurora, South Dakota and Fort Dodge and Charles City, Iowa, and has another 330 million under construction and development around the U.S.

Morgan Stanley is serving as the financial adviser, and Cravath, Swaine & Moore LLP is acting as legal counsel for VeraSun on this transaction.

VeraSun is headquartered in Brookings, South Dakota.