The all-stock deal is worth around $190m, reports 24/7 Wall St.

The deal is expected to raise Pacific Ethanol’s annual production capacity from 200 million gallons to 515 million gallons.

The combined entity is likely to have an annual ethanol marketing volume of over 800 million gallons.

The transaction is expected to be concluded by the second quarter of 2015.

Under the deal, the existing Pacific Ethanol shareholders will own around 58% of the issued and outstanding shares of common stock of the combined firm. Two representatives from Aventine will be a part of Pacific Ethanol’s board of directors.

The deal is subject to customary closing conditions and awaits regulatory approvals.

Pacific Ethanol CEO Neil Koehler said: "With this transaction, Pacific Ethanol strengthens its unique production and marketing advantages by diversifying into two additional discrete markets and connecting its Western markets with Aventine’s Midwest and Eastern markets for low-carbon renewable fuels.

"This transaction will more than double our annual ethanol production capacity, and it will establish Pacific Ethanol as the fifth largest producer and marketer of ethanol in the United States.

"Once closed, we expect the transaction to be immediately accretive to earnings with expected operational synergies and the expansion of our ethanol and co-product marketing business."

Image: Celebrations during the reopening of Aventine’s Aurora NE ethanol plant in the US in May 2014. Photo: courtesy of Aventine renewable Energy Inc.