The merger of two major ethanol producers is being seen as “a sign that ethanol-industry consolidation is gaining velocity.”

VeraSun Energy and US BioEnergy will merge into one entity under an agreement announced this week where VeraSun will pay $700 million in stock and the new company will retain the name of VeraSun.

VeraSun Chairman, CEO and President Donald L. Endres will remain CEO of the combined company, and US BioEnergy President and CEO Gordon Ommen will serve as chairman following the closing of the merger, which is expected to happen during the first quarter of 2008.

Upon completion of the merger, the combined company will have nine ethanol production facilities in operation and seven additional facilities under construction. Ommen says they “expect to reach 1.6 billion gallons of ethanol production capacity by the end of 2008, making us a global leader in ethanol production.”