Energy company Chevron Corporation (NYSE: CVX) is set to acquire Renewable Energy Group, Inc. (Nasdaq: REGI) in a $3.15 billion cash deal that will accelerate Chevron’s growth in the renewable fuels sector.
Accordingly, the transaction is the equivalent of $61.50 per outstanding share of Renewable Energy Group. The transaction price represents a 57% premium on a 30-day average based on the closing stock price on February 25, 2022.
The deal, announced February 28, will combine Renewable Energy Group’s “growing renewable fuels production and leading feedstock capabilities with Chevron’s large manufacturing, distribution and commercial marketing position.”
“REG was a founder of the renewable fuels industry and has been a leading innovator ever since,” Chevron Chairman and CEO Mike Wirth said in a press release. “Together, we can grow more quickly and efficiently than either could on its own.”
As noted in the filings, the deal will accelerate Chevron’s growth toward its renewable fuels production goal of 100,000 barrels per day by 2030, while also adding feedstock supplies and pre-treatment facilities.
“This transaction delivers premium cash value to shareholders and will give us additional resources as we aim to accelerate growth and strengthen our collective ability to deliver the sustainable fuels our customers and the world need,” CJ Warner, REG President & CEO, said in a statement.
Upon consummation, the headquarters of Chevron’s renewable fuels business, RenewableFuelsREG, will be in Ames, Iowa, and CJ Warner will join Chevron’s Board of Directors.
It is expected to be accretive to Chevron’s earnings in the first year after closing and will be accretive to free cash flow after the launch of Renewable Energy Group’s Geismar expansion.
The deal is expected to close in the second half of 2022. The transaction is subject to customary closing conditions and shareholder approval.
Chevron is represented by Paul, Weiss, Rifkind, Wharton & Garrison LLP and its financial advisor is Goldman Sachs & Co. LLC. Renewable Energy Group is represented by Latham & Watkins LLP and its financial advisor is Guggenheim Securities, LLC.
Before the announcement, Chevron and Renewable Energy Group’s stock were valued at $140.38 and $43.81, respectively on February 25. When it was announced on February 28, Chevron and Renewable Energy Group’s stock were valued at $144.00 and $61.50, respectively. About a week later, on March 7, Chevron’s stock was at $162.04 and Renewable Energy Group’s stock was valued at $60.83.
This deal comes after Chevron stated it would acquire oil and natural gas exploration and production company Noble Energy, Inc. in 2020 for $5 billion.