In the United States (US), Chevron Corporation, one of the world’s largest integrated energy companies, and Renewable Energy Group, Inc. (REG), a global producer and supplier of renewable fuels have announced a definitive agreement under which Chevron will acquire the outstanding shares of REG in an all-cash transaction valued at US$3.15 billion or US$61.50 per share.
The acquisition combines REG’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. Together, we can grow more quickly and efficiently than either could on its own, said Chevron Chairman and CEO Mike Wirth.
The transaction is expected to accelerate progress toward Chevron’s goal to grow renewable fuels production capacity to 100 000 barrels per day by 2030 and bring additional feedstock supplies and pre-treatment facilities.
After closing of the acquisition, Chevron’s renewable fuels business, Renewable Fuels – REG, will be headquartered in Ames, Iowa. In addition, CJ Warner is expected to join Chevron’s Board of Directors.
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. Our employees’ hard work and dedication have built a fantastic renewable fuels company and made this transaction possible. We look forward to joining Chevron’s team, said CJ Warner, REG President & CEO.
Transaction details
The transaction is expected to be accretive to Chevron earnings in the first year after closing and accretive to free cash flow after the start-up of REG’s Geismar expansion.
The acquisition consideration is 100 percent cash. The total enterprise value of US$2.75 billion includes a net cash position around US$400 million greater than debt.
The transaction has been approved by the Boards of Directors of both companies and is expected to close in the second half of 2022. The acquisition is subject to REG shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.
The transaction price represents a premium of around 57 percent on a 30-day average based on closing stock prices on February 25, 2022.
Goldman Sachs & Co. LLC is acting as a financial advisor to Chevron. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Chevron. Guggenheim Securities, LLC is acting as financial advisor and Latham & Watkins LLP is acting as legal advisor to REG.
