British oil and gas company BP has signed an agreement to acquire US-based renewable natural gas (RNG) producer Archaea Energy in a transaction valued at around $4.1bn.
Under the terms of the agreement, Archaea shareholders will receive $26 per Class A and Class B share in cash, representing a total enterprise value of around $4.1bn.
BP to purchase US biogas company Archaea Energy. (Credit: Pedro Farto on Unsplash)
The total consideration includes about $800m of net debt and represents around 38% premium to Archaea’s volume-weighted average price for 30 days ending 14 October 2022.
The acquisition is expected to be completed by the end of 2022, subject to regulatory approvals and approval of Archaea shareholders.
Archaea’s existing shareholders, who collectively own around 27% of its outstanding shares, have agreed to vote in favour of the transaction.
Upon closing of the transaction, Archaea will operate as a subsidiary within BP, and become an integral part of its existing bioenergy business.
Archaea chief executive officer and co-founder Nick Stork said: “Archaea was founded with a mission to build the world’s leading RNG development company to reduce global emissions and make multi-generational sustainability impacts.
“In a very short period of time, we have rapidly become a leading RNG platform in the US, and today’s announcement will further enable this business to realise its full potential.
“I am incredibly proud of our employees at Archaea who have driven this tremendous value creation and will continue to push forward Archaea’s drive to foster clean energy growth and promote domestic energy reliance.”
Archaea said that the acquisition will enable the company to access BP’s advanced platforms, capabilities, and capital resources, along with trading capabilities, and customer base.
BP said that the acquisition of Archaea will expand its presence in the US biogas industry, and enhance its ability to support customers’ decarbonisation goals.
BP chief executive Bernard Looney said: “Archaea is a fantastic fast-growing business, and BP will add distinctive value through our trading business and customer reach.
“It will accelerate our key bioenergy growth engine, creating a real leader in the biogas sector, and support our net-zero ambition. And, importantly, we're doing this while remaining focused on the disciplined execution of our financial frame.
Investing with discipline into the energy transition, creating further value through integration – this is exactly what BP’s transformation into an integrated energy company is all about.”
BofA Securities is serving as the financial advisor and Kirkland & Ellis is acting as the legal advisor to Archaea on the transaction.
Earlier this year, Archaea Energy’s subsidiary Archaea Infrastructure entered into a definitive agreement to purchase NextGen Power Holdings for $215m in cash.
