Archaea Energy Inc (NYSE: LFG) opened more than 50% up on Monday after BP plc (LON: BP) said it will buy the renewable natural gas producer for about $4.1 billion.
Archaea shareholders to get a massive premium
The all-cash agreement translates to $26 a share and is expected to close by the end of 2022. In the press release, Daniel Rice – Chairman of Archaea’s Board said:
Combining Archaea’s RNG assets and strong development backlog with BP’s existing bioenergy business and deep operational and financial resources is the best way to achieve Archaea’s full potential, while maximising value for our shareholders.
BP will also assume roughly $800 million that Archaea has in debt. The deal is yet to secure regulatory and shareholder approval.
Shares of the British multinational ended roughly flat on Monday.
Archaea Energy to become a subsidiary of BP plc
BofA Securities and Kirkland & Ellis LLP acted as Archaea’s financial and legal advisors for the deal, respectively. According to Dave Lawler – Chairman and President of BP America:
This deal accelerates our ability to deliver cleaner energy, generate significant earnings in a fast-growing sector and help reduce emissions. This could help BP take a significant stride toward our net zero ambition.
The Houston-headquartered firm will be a subsidiary of BP plc once the transaction is complete.
In August, Archaea Energy reported a massive year-on-year growth in its second-quarter revenue to $77.2 million and raised its outlook for the full year. Wall Street currently has a consensus “buy” rating on the RNG company.
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