BP to buy US biogas producer Archaea Energy for USD 4.1bn

British oil and gas major BP Plc (LON:BP) has agreed to acquire US renewable natural gas (RNG) producer Archaea Energy Inc (NYSE:LFG) for USD 3.3 billion (EUR 3.4bn) in cash plus the assumption of around USD 800 million in net debt, it was announced today.

The deal, which is subject to regulatory and Archaea shareholder approval and is expected to close by end-2022, will expand and accelerate the growth of BP’s strategic bioenergy business, the oil group said. It has agreed to take over Archaea for USD 26 per share, which is a 38% premium to the company’s volume-weighted average share price in the past 30 days.

Houston-based Archaea operates 50 RNG and landfill gas-to-energy facilities across the US. It produces around 6,000 barrels of oil equivalent a day (boe/d) of RNG, which would boost bp’s biogas supply by 50%. In addition, Archaea has a development pipeline of over 80 projects that could increase RNG production five times by 2030. The pipeline includes 40 projects to be developed in a joint venture with Republic Services Inc.

“Archaea is a fantastic fast-growing business, and bp will add distinctive value through our trading business and customer reach,” said BP chief executive Bernard Looney.

Archaea expects to benefit from BP’s resources to speed up growth. “Archaea has become one of the largest and fastest growing RNG platforms in the US and today’s announcement will further enable this business to realise its full potential,” said its chief executive Nick Stork.

The acquisition will expand BP’s biogas position in the US and could also drive expansion in key international markets such as the UK and Germany, according to BP’s announcement.

In view of the transaction, the oil group now expects biogas to contribute around USD 2 billion to its earnings before interest, tax, depreciation and amortisation (EBITDA) by 2030, a doubling of its previous aim, while the guidance for EBITDA from transition growth businesses has been increased to more than USD 10 billion from USD 9 billion-10 billion.

(USD 1 = EUR 1.029)

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