BP Plc agreed to acquire biogas producer Archaea Energy Inc. for about US$4.1 billion including debt, the latest step in the U.K. energy giant’s expansion into lower-carbon fuels.
BP will pay $26 per share, a 38 per cent premium to the average share price in the 30 days to Oct. 14, Archaea said Monday in a statement. The Houston-based company, which captures waste-gas emissions from landfills and farms, will become a key part of BP’s bioenergy business and accelerate its growth, according to the statement.
The company captures biogas at landfills or farms and processes it into pipeline-quality natural gas. Burning the fuel still releases carbon dioxide, but has a lower overall climate impact than if the methane had been allowed to simply vent into the atmosphere. Archaea has a “huge backlog of sites that they can develop into RNG” and BP’s acquisition “does imply a ton of growth,” said Matthew Blair, head of chemicals, refiners and renewable fuels equity research at Tudor, Pickering, Holt & Co. The target company is being valued at the equivalent to roughly four times Archaea’s forecast $1 billion in earnings before items such as interest and taxes by 2027, compared with about $140 million currently.
BP shares erased earlier gains and were 0.9 per cent lower at 450.95 pence as of 4:22 p.m. in London.
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