Chevron Agrees to Acquire Renewable Energy Group in $3.15 Billion All-Cash Deal

February 28, 2022

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(Renewable Energy Group/Biobased Diesel Daily) Chevron Corp. and Renewable Energy Group Inc. announced Feb. 28 a definitive agreement under which Chevron will acquire the outstanding shares of REG in an all-cash transaction valued at $3.15 billion, or $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,” said Mike Wirth, Chevron chairman and CEO. “Together, we can grow more quickly and efficiently than either could on its own.”

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 brings additional feedstock supplies and pretreatment facilities. After closing of the acquisition, Chevron’s renewable fuels business, Renewable Fuels-REG, will be headquartered in Ames, Iowa. In addition, CJ Warner, REG president and CEO, 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,” Warner said. “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.”

The transaction is expected to be accretive to Chevron earnings in the first year after closing and accretive to free cash flow after start-up of REG’s Geismar expansion.

Transaction Details

The acquisition consideration is 100 percent cash. Total enterprise value of $2.75 billion includes a net cash position around $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 Feb. 25. READ MORE

Chevron Announces Agreement to Acquire Renewable Energy Group (Chevron/Business Wire)

Chevron to acquire Renewable Energy Group for $3.15 billion (Biofuels Digest)

Chevron said that the transaction is expected to be accretive to Chevron earnings in the first year after closing and accretive to free cash flow after start-up of REG’s Geismar expansion. (DTN Progressive Farmer)

Chevron will spend $3.15 billion to buy biobased fuel maker Renewable Energy Group (Chemical & Engineering News)

Chevron Buys Renewable Energy Group in Low-Carbon Move (World War Zero; includes VIDEOS)

Chevron to acquire REG for $3.15 billion (Biomass Magazine)

REG throttles back biodiesel production, ramps up 3rd-party renewable diesel sales in 2021 (Biobased Diesel Daily)

Chevron sees 'bright future' for Ames-based Renewable Energy Group as its biofuels headquarters (Des Moines Register)

GRASSLEY “SUSPICIOUS OF BIG OIL TAKING OVER” AS CHEVRON BUYS LEADING BIODIESEL PRODUCER (Brownfield Ag News)

This Oil Giant is Banking on Biofuel to Pacify Climate Critics (Triple Pundit)

REG stockholders approve agreement to be acquired by Chevron (Biodiesel Magazine)

Clean Fuels Applauds Chevron on the Completion of Its Acquisition of REG: REG’s partnership with Clean Fuels will continue as it becomes Chevron’s ‘renewable fuels business headquarters’ (Clean Fuels Alliance America)

with REG acquisition, chevron becomes a leading US renewable fuel company (Chevron)

Chevron buys biofuels refiner REG for $3B (Houston Chronicle)

Chevron Completes Acquisition of Renewable Energy Group (Renewable Energy Group)

Chevron finalizes Renewable Energy Group purchase, making Ames its biofuel headquarters (Des Moines Register)

CHEVRON NOW IN BIOFUEL SECTOR (Brownfield Ag News)

CHEVRON RENEWABLE ENERGY GROUP SAYS FUTURE BRIGHT FOR BIOFUELS (Sucessful Farming)

Excerpt from Biofuels Digest: Chevron said that the transaction is expected to be accretive to Chevron earnings in the first year after closing and accretive to free cash flow after start-up of REG’s Geismar expansion.

The rationale

Last September, during its Energy Transition Spotlight, Chevron Corporation announced plans to invest more than $10 billion by 2028 to grow lower carbon energy businesses, tripling the company’s previous guidance. The company set four 2030 growth targets for new energy businesses:

1. Grow renewable natural gas production to 40,000 MMBtu per day to supply a network of stations serving heavy duty transport customers;
2. Increase renewable fuels production capacity to 100,000 barrels per day to meet growing customer demand for renewable diesel and sustainable aviation fuel;
3. Grow hydrogen production to 150,000 metric tons per year to supply industrial, power and heavy-duty transport customers;
4. Increase carbon capture and offsets to 25 million tons per year by developing regional hubs in partnership with others.

The acquisition combines REG’s growing renewable fuels production and leading feedstock capabilities with Chevron’s large manufacturing, distribution and commercial marketing position.

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The Chevron backstory

Last week, Brightmark RNG Holdings LLC – a joint venture partnership between Chevron and Brightmark announced plans to construct an anaerobic digestion project at Vlot Calf Ranch in Chowchilla, California.

Earlier, Chevron and Bunge North America, Inc. announced the signing of definitive transaction agreements to create their previously announced joint venture. The new venture will create renewable feedstocks leveraging Bunge’s expertise in oilseed processing and farmer relationships and Chevron’s expertise in fuels manufacturing and marketing. The agreements are subject to customary closing conditions, including regulatory approval. Bunge’s soybean processing plants in Destrehan, Louisiana and Cairo, Illinois will be contributed to the joint venture with Chevron contributing approximately $600 million in cash. Plans include approximately doubling the combined capacity of these facilities from 7,000 tons per day by the end of 2024. The joint venture may also explore opportunities in other renewable feedstocks, as well as in feedstock pretreatment. https://www.biofuelsdigest.com/bdigest/2022/02/23/chevron-finalizes-jv-with-bunge-for-renewable-fuel-manufacturing-and-marketing/

In January, Lummus Technology’s Green Circle and Chevron Lummus Global are integrating multiple technologies from their portfolios for application in the circular economy. The partners will use a combination of the Lummus New Hope Energy plastic pyrolysis technology, CLG’s ISOCONVERSION technology and Lummus’ steam cracking technology to provide operators the ability to produce steam cracker products in large quantities from hydroprocessed mixed-waste plastic pyrolysis oil.

In December, Progress Rail, BNSF Railway Company, and Chevron U.S.A. Inc. announced a memorandum of understanding to advance the demonstration of a locomotive powered by hydrogen fuel cells. The goal of the demonstration is to confirm the feasibility and performance of hydrogen fuel for use as a viable alternative to traditional fuels for line-haul rail. Hydrogen has the potential to play a significant role as a lower-carbon alternative to diesel fuel for transportation, with hydrogen fuel cells becoming a means to reduce emissions.

Last September, Chevron and Gevo, Inc. announced a letter of intent to jointly invest in building and operating one or more new facilities that would process inedible corn to produce sustainable aviation fuel, which can lower the lifecycle carbon intensity of fuels used in the aviation industry. The new facilities would also produce proteins and corn oil.

The REG backstory

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A Digest Data DeepDive into Renewable Energy Group

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Excerpt from Chemical & Engineering News: REG currently produces close to 2 billion L of biobased diesel per year, made from raw materials such as used cooking oil and purpose-grown oil crops. Buying REG, and completing projects like a planned expansion of REG’s facility in Louisiana, will get Chevron about halfway to its 2030 renewable fuel goal, says Jim Lane, editor of Biofuels Digest. Chevron made around 15 billion L of petroleum diesel in 2020.

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Though REG is well-regarded in the biofuel business, it has struggled to attract capital at times because of the uncertainty of US tax incentives for green fuels, Lane says. “Chevron has the size and capital structure to give stability to REG should, for example, renewable fuel tax credits get hung up again in Congress,” he says.

The investment shows that the oil and gas industry is serious about renewable fuels, according to Joanne Ivancic, executive director of Advanced Biofuels USA, an advocacy group. “Chevron understands the powerful renewable fuels market forces in California—and that they could spread around the country,” she says.

“I’m expecting this is an early step toward consolidation of transportation fuels—renewable and fossil,” Ivancic says. Big oil, she says, is looking to establish control of renewable feedstocks as biofuel becomes competitive with fossil fuel. “If you think about it, soybean fields, canola fields, and other lipid sources are like the easy-access oil fields.” READ MORE