Chevron Acquires REGI for $3.15 Billion

Chevron

Gasoline prices have risen massively in recent months. This has also been exacerbated by Russia’s invasion of Ukraine. And as is often the case, rising prices are leading to increased takeover activity in the refining sector.

For example, U.S. energy giant Chevron (CVX) confirmed last week that it has signed an acquisition agreement with Ames, Iowa-based biodiesel producer Renewable Energy Group (REGI).

In the agreement, Chevron agreed to pay Renewable Energy Group shareholders a whopping $61.50 per share in cash. With just over 50 million REGI shares issued, the Chevron offer thus adds up to a whopping $3.15 billion.

Chevron Pays High Premium

The takeover of the Iowa-based biodiesel producer is costing Chevron a lot. Thus the offered $61.50 contains a takeover premium of 40% compared to the closing price of REGI last Friday.

This takeover premium is even higher if one takes a longer observation period as a basis. Based on the 30-day average price of REGI shares before Feb. 25, 2022, the transaction price includes a premium of around 57%.

Prices of REGI and CVX Explode

As early as two weeks ago, Bloomberg had reported rumors of a takeover of REGI by Chevron. Thereupon the REGI share price shot up last Wednesday by 26%.

When Chevron confirmed the deal at 7 am EST Monday morning, REGI’s price surged again, jumping another 40% to $61.50. Thus, Monday’s closing price was exactly at the price offered by Chevron. So there is much to suggest that investors are assuming that the deal will go through without a hitch.

However, the Chevron share price also made significant gains yesterday. It rose by 2.57% to $144. Investors are obviously convinced that CVX will also benefit from the deal.

Chevron Expands Its Portfolio, Moves Closer to Environmental Goals

Through the acquisition of the biodiesel specialist, the energy multinational Chevron benefits twice. On the one hand, it expands its portfolio in the field of renewable fuels. On the other hand, it is approaching the goal it has set for itself of focusing more on biofuels in the future.

Chevron significantly expanded its fuel capacities through this acquisition. For example, REGI produced 519 million gallons of biodiesel and renewable diesel in 2020. The company owns 11 biorefineries in the U.S. and Europe. REGI’s European headquarters is in Amsterdam. There are also 2 German regional offices in Borken (Münsterland) and Ratingen (Rhineland).

In addition, Chevron expects the transaction to accelerate its self-imposed goal of increasing renewable fuel production capacity to 100,000 barrels per day (equivalent to about 159,000 liters) by 2030.

How It Will Proceed

The transaction should close in the second half of the current year, according to the company. The acquisition is subject to REGI shareholder approval. It is also subject to regulatory approvals and other customary closing conditions.

Upon completion of the acquisition, Chevron’s renewable fuels business headquarters will be in Ames, Iowa. In addition, REGI’s current chief executive officer, Cynthia Warner, will to join Chevron’s board of directors.

Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.
Dr. Gregor Bauer
Dr. Gregor Bauer
Dr. Gregor Bauer credits his trading success to combining fundamental aspects of a trade with expert technical analysis. A Certified Financial Technician from the International Federation of Technical Analysts (IFTA), he’s rated as one of Germany’s top 300 economic experts.

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