- Mergers & Acquisitions
Archaea purchase marks milestone for bp’s bioenergy business
bp has completed its acquisition of Archaea Energy Inc., a leading provider of renewable natural gas (RNG), for USD3.3 billion in cash and around USD800 million of net debt, representing a multiple of around four times.
The acquisition marks a milestone in the growth of bp’s strategic bioenergy business. Bioenergy is one of five strategic transition growth engines that bp intends to grow rapidly through this decade. bp expects investment into its transition growth businesses to reach more than 40% of its total annual capital expenditure by 2025, aiming to grow this to around 50% by 2030.
Morgan Stanley & Co. LLC acted as financial adviser to bp and Freshfields Bruckhaus Deringer as lead legal adviser.
Based in Houston, Texas, U.S.A., Archaea Energy operates 50 RNG and landfill gas-to-energy facilities across the U.S., producing around 6,000 barrels of oil equivalent a day (boe/d) of RNG. The acquisition provides an immediate 50% increase to bp’s biogas supply volumes, and with a development pipeline of more than 80 projects, the potential for around a five-fold increase in RNG volumes by 2030.
bp expects to double the EBITDA (earnings before interest, taxes, depreciation and amortization) from biogas to reach around USD2 billion by 2030 with the acquisition of Archaea Energy.. Bp aims to boost its EBITDA from transition growth businesses by 2030 from USD9-10 billion to more than USD10 billion.
“We see enormous opportunity to grow our bioenergy business by bringing Archaea fully into bp,” said Dave Lawler, chairman and president of bp America. “The talent, expertise and passion of their team has let them achieve incredible growth so far, and we’re excited to support the next chapter in line with our strategy.”
In October 2022, bp announced that it had agreed to acquire Archaea, subject to regulatory and Archaea shareholder approval. Having received those approvals and with the transaction complete, Archaea expands bp’s presence in the U.S. biogas industry, enhancing its ability to support customers’ decarbonisation goals and progressing its aim to reduce the average lifecycle carbon intensity of the energy products it sells.
With the close of the agreement, Archaea common shares will cease to be listed on the New York Stock Exchange.