Chevron to acquire REG for $3.15 billion

Chevron Corp. on Feb. 28 announced a definitive agreement to acquire the outstanding shares of Renewable Energy Group Inc. in an all-cash transaction valued at $3.15 billion, or $61.50 per share. Chevron cited REG’s expertise in feedstock sourcing and market access as two factors that make the transaction an attractive way to boost Chevron’s renewable fuels business.

“We believe REG’s unique capabilities combined with Chevron’s advantaged assets and market positions create a leading provider of lower-carbon-intensity fuels with strength across the value chain,” said Mike Wirth, chairman and CEO of Chevron.

After the transaction closes, Chevron’s renewable fuels business will be headquartered in Ames, Iowa, which is the current corporate headquarters of REG. Wirth said locating the headquarters of the renewable fuels business in Ames will help preserve the expertise and relationships that have been key to REG’s success.

“One of the reasons we want to headquarter our renewable fuels business is Ames is much of this expertise resides in Ames, and we want to be sure that we preserve that talent,” Wirth said, noting that Iowa is expected to become the epicenter for Chevron’s renewable sourcing. The company’s joint venture with Bunge for renewable feedstocks is also likely to be largely managed out of Ames, he said.

During a teleconference held on Feb. 28 to discuss the planned acquisition, Wirth focused on the value REG will bring to Chevron in terms of feedstock sourcing and technical expertise. “In the fuels business, securing feedstocks is absolutely critical to your success,” he said, stressing the importance of the ability to consistently acquire high-quality feedstocks at good terms and have the flexibility to move them to the right manufacturing facilities with the right logistics. “REG has been a leader in sourcing and aggregation of feedstocks—particularly lower-carbon intensity feedstocks,” Wirth added.

“This is an area where REG has distinguished itself,” he said. “It’s an area that we don’t—to be completely blunt—have the expertise. We’ve been moving into these markets, but REG brings decades of experience and people who have relationships and technical understanding that we simply don’t have.”

CJ Warner, president and CEO of REG, 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.”

REG’s existing biodiesel plants are expected to continue producing biodiesel. When asked about plans to convert biodiesel plants to renewable diesel production, Wirth said the transaction “is not about converting the platform as much as growing the platform.” As part of that effort, the company plans to work to uplift biodiesel as part of an 80/20 fuel blend, particularly in California’s Low Carbon Fuel Standard market.

Chevron’s acquisition of REG is expected to accelerate progress toward the company’s goal to grow its renewable fuels production capacity to 100,000 barrels per day by 2030. Part of that growth will come from the current expansion project at REG’s existing renewable diesel plant in Geismar, Louisiana, and Chevron’s ongoing project to convert its El Segundo refinery in California to renewable diesel production. Following its acquisition of REG, Wirth said Chevron will have a larger portfolio of assets and project opportunities to evaluate with regard to expanding renewable fuels production.

The transaction has been approved by the board of directors of both companies and is expected to close in the second half of 2022. The transaction is subject to REG shareholder approval, regulatory approvals and other customary closing conditions.