Chevron Enters All-Cash Deal to Acquire Renewable Energy Group

Chevron Corporation (NYSE: CVX) has announced plans to acquire Renewable Energy Group, Inc. (NASDAQ: REGI) in an all-cash transaction worth $3.15 billion. The deal is expected to close in the second half of 2022.

With this deal, Chevron will be able to integrate its large manufacturing, distribution and commercial marketing position with Renewable Energy’s growing renewable fuels production and feedstock capabilities.

Also, the acquisition will help Chevron in achieving its target of producing 100,000 barrels of renewable fuels per day by 2030. Post completion of the deal, Chevron’s renewable fuels business, Renewable Fuels – REG, will be headquartered in Ames, Iowa. Also, CEO of Renewable Energy Cynthia (CJ) Warner will join Chevron as a member of the board of directors.

Notably, the deal is expected to be accretive to its earnings in the first year after closing and accretive to free cash flow after the start-up of REG’s Geismar expansion.

Chevron’s Chairman and CEO Mike Wirth said, “REG was a founder of the renewable fuels industry and has been a leading innovator ever since. Together, we can grow more quickly and efficiently than either could on its own.”

Wall Street’s Take

Last week, Credit Suisse analyst Manav Gupta maintained a Buy rating on Chevron and increased the price target to $152 (8.3% upside potential) from $145.

Shares of the company have rallied 44.3% over the past year. The stock has a Strong Buy consensus rating based on 12 Buys versus 4 Holds. The average Chevron price prediction of $143.38 implies 2.1% upside potential to current levels.

Smart Score

Chevron scores a “Perfect 10” from TipRanks’ Smart Score rating system. This makes it one of TipRanks’ Top Stocks and implies that it has strong potential to outperform market expectations.

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