Methanex to acquire international methanol business of OCI Global for $2.05B

Methanex announced that it has entered into a definitive agreement to acquire OCI Global’s international methanol business for $2.05B. The transaction includes OCI’s interest in two methanol facilities in Beaumont, Texas, one of which also produces ammonia. The transaction also includes a low-carbon methanol production and marketing business and a currently idled methanol facility in the Netherlands. As part of the transaction, Methanex expects to achieve approximately $30M of annual cost synergies from lower logistics costs and lower selling, general and administrative expenses. Methanex anticipates low integration costs because of OCI’s similar operating model and expects that additional value can be obtained by applying its expertise and operational experience to the OCI assets. Methanex plans to integrate key operational practices at the facilities and will incorporate the OCI assets into its global risk-based management processes including turnaround and capital planning post-closing. As part of the transaction, Methanex will acquire the following: A methanol facility in Beaumont, Texas with an annual production capacity of 910,000 tons of methanol and 340,000 tons of ammonia. This plant was restarted in 2011 and since that time the plant has been upgraded with $800M of capital for full site refurbishment and debottlenecking. A 50% interest in a second methanol facility also in Beaumont, Texas, operated by the joint venture Natgasoline. The Natgasoline plant was commissioned in 2018 and has an annual capacity of 1.7M tons of methanol, of which Methanex’s share will be 850,000 tons. OCI HyFuels, which produces low-carbon methanol and sells volumes with trading and distribution capabilities for renewable natural gas. A methanol facility in Delfzijl, Netherlands with an annual capacity to produce 1M tons of methanol. This facility is not currently in production due to unfavorable pricing for natural gas feedstock. Under a definitive agreement with OCI, the $2.05B purchase price will consist of $1.15B in cash, the issuance of 9.9M common shares of Methanex valued at $450M and the assumption of $450M in debt and leases. The purchase price implies a multiple of 7.5 times adjusted EBITDA at a $350/MT realized methanol price, including anticipated synergies. The North American operating assets have been acquired below reinvestment economics of brownfield or greenfield capacity. After the transaction Methanex will have approximately 77M shares outstanding, of which OCI will own approximately 13%. Methanex intends to fund the cash consideration of the transaction through a combination of cash on hand and new debt issuance. The company has obtained a fully committed debt financing package from Royal Bank of Canada to support the transaction. Closing of the transaction is expected in the first half of 2025. The transaction has been approved by the boards of directors of both companies and is subject to receipt of certain regulatory approvals and other closing conditions including TSX approval for the issuance of Methanex shares to OCI. The transaction is also subject to approval by a simple majority of the shareholders of OCI. The largest shareholder of OCI, has signed an agreement to vote for the transaction. There is currently a legal proceeding between OCI and its Natgasoline joint venture partner over certain shareholder rights. The obligation of Methanex to purchase OCI’s 50% stake in Natgasoline is subject to the resolution of this legal proceeding. If it is not settled within a certain period, Methanex has the option to carve out the purchase of the Natgasoline joint venture and close only on the remainder of the transaction. If Methanex elects to complete the transaction on a carved-out basis, it will retain the right to acquire OCI’s joint venture interest for a specified period thereafter at its sole option. Approximately 40% of the gross transaction and operating metrics are attributable to Natgasoline. Substantially all the debt in the total transaction is attributable to Natgasoline.