The Business Times

Rice gets into renewable gas with US$1.2b SPAC deal

Published Thu, Apr 8, 2021 · 10:55 PM

[CARNEGIE] Rice Acquisition will merge with two other companies to create a US$1.15 billion renewable natural gas giant.

Rice will combine with Aria Energy Operating and Archaea EnergyC, with the new company taking Archaea's name, it said in a press release. Rice said it will be the leading US platform for harnessing natural gas seeping out of decaying matter in landfills. Its shares surged as much as 53 per cent on Thursday in New York.

Renewable gas, which can include things like landfill gas or biogas from animal waste, captures methane before it enters the atmosphere as a far more powerful global warming agent than carbon dioxide. It still emits CO2 when burnt, though, raising questions about its environmental merits.

"Early in our acquisition search we identified landfill gas as the most predictable, cost-effective, and environmentally beneficial feedstock to help organizations achieve their carbon neutrality goals," Daniel Rice IV, Rice Acquisition's chief executive officer, said in the release.

The firm said it sees US landfill waste growing to 13 billion tons by 2050 from about 8 billion tons now. That will increase emissions from them to 2.8 billion cubic feet a day from about 1.9 billion now, about half of which are methane and 35% carbon dioxide.

Daniel Rice IV was CEO of Rice Energy when it was bought by EQT to form the US's largest natural gas driller in 2017. He now runs the eponymous special purpose acquisition company, which raised about US$237 million in an initial public offering in October. Prior to Thursday, the shares had fallen 1.6 per cent since debuting in mid-December.

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Aria is being acquired for US$680 million, and Archaea for US$357 million, Rice said in the release. Archaea chief executive officer Nicholas Stork will run the combined company.

The deal involves a private investment in public equity that raised US$300 million, led by investors including the Baupost Group and Goldman Sachs Asset Management. The Rice family invested US$20 million in the PIPE, with the deal also including US$340 million in debt.

The combined company had an estimated 2020 profit of US$40 million, which it expects to grow to US$395 million in 2025, according to a presentation. Its enterprise value is US$1.15 billion.

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