- Combined company is a proven and profitable business today with
estimated 2021 EBITDA of $65 million, which is expected to grow to
$327 million in 2024.
- Expect to contract 60-70% of renewable natural gas volumes
under 10-20 year, fixed-price arrangements with investment-grade
buyers.
- At $10 per share, the combined Company’s enterprise value of
$1.15 billion implies a valuation multiple of 8.2x estimated 2022
EBITDA and 3.5x estimated 2024 EBITDA.
- Rice Acquisition Corp.’s heavily oversubscribed and upsized
PIPE obtained $300 million in commitments led by institutional
investors including The Baupost Group, BNP Paribas Energy
Transition Fund, CIBC, Goldman Sachs Asset Management LP[1],
and Wellington Management.
Rice Acquisition Corp. (NYSE: RICE) (“RAC”), a special
purpose acquisition company focused on the energy transition
sector, today announced an agreement to enter into a business
combination with Aria Energy LLC (“Aria”) and Archaea Energy LLC
(“Archaea LLC”), which will create the industry-leading renewable
natural gas (“RNG”) platform. The combined Company will be named
Archaea Energy (the “combined Company”), with an experienced
executive team comprised of leaders from Archaea LLC and Aria. The
transaction is expected to close in the third quarter of 2021 and
the combined Company plans to be listed on the NYSE under the
ticker symbol “LFG”.
RAC is led by former executives of Rice Energy, which merged
with EQT (NYSE: EQT) to become the largest U.S. natural gas
producer. Daniel Rice IV, CEO of RAC, led Rice Energy’s growth from
a start-up to the eventual $10 billion sale to EQT in 20172.
“Early in our acquisition search we identified landfill gas
(“LFG”) as the most predictable, cost-effective, and
environmentally beneficial feedstock to help organizations achieve
their carbon neutrality goals,” said RAC CEO Daniel Rice. “We
became determined to create a leading RNG platform, and I believe
bringing together Archaea LLC and Aria goes beyond that; I think
we’ve created a new paradigm in RNG development. The combination of
these companies’ respective skills and assets instantly creates a
proven, technology-driven LFG developer that’s operating at scale
today with a deep inventory of highly economic, low-risk growth
projects to meet the ever-growing RNG demand. The combined
Company’s industry-leading growth is supported with innovative,
long-term fixed-price offtake agreements to ensure it achieves its
economic goals, while also helping its customers achieve their
long-term climate goals. This places Archaea on a short list of
companies that can generate sustainable and compelling
risk-adjusted returns while significantly reducing GHG
emissions.”
Nicholas Stork, co-founder and CEO of Archaea LLC and CEO of the
combined Company, added: “We are on a mission to transform the role
of RNG in empowering organizations to decarbonize and achieve their
sustainability goals. In Aria, we found an irreplicable asset base
and a team who shares our vision to harness the power of RNG and
help both landfill owners/operators and investment-grade buyers of
RNG meet their sustainability targets. The new capital raised will
accelerate the combined Company’s growth and solidify its
leadership in the industry.”
Investment Highlights:
- The business combination is expected to create the
industry-leading platform in the U.S. to capture and convert waste
emissions from landfills and anaerobic digesters into low-carbon
RNG, electricity, and green hydrogen.
- Aria, a portfolio company of funds managed by the
Infrastructure and Power strategy of Ares Management Corp (NYSE:
ARES) (“Ares”), is being acquired for $680 million and brings a
comprehensive portfolio of operational LFG assets, best-in-class
operating experience, and a deep inventory of greenfield LFG-to-RNG
projects and electric-to-RNG conversion opportunities.
- Archaea LLC is being acquired for $347 million and brings
leading RNG technology professionals, a deep inventory of
LFG-to-RNG projects – including the world’s largest RNG plant
currently under construction (“Project Assai”) – an innovative
commercial strategy, groundbreaking low-cost carbon sequestration,
and negative-carbon LFG-to-green hydrogen development projects
currently in the design stage.
- Pro forma for the transaction, the combined Company will have
over $350 million of cash on the balance sheet, providing ample
liquidity to fund its pipeline of development projects and bridging
the combined Company to free cash flow generation starting in
2023.
- The combined Company will be led by a majority-independent
board consisting of executives Daniel J. Rice, IV, Kyle Derham,
Kate Jackson, Joe Malchow, and Jim Torgerson of RAC; Nicholas
Stork, CEO of Archaea; and Scott Parkes of Ares.
Additional Information on Acquisition Rationale and
Process
Archaea Energy, the combined Company, is tackling one of the
world’s most important climate problems. U.S. landfills are
expected to grow from approx. 8 billion tons of waste in place in
2020 to 13 billion tons by 2050, which is expected to increase LFG
emissions from 1.9 Bcf/d in 2020 to 2.8 Bcf/d by 2050. Capturing
these emissions, comprised of ~50% methane and ~35% CO2, has the
same environmental benefit as electrifying 75% of U.S. passenger
vehicles.
LFG has a very predictable, 20-30 year production profile, and
when coupled with continued growth in U.S. landfill waste for the
next 20-30 years, creates 40-60 years of unparalleled LFG feedstock
visibility. Compared to other renewable fuels, LFG-to-RNG developed
by the combined Company is lower cost, more predictable, better for
the environment, and more effective in reversing the impacts of
climate change.
Aria Energy LLC is a market leader in the North American LFG
sector, having developed or constructed more than 50 projects over
the last 25 years. Aria is led by seasoned industry veterans
including Richard DiGia, CEO, and has approximately 100 highly
trained plant operators across the U.S., with a strong safety and
environmental track record. Under Ares’ 13-years of ownership, Aria
has grown through internal project development and the strategic
consolidation of several of the largest and most experienced
companies in the LFG-to-renewable energy space, including Landfill
Energy Systems, Innovative Energy Systems, and Timberline
Energy.
Andrew Pike, co-head of Ares’ Infrastructure and Power strategy,
stated: “With the combination of Archaea LLC and Aria, RAC has
created a scaled and growth-oriented premier platform that will be
guided by a seasoned management team positioned for even greater
success through continued decarbonization of the natural gas
grid.”
Archaea Energy LLC was founded in 2018 by landfill owners and
RNG technologists with the goal of building a cost-efficient
solution for generating high-BTU RNG projects in the U.S. Archaea
LLC’s development strategy and industry-leading gas separation
expertise enables it to capture and convert LFG emissions with
lower development costs. Its team helped design, build, or develop
key gas processing systems for the majority of U.S. RNG facilities
in operation today. Archaea LLC is actively tapping into a backlog
of RNG demand via long-term fixed-price contracts, thereby reducing
risks from RIN price volatility, a key differentiator of its
commercial strategy compared to other RNG developers. Archaea LLC
is also actively developing carbon sequestration projects and
deploying on-site renewable power generation to further reduce the
carbon intensity of its RNG to zero or negative. Archaea LLC
believes it can develop green hydrogen from LFG and RNG at
industry-leading costs by deploying proven technology.
Archaea LLC is currently majority-owned and controlled by Rice
Investment Group, an affiliate of RAC. RAC created a Special
Committee, comprised of the independent directors of RAC (the
“Special Committee”), to negotiate the business combination of
Aria, Archaea LLC, and RAC, including the purchase price for Aria
and Archaea LLC. The Special Committee engaged Moelis & Company
LLC as its independent financial advisor and Richards, Layton and
Finger, PA as its independent legal counsel for the business
combination. 100% of Rice Investment Group’s equity ownership will
be rolled into the transaction, with no secondary proceeds,
demonstrating confidence in the combined Company's long-term value
proposition. The Rice family is also investing $20 million in the
PIPE.
The business combination was recommended to RAC’s board of
directors (the “Board”) by the Special Committee, has been approved
by the Board based on the Special Committee’s recommendation, and
is expected to close in the third quarter of 2021, subject to
certain closing conditions, including receipt of approval by
holders of a majority of the RAC stock held by stockholders
unaffiliated with Rice Investment Group.
Debt Financing
In addition to the PIPE capital, RAC has secured $340 million of
debt commitments from Comerica Bank’s Environmental Services
Department.
Advisors
Moelis & Company LLC acted as financial advisor to the
Special Committee. Richards, Layton and Finger PA served as legal
counsel to the Special Committee. Kirkland & Ellis LLP served
as legal counsel to RAC. Pillsbury Winthrop Shaw Pittman LLP served
as legal counsel to Archaea LLC. Barclays acted as financial
advisor to Aria. Orrick served as legal counsel to Aria and Ares.
Citi and Jefferies LLC acted as lead placement agents and Roth
Capital Partners LLC acted as co-placement agent on the PIPE.
Investor Presentation
For more information, please view the investor presentation
here. The Archaea Energy website is www.archaeaenergy.com. A
recorded presentation from management discussing the business
combination will be available here on April 7th at 8:00pm Eastern
Time and a transcript of this webcast will be filed by RAC with the
SEC.
About Rice Acquisition Corporation
Rice Acquisition Corp. is led by former executives of Rice
Energy and EQT, the largest natural gas producer in the U.S. We
intend to leverage our expertise building industry-leading energy
production companies to develop the world’s clean energy
supply.
About Ares Management Corporation
Ares Management Corporation is a leading global alternative
investment manager operating integrated groups across Credit,
Private Equity, Real Estate and Strategic Initiatives. Ares
Management’s investment groups collaborate to deliver innovative
investment solutions and consistent, attractive investment returns
for fund investors throughout market cycles. As of December 31,
2020, Ares Management's global platform had approximately $197
billion of assets under management with more than 1,450 employees
operating across North America, Europe, Asia Pacific and the Middle
East. For more information, please visit www.aresmgmt.com.
About Ares Infrastructure and Power
Ares Infrastructure and Power (“AIP”) provides flexible capital
across the climate infrastructure, natural gas generation, and
energy transportation sectors. AIP leverages a broadly skilled and
cohesive team of more than 25 investment professionals with deep
domain experience and has deployed over $9 billion of capital in
more than 200 different infrastructure and power assets and
companies as of December 31, 2020.
Forward Looking Statements
This press release includes “forward looking statements” within
the meaning of the “safe harbor” provisions of the United States
Private Securities Litigation Reform Act of 1995. Forward-looking
statements may be identified by the use of words such as “may,”
“might,” “will,” “would,” “could,” “should,” “forecast,” “intend,”
“seek,” “target,” “anticipate,” “believe,” “expect,” “estimate,”
“plan,” “outlook,” and “project” and other similar expressions,
although not all forward looking statements contain such
identifying words. All statements other than historical facts are
forward looking statements. Such statements include, but are not
limited to, statements concerning the business combination; the
PIPE offering; market conditions and trends; earnings, performance,
strategies, prospects and other aspects of the businesses of RAC,
Aria, Archaea LLC and the combined Company. Forward looking
statements are based on current expectations, estimates,
projections, targets, opinions and/or beliefs of RAC, Archaea LLC
and/or Aria, and such statements involve known and unknown risks,
uncertainties and other factors.
The risks and uncertainties that could cause those actual
results to differ materially from those expressed or implied by
these forward looking statements include, but are not limited to:
(a) the occurrence of any event, change or other circumstances that
could give rise to the termination of the proposed business
combination and any transactions contemplated thereby; (b) the
ability to complete the transactions contemplated by the proposed
business combination due to the failure to obtain approval of the
stockholders of RAC, or other conditions to closing of the proposed
business combination; (c) the ability to meet NYSE's listing
standards following the consummation of the transactions
contemplated by the proposed business combination; (d) the risk
that the proposed transactions disrupt current plans and operations
of Aria, Archaea or their subsidiaries as a result of the
announcement and consummation of the transactions described herein;
(e) the ability to recognize the anticipated benefits of the
proposed transactions, which may be affected by, among other
things, competition, the ability of the combined Company to grow
and manage growth profitably and retain its management and key
employees; (f) costs related to the proposed business combination
and related transactions; (g) the possibility that Aria or Archaea
may be adversely affected by other economic, business, and/or
competitive factors; (h) the combined Company’s ability to develop
and operate new projects; (i) the reduction or elimination of
government economic incentives to the renewable energy market; (j)
delays in acquisition, financing, construction and development of
new projects; (k) the length of development cycles for new
projects, including the design and construction processes for the
combined Company’s projects; (l) the combined Company’s ability to
identify suitable locations for new projects; (m) the combined
Company’s dependence on landfill operators; (n) existing
regulations and changes to regulations and policies that effect the
combined Company’s operations; (o) decline in public acceptance and
support of renewable energy development and projects; (p) sustained
demand for renewable energy; (q) impacts of climate change,
changing weather patterns and conditions, and natural disasters;
(r) the ability to secure necessary governmental and regulatory
approvals; and (s) other risks and uncertainties indicated in the
preliminary or definitive proxy statement, including those under
"Risk Factors" therein, and other documents filed or to be filed
with the SEC by RAC.
The foregoing list of factors is not exclusive. You should not
place undue reliance upon any forward looking statements, which
speak only as of the date made. RAC, Aria, Archaea LLC and the
combined Company do not undertake or accept any obligation or
undertaking to update or revise the forward looking statements set
forth herein, whether as a result of new information, future events
or otherwise, except as may be required by law.
Non-GAAP Financial Measures
This press release includes non-GAAP measures, such as EBITDA,
that are not prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”) and that may be
different from non-GAAP measures used by other companies. These
non-GAAP measures should not be considered in isolation from, or as
an alternative to, financial measures prepared in accordance with
GAAP. Forward looking non-GAAP measures are presented without
reconciliation to the comparable GAAP measures due to the inherent
difficulty in forecasting and quantifying certain amounts that are
necessary for such reconciliation, and RAC is unable to provide
such reconciliation without unreasonable effort.
Important Information about the Transaction and Where to Find
It
In connection with the proposed business combination, RAC
intends to file a preliminary proxy statement and a definitive
proxy statement with the Securities and Exchange Commission (the
“SEC”). This press release does not contain all the information
that should be considered concerning the proposed combination, and
it is not intended to provide the basis for any investment decision
or any other decision regarding the proposed combination. RAC’s
stockholders and other interested persons are advised to read, when
available, the preliminary proxy statement, the amendments thereto,
and the definitive proxy statement and documents incorporated by
reference therein filed in connection with the proposed
combination, as these materials will contain important information
about the combined Company, RAC, Aria, Archaea LLC and the proposed
combination. When available, the definitive proxy statement will be
mailed to the stockholders of RAC as of a record date to be
established for voting on the proposed combination. Stockholders
will also be able to obtain copies of the preliminary proxy
statement, the definitive proxy statement and other documents filed
with the SEC that will be incorporated by reference therein,
without charge, once available, at the SEC’s website at
http://www.sec.gov.
Participants in the Solicitation
RAC, Aria and Archaea LLC and their respective directors,
executive officers and other employees may be deemed to be
participants in the solicitation of proxies of RAC’s stockholders
in connection with the proposed business combination. Information
regarding the persons who may, under SEC rules, be deemed
participants in the solicitation of RAC’s stockholders in
connection with the proposed combination, including their names and
a description of their interests in the proposed combination, will
be set forth in the proxy statement relating to such transaction
when it is filed with the SEC.
No Offer or Solicitation
This press release shall not constitute a solicitation of a
proxy, consent or authorization with respect to any securities or
in respect of the proposed business combination. This press release
shall not constitute an offer to sell or the solicitation of an
offer to buy any securities, nor shall there be any sale of
securities in any states or jurisdictions in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of such state or
jurisdiction. No offering of securities shall be made except by
means of a prospectus meeting the requirements of section 10 of the
Securities Act of 1933, as amended.
___________________
1 Acting as investment advisor on behalf
of client accounts.
2 Rice Energy sold to EQT Corporation in
2017 for $8.2bn. Rice Midstream Partners sold to EQT Midstream
Partners in 2018 for $2.4bn.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210407006030/en/
Investor Relations Kyle Derham
kyle@riceinvestmentgroup.com
Media Relations Montieth M. Illingworth
montieth@montiethco.com
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