San Ramon, CA-based integrated oil company Chevron Corporation CVX announced plans of acquiring the biodiesel producer, Renewable Energy Group Inc REGI, for $3.15 billion in an all-cash deal for which Chevron will pay $61.50 per share of Renewable Energy Group. $61.50 per share represents a premium of about 40% to REGI’s last Friday close and a premium of about 57% on a 30-day average based on the closing stock prices on Feb 25, 2022.

According to Chevron, this acquisition amalgamates its extensive experience in manufacturing, distribution and commercial marketing with Renewable Energy Group’s increasing renewable fuels production and leading feedstock competencies. It is in line with Chevron’s objective to boost its renewable fuels output capacity to 100,000 barrels per day by 2030 and also provide surplus feedstock supplies and pre-treatment facilities.

With investors stepping up pressure on carbon emitters, the likes of CVX are looking at a monumental shift in their business models by effectively moving away from their primary operations of oil and gas development. To this end, Chevron’s existing renewable fuel partnership with Bunge, together with Renewable Energy Group’s biodiesel production facilities, will transform the energy behemoth into one of the largest North American renewable fuels producers.

The deal, anticipated to conclude by June, is expected to augment Chevron’s earnings in the first year after closing and increase free cash flow after the start-up of REGI's Geismar expansion. The supermajor will also generate the $500-$600 million range of EBITDA by 2025. Moreover, if the transaction goes through, Chevron's renewable fuels business will be headquartered in Ames, IA.

Commenting on the takeover, Chevron Chairman and CEO, Mike Wirth, said "Together, we can grow more quickly and efficiently than either could on its own."

Moreover, Renewable Energy Group CEO, Cynthia Warner, is likely to join Chevron’s Board of Directors.

Chevron is one of the largest publicly traded oil and gas companies in the world with operations spanning worldwide. The only energy component of the Dow Jones Industrial Average, CVX is fully integrated as it participates in every aspect related to energy, from oil production to refining and marketing. The company generates around $95 billion in annual revenues and produces more than three million barrels per day of oil equivalent. It currently churns out oil and natural gas at a 59/41 ratio. As of the end of 2021, the company had proved reserves of approximately 12.4 billion barrels of oil equivalent.