Methanex Corporation MEOH disclosed that it has entered into a definitive agreement to acquire OCI Global‘s international methanol business for $2.05 billion.
The deal encompasses OCI’s stakes in two major methanol facilities in Beaumont, Texas, one of which also produces ammonia, along with a low-carbon methanol production and marketing business and an idled methanol facility in the Netherlands.
Rich Sumner, President and Chief Executive Officer of Methanex, said, “This is a unique opportunity to create value by acquiring two highly attractive North American methanol assets that will further strengthen our global production base and we expect it will be immediately accretive to free cash flow per share.”
“The Beaumont plants benefit from access to North America’s abundant and favourably-priced supply of natural gas feedstock, and are expected to increase our global methanol production by over 20 percent.”
Through the OCI acquisition, Methanex expects to gain $30 million in annual cost synergies from reduced logistics and administrative expenses.
With minimal integration costs due to similar operating models, Methanex plans to enhance value by applying its global expertise and incorporating OCI assets into its operational and risk management processes.
OCI’s ammonia production, though smaller than its methanol output, offers Methanex a low-risk entry into a complementary commodity.
The transaction, which has been approved by both companies’ boards, is expected to close in the first half of 2025.
It remains subject to regulatory approvals and other closing conditions, including TSX approval for the issuance of Methanex shares to OCI.
After the transaction, Methanex will have approximately 77 million shares outstanding, with OCI owning about 13%.
Methanex plans to fund the cash portion through a mix of cash on hand and new debt, supported by a fully committed financing package from the Royal Bank of Canada.
Dean Richardson, Senior Vice President, Finance & Chief Financial Officer of Methanex, commented, “We expect the acquisition to add incremental annual Adjusted EBITDA of $275 million to our expected run-rate Adjusted EBITDA of $850 million at a $350/MT realized methanol price.”
“We remain firmly committed to maintaining financial flexibility and have in place a robust financing plan that will support de-levering to our target range of 2.5 to 3.0 times debt/Adjusted EBITDA within approximately 18 months from closing, assuming an average realized price of $350/MT. The plan includes the repayment of our $300 million bond as scheduled in December 2024.”
As of June-end, the company maintained a strong liquidity position with a cash balance of $426 million.
Investors can gain exposure to the stock via American Beacon Select Funds American Beacon GLG Natural Resources ETF MGNR.
Price Action: MEOH shares traded lower by 8.4% at $38.88 premarket at the last check Monday.
Image via Shutterstock
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