This morning, shares of Rice Acquisition (NYSE:RICE) are on the move in a big way. Investors in RICE stock have seen gains of more than 40% as the company announced a combination with two renewable energy companies.
That’s a bit unusual, as most SPAC mergers are between an acquisition company and one target. However, the combination ultimately sets the stage for the leading U.S. renewable gas (RNG) player. Investors in Rice seem to like that concept.
Size matters, and the hope is that continued optimism among clean energy companies will take this combined entity on a nice run in the years to come. Following President Joe Biden’s recently announced American Jobs Plan, clean energy companies have been in the spotlight more so than usual.
So, let’s dive into what the announcement is all about, and why investors are getting excited about this SPAC today.
RICE Stock Merger a Clean Energy Investor’s Dream
- Rice will be combining with both Aria Energy and Archaea Energy. These companies are leading players in green hydrogen, landfill gas conversion and CO2 sequestration.
- The combined entity will use the Archaea Energy name and will begin trading on the New York Stock Exchange under the ticker LFG sometime in the third quarter.
- According to the company’s press release, the SPAC merger implies a valuation of $1.19 billion.
- Thus, investors buying into an entity which will have an implied valuation multiple of 8.2 times 2022 EBITDA and 3.5 times 2024 EBITDA (estimated).
- Archaea Energy is a leader in producing renewable natural gas (RNG) and CO2 sequestration. The company focuses on reducing carbon emissions in industries that are deemed difficult or inefficient to electrify.
- Aria Energy is one of the largest players in landfill gas conversion. The company’s cash flows are largely contracted under fixed-price arrangements. Therefore, investors benefit from cash flow stability and lower-volatility earnings. This helps RICE stock stand out in the clean energy space.
- The deal is being partially funded by a $300 million PIPE. Of this, the Rice family will be committing $20 million.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.
