Under the terms of the deal, Archaea’s shareholders will receive $26 for each Class A and Class B share or $3.3bn in cash, as well as around $800m of net debt.
The deal consideration represents a premium of around 38% to Archaea’s 30-day average price as of 14 October.
Archaea’s shareholders, who collectively own around 27% of the company, have agreed to vote in favour of the transaction.
Archaea CEO and co-founder Nick Stork said: “BP is a world-class partner and a strong fit for Archaea, with a strategic focus on bioenergy and an operational history in the RNG value chain that is fully aligned with ours and our partners’.
“We are excited to join them in our mission to increase the role of RNG in helping customers reach their long-term climate goals, and I look forward to our hard-working team joining the bp organisation to help achieve their bioenergy objectives.”
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Once the deal has closed, Archaea will operate as a subsidiary within BP and become an ‘integral’ part of BP’s existing bioenergy business.
BP expects the acquisition to expand its presence in the US’ biogas industry while enhancing its ability to support its customers’ decarbonisation goals.
BP CEO Bernard Looney said: “Archaea is a fantastic fast-growing business, and BP will add distinctive value through our trading business and customer reach.
“It will accelerate our key bioenergy growth engine, creating a real leader in the biogas sector, and support our net-zero ambition.”
Reuters quoted Looney as saying that BP intends to expand Archea’s production five-fold by 2030 to 30,000 barrels of oil equivalent a day.
The deal is expected to close by the end of this year subject to receiving regulatory approvals.