Rice Gets Into Renewable Gas With $1.2 Billion SPAC Deal

(Bloomberg) -- Rice Acquisition Corp. will merge with two other companies to create a $1.15 billion renewable natural gas giant.

Rice will combine with Aria Energy Operating LLC and Archaea Energy LLC, with the new company taking Archaea's name, it said in a press release. Rice said it will be the leading U.S. platform for harnessing natural gas seeping out of decaying matter in landfills. Its shares surged as much as 53% on Thursday in New York.

Renewable gas, which can include things like landfill gas or biogas from animal waste, captures methane before it enters the atmosphere as a far more powerful global warming agent than carbon dioxide. It still emits CO2 when burnt, though, raising questions about its environmental merits.

"Early in our acquisition search we identified landfill gas as the most predictable, cost-effective, and environmentally beneficial feedstock to help organizations achieve their carbon neutrality goals," Daniel Rice IV, Rice Acquisition's chief executive officer, said in the release.

The firm said it sees U.S. landfill waste growing to 13 billion tons by 2050 from about 8 billion tons now. That will increase emissions from them to 2.8 billion cubic feet a day from about 1.9 billion now, about half of which are methane and 35% carbon dioxide.

Daniel Rice IV was CEO of Rice Energy Inc. when it was bought by EQT Corp. to form the U.S.'s largest natural gas driller in 2017. He now runs the eponymous special purpose acquisition company, which raised about $237 million in an initial public offering in October. Prior to Thursday, the shares had fallen 1.6% since debuting in mid-December.

Aria is being acquired for $680 million, and Archaea for $357 million, Rice said in the release. Archaea Chief Executive Officer Nicholas Stork will run the combined company.

The deal involves a private investment in public equity that raised $300 million, led by investors including the Baupost Group LLC and Goldman Sachs Asset Management LP. The Rice family invested $20 million in the PIPE, with the deal also including $340 million in debt.

The combined company had an estimated 2020 profit of $40 million, which it expects to grow to $395 million in 2025, according to a presentation. Its enterprise value is $1.15 billion.

Rice shares were 35% higher at $13.59 at 9:50 a.m. in New York.

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