Methanex Acquires OCI Global's Methanol Business for $2.05B

Methanex Corp. has agreed to purchase OCI Global's international methanol business for $2.05 billion, aiming to enhance production capabilities and cut costs. This strategic expansion may positively affect its stock price in coming periods.

Date: 09-09-2024

AI Rating: 7

Methanex Corp. (MEOH) has announced a significant acquisition of OCI Global's international methanol business for US$2.05 billion. This expansion reflects Methanex's strategic commitment to enhancing its market presence in the methanol sector, particularly through the inclusion of two world-scale methanol facilities located in Beaumont, Texas, and a low-carbon methanol production facility.

The financial details of the transaction indicate that Methanex will pay $1.15 billion in cash, alongside issuing 9.9 million shares valued at $450 million and assuming $450 million in debt. Post-transaction, Methanex is expected to have approximately 77 million shares outstanding, with OCI owning roughly 13% of the company. This could dilute existing shareholders' equity, impacting stock price volatility in the short term.

The funding strategy for this acquisition includes a combination of cash reserves and new debt issuance. Methanex has secured a committed debt financing package from the Royal Bank of Canada, which will help facilitate this purchase. It's important for investors to monitor the overall debt levels as the company leverages financial resources for growth.

In terms of operational efficiencies, Methanex anticipates achieving about $30 million in annual cost synergies, primarily driven by reduced logistics costs and lower selling, general, and administrative expenses. This aspect could bode well for future profit margins, enhancing overall profitability.

The acquisition is projected to close in the first half of 2025, allowing ample time for integration and realization of the anticipated synergies. As Methanex positions itself with enhanced production capabilities, this could potentially lead to increased revenue growth and improved market competitiveness.

Stocks: MEOH