Recently, Chevron (CVX 0.84%) boosted its investment in renewable energy with an intriguing acquisition. In this video clip from "The M&A Show" on Motley Fool Live, recorded on June 17, Fool.com contributors Travis Hoium and Jason Hall discuss the transaction that added millions of gallons of biodiesel to its fuel offerings.
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Travis Hoium: Chevron closed its deal with the Renewable Energy Group (REGI), a public company that they bought out. What's the thought behind this for Chevron, because I know this is one of your favorite energy stocks here.
Jason Hall: Yeah, so it's one of the fully integrated supermajors and one that I do like a lot. By the way, it's a dividend aristocrat along with ExxonMobil (XOM 0.24%), even though ExxonMobil didn't increase its dividend for two and a half years. Chevron is the one that has consistently been able to raise its dividend at a higher rate. This is about a $3 billion dollar deal, $2.75 billion, about a 50% premium to Renewable Energy Group's share price, 30 prior days, but the stock had been struggling over the longer term. But here's what they basically bought. I know that's a bunch of little lines on the screen, it's hard to see, but it's really these numbers down here at the bottom. About 652 million gallons per year of mostly renewable biodiesel production.
Hoium: When you say renewable, the sources are what?
Hall: Soybean oil, used cooking oil. One of the things that Renewable Energy Group actually highlighted, and I think this is part of why Chevron targeted it, is they've done a pretty good job of innovating and improving the technology and their ability to process different feedstocks like rendered animal fats, for example.
Not a lot of companies are able to take rendered animal fats and make biodiesel out of it. I've talked a lot about Phillips 66 (PSX 0.63%) with their traditional refineries, having an edge of the crudes that they can take. Renewable Energy Group has that with these animal and vegetable fats that they can take and process and turn into biodiesel.