Methanex Corporation MEOH agreed to acquire OCI Global’s international methanol business for $2.05 billion. The acquisition includes OCI’s stakes in two large methanol facilities located in Beaumont, TX, one of which also produces ammonia. MEOH will acquire OCI’s low-carbon methanol production and marketing business, along with a currently-idled methanol plant in the Netherlands.
Methanex highlighted this acquisition as a significant opportunity to strengthen its global production capacity, particularly benefiting from North America’s abundant and favorably priced natural gas feedstock at the Beaumont facilities. It expects the deal to immediately boost free cash flow per share and increase its global methanol production by more than 20%.
This move aligns with Methanex’s strategic goals of industry leadership and financial stability. The company emphasized the operational synergies between the two businesses, especially in areas like safety and operational excellence, while also marking Methanex’s entry into ammonia production. It is a complementary segment to methanol with a similar feedstock advantage, providing MEOH with a revenue-diversification opportunity.
OCI expressed confidence in Methanex’s ability to generate long-term shareholder value, noting that Methanex was the ideal buyer as OCI conducted its strategic review.
Methanex Corporation Price and Consensus
Methanex Corporation price-consensus-chart | Methanex Corporation Quote
Significant Synergy & Expansion Opportunity for MEOH
Methanex anticipates approximately $30 million in annual cost synergies, primarily from reduced logistics and selling, general and administrative expenses. Given the similar operational models of both companies, the integration process is expected to be smooth. The acquisition also allows MEOH to diversify into ammonia, a commodity with increasing demand as a low-carbon fuel for power generation and marine applications apart from industrial and agricultural uses.
The company projects that the acquisition will add $275 million in incremental annual adjusted EBITDA to its expected run-rate of $850 million, based on a methanol price of $350/MT. It reiterated its commitment to maintaining financial flexibility, with a plan to reduce its debt-to-adjusted EBITDA ratio to a target range of 2.5-3.0 within 18 months after the deal closes.
The $2.05 billion purchase price will comprise $1.15 billion in cash, the issuance of 9.9 million Methanex common shares valued at $450 million and the assumption of $450 million in debt and leases. The price reflects a multiple of 7.5 times Adjusted EBITDA, assuming a methanol price of $350/MT and includes anticipated synergies.
Post-acquisition, MEOH will have around 77 million shares outstanding, with OCI holding approximately 13%. The transaction is expected to close in the first half of 2025, subject to regulatory approvals and a shareholder vote by OCI. Depending on the resolution of an ongoing legal proceeding between OCI and its Natgasoline joint venture partner, Methanex might opt to carve out the purchase of OCI's 50% stake in Natgasoline and complete only the rest of the deal.
In the past year, the stock has increased 4.3% against the industry’s 10.6% fall.
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Zacks Rank & Key Picks
Methanex currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Basic Materials space are Newmont Corporation NEM, Carpenter Technology Corporation CRS and Eldorado Gold Corporation EGO, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Newmont’s current-year earnings is pegged at $2.82 per share, indicating a rise of 75% from the year-ago level. The consensus mark for NEM’s earnings has increased 14% in the past 60 days.The stock has gained nearly 29.4% in the past year.
The Zacks Consensus Estimate for CRS’ current fiscal-year earnings is pegged at $6.06 per share, indicating a rise of 27.9% from the year-ago level. CRS’ earnings beat the consensus estimate in each of the last four quarters, the average earnings surprise being 15.9%. The stock has rallied nearly 106.6% in the past year.
The Zacks Consensus Estimate for Eldorado Gold’s current year earnings is pegged at $1.35 per share, indicating a year-over-year rise of 136.8%. EGO beat the consensus estimate in each of the last four quarters, with the average surprise being 430.3%. The company's shares have surged nearly 61.4% in the past year.
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