Methanex Corp., Vancouver, B.C., is stepping up its methanol production and marketing operations on a large scale.
It has disclosed plans to buy the methanol operations of Fletcher Challenge Ltd. of New Zealand in a deal valued at more than $700 million (U.S.). It plans expansion of methanol capacity, citing a growing market for methanol-derived methyl tertiary butyl ether (MTBE) as an octane enhancer for oxygenated gasoline.
Subject to several approvals, Methanex will acquire from Fletcher Challenger:
- Petralgas, a 520,000 ton/year methanol plant in New Zealand.
- Synfuel, a New Zealand plant with swing capacity to produce 450,000 tons/year of methanol. This volume could increase to 900,000 tons/year with addition of distillation capacity. The present plant also is rated at the equivalent of 1.8 million tons/year of methanol, or 700,000 tons/year of gasoline, or a combination of both.
- Cape Horn, an 800,000 ton/year methanol plant in Chile. Methanex said this is one of the world's largest single train methanol units.
For consideration, Methanex will issue about 74 million of its shares to Fletcher Challenge and pay Fletcher Challenge $250 million (U.S.) in cash. A recent Nasdaq quote listed Methanex at $6.25/share, making the stock issue worth $462.5 million and total consideration $712.5 million (U.S.).
The trade hinges on regulatory approvals, Methanex shareholder approval, certain third party consents, and financing of the cash portion of the purchase price.
As part of the last condition, Methanex signed an underwriting agreement with several securities dealers for the sale of 42 million of its shares in Canada at $8.25/share for gross proceeds of $346.5 million (Canadian). Net proceeds are to be used to finance the cash portion of the Fletcher Challenge purchase.
AFTER THE DEAL
Closing of the Fletcher Challenge deal will give Methanex production capacity of 2.4 million tons/year of methanol and marketing agreements for another 1 million tons/year.
Methanex plans additional methanol production capacity of 1.2 million tons/year and further marketing arrangements for 600,000 tons/year during the next 1 1/2 years. The new capacity is slated in the U.S. and Trinidad, resulting in Methanex producing and marketing more than 5 million tons/year of methanol worldwide.
After the trade closes and assuming the cash portion of the purchase price is financed with new equity, Fletcher Challenge is expected to hold about 43% of the outstanding common shares of Methanex. Methanex's current major shareholder, Metallgesellschaft Corp., New York, will own about 10% of outstanding Methanex shares, compared with its present 32% shareholding.
Methanex said the purchase underscores its confidence in the future of methanol, particularly, with the emergence of MTBE to satisfy the required use of oxygenates in U.S. gasoline in the wake of passage of the Clean Air Act amendments in 1990.
The company expects MTBE demand to rise in other countries as they follow the U.S. lead in environmental and octane requirements for cleaner burning gasoline.
Copyright 1993 Oil & Gas Journal. All Rights Reserved.
