BP PLC's (LSE:BP.) new management team has got the endorsement of analysts at Citigroup, who described two recent transactions as “favourable”.
It comes after BP agreed to acquire agri-giant Bunge's 50% stake in their Brazilian sugar and ethanol joint venture, BP Bunge Bioenergia, for $1.4 billion.
In doing so, the UK oil major will take control of a business producing around 50,000 barrels of ethanol equivalent per day from sugar cane.
The deal, expected to close by the end of 2024, will also see BP consolidate Bioenergia's $1.2 billion in debt and lease obligations, meaning BP will effectively pay Bunge $800 million.
Citi’s London-based analyst team, in a note, asserted that ‘management always gets judged on capital allocation, and made the case that the latest iteration of BP’s leadership team looked to be getting things right.
“In the past eight months the new bp management team have executed two M&A deals, both in the New Energy arena: consolidating the ownership of Lightsource bp and, yesterday, consolidating the ownership of bp Bunge Bioenergia,” the American bank said.
“The combined capital outlay of these two deals is $1.1 B, accommodated for within the existing financial frame, and for multiples of 7x and 4x EV/EBITDA respectively.”
“In our view, the evidence from these two deals looks favourable for this management team.”