Business Context and Reporting Period
ArcLight Clean Transition Corp. II filed a Form 8-K dated December 2, 2021, under Item 7.01 (Regulation FD Disclosure) and Item 9.01. The filing announces a Business Combination Agreement with Opal HoldCo LLC and Opal Fuels LLC. The transaction is intended to create a public company named Opal Fuels Inc. and is not a periodic financial-results filing.
Transaction Terms and Key Financial Information
- Opal’s stated pre-transaction equity value is $1,501,870,000, reduced by the principal and accrued interest outstanding under a convertible promissory note dated May 1, 2021, as of immediately after closing.
- ArcLight is expected to contribute available cash from its trust account after funding shareholder redemptions and other required obligations.
- ArcLight also proposes to sell 12,500,000 shares at $10.00 per share for aggregate gross proceeds of $125,000,000.
- Opal’s existing limited liability company interests will be reclassified into common units, and New Opal will issue corresponding high-vote Class B and Class D shares to Opal HoldCo, Hillman RNG Investments, LLC, and ARCC Beacon LLC. These shares will have no economic value but will carry one or five votes per share, as applicable.
- Following the domestication, each ArcLight Class A ordinary share is expected to convert into one share of New Opal Class A common stock. Existing ArcLight warrants are expected to become warrants for New Opal common stock, with the existing $11.50 exercise price per share.
- The filing does not provide current or historical revenue, net income, operating cash flow, margins, debt balances, cash balances, liquidity ratios, or other periodic operating metrics.
Material Changes Versus the Prior Comparable Period
The filing does not compare financial results with a prior period. The material development is the execution of the proposed business combination and related financing and capitalization arrangements.
Outlook, Risks, and Unusual Items
- Completion remains subject to shareholder approval, regulatory review, effectiveness of an anticipated Form S-4 registration statement and proxy statement, redemption elections, financing, and other customary closing conditions.
- Opal operates in renewable natural gas, landfill gas, livestock waste, renewable projects, and RNG fueling stations. The filing identifies risks involving competition, project development and operations, customer and supplier relationships, key employees, and dependence on landfill and livestock waste site owners and operators.
- Additional risks include COVID-19-related macroeconomic conditions, regulatory delays, litigation, the amount of shareholder redemptions, and the ability to obtain equity or debt financing.
- The transaction may not be completed, and anticipated benefits may not be realized. The filing states that forward-looking statements are subject to material uncertainties and that neither company undertakes to update them.
- The filing includes a proposed domestication from the Cayman Islands to Delaware and a change of name from ArcLight Clean Transition Corp. II to Opal Fuels Inc.
Important Facts for Investors to Verify
- Review the eventual Form S-4, proxy statement, and prospectus for the definitive transaction structure, valuation, capitalization, ownership, dilution, and financial statements.
- Verify the final amount available from the trust account after redemptions and transaction expenses.
- Confirm whether the proposed $125 million share sale closes and identify its effect on ownership and dilution.
- Review the convertible promissory note balance, including accrued interest, because it reduces the stated $1.502 billion pre-transaction equity value.
- Assess the voting rights and potential control implications of the non-economic Class B and Class D shares.
- Review Opal’s historical and projected revenue, profitability, cash flow, debt, liquidity, project pipeline, and exposure to environmental credits in the subsequent registration materials.