425: Arcadia Biosciences to Merge with Roosevelt Resources in All-Stock Deal, Shifting Focus to Oil and Gas

Arcadia Biosciences will combine with Roosevelt Resources in an all-stock transaction, resulting in a shift of focus to oil and gas operations and a change of company name and ticker.

Summary

• Arcadia Biosciences has entered into a Securities Exchange Agreement with Roosevelt Resources, a Texas-based oil and gas company, for a business combination.
• The transaction is an all-stock deal where Arcadia will issue approximately 12.3 million shares to Roosevelt's partners in exchange for 100% equity interest in Roosevelt.
• Post-transaction, Roosevelt equity owners will hold approximately 90% of the combined company's shares, while Arcadia shareholders will own about 10%.
• The combined company will be renamed Roosevelt Resources, Inc. and will trade under a new Nasdaq symbol.
• The transaction is expected to close in the first quarter of 2025 or soon thereafter.
• Arcadia's strategic review led to the conclusion that this business combination was the best alternative for shareholders.
• Arcadia has discontinued its CBD body care brands, monetized its Resistant Starch Durum Wheat trait, and sold its GoodWheat brand of wheat products.
• Zola coconut water sales have shown strong growth, with a 55% year-over-year increase in Q3 2024 and a 29% year-to-date increase, driven by a 68% increase in retail distribution in 2024.
• Select Arcadia team members may continue to manage the ongoing operations of Zola.

Sentiment

Score: 5

Explanation: The document presents a significant strategic shift for Arcadia, which could be viewed as both positive and negative. The move into oil and gas is a high-risk, high-reward proposition. The dilution of existing shareholders is a negative, but the potential for growth in the oil and gas sector is a positive. The sentiment is neutral overall.

Positives

• The business combination is expected to provide a better alternative for Arcadia shareholders.
• Zola coconut water is experiencing strong sales growth and increased retail distribution.
• Roosevelt Resources has a proven track record in the oil and gas industry.
• The combined company will have a new focus on oil and gas, potentially leading to new growth opportunities.
• Roosevelt's project has been significantly de-risked with a proven CO2 EOR technology.

Negatives

• Arcadia shareholders will have a significantly reduced ownership stake in the combined company, owning only approximately 10%.
• The transaction involves a complete shift in business focus from biosciences to oil and gas.
• The transaction is subject to shareholder approval and may not close as expected.
• There are risks associated with integrating the operations of Arcadia and Roosevelt.
• The combined company will be exposed to the risks of oil and gas activities, including price volatility and regulatory changes.

Risks

• The transaction is subject to shareholder approval and may not be completed.
• There are risks associated with integrating the operations of Arcadia and Roosevelt.
• The combined company will be exposed to the risks of oil and gas activities, including price volatility and regulatory changes.
• The combined company's ability to finance operations may be affected by changes in capital markets.
• There is a risk that operating costs and business disruption may be greater than expected following the transaction.
• The success of Roosevelt's oil and gas project is dependent on various factors, including commodity prices, development costs, and CO2 availability.
• There is a risk that the combined company may not be able to generate sufficient cash flows from operations to meet its capital expenditure budget.

Future Outlook

The combined company will focus on developing Roosevelt's oil and gas assets, with the transaction expected to close in the first quarter of 2025. The company will be renamed Roosevelt Resources, Inc. and trade under a new Nasdaq symbol. The company will also continue to manage the Zola coconut water business.

Management Comments

• Arcadia's strategic review led to the conclusion that the business combination was the best alternative for shareholders.
• Tony Roosevelt will be the CEO and Chairman of the Board of the combined company.
• Jimmy Hawkins will be the President and Chief Operating Officer of the combined company.
• Jerrel Branson will be the Chief Development and Financial Officer of the combined company.

Industry Context

This merger represents a significant shift for Arcadia Biosciences, moving away from its focus on agricultural biotechnology and into the oil and gas sector. This type of strategic shift is not uncommon for companies seeking to maximize shareholder value, especially when facing challenges in their core business. The oil and gas industry is currently experiencing volatility, but Roosevelt's focus on CO2 enhanced oil recovery (EOR) could provide a competitive advantage.

Comparison to Industry Standards

• Roosevelt's CO2 EOR project is comparable to other projects in the Northwest Shelf San Andres Fields, which have produced over 1 billion barrels of oil equivalent (boe).
• The estimated recovery factor of 55-60% of the oil in place using Roosevelt's Miscible Ascending Dispersion (MAD) EOR technique is within the range of industry standards for CO2 EOR projects.
• Companies like Occidental Petroleum and Denbury Resources are active in CO2 EOR in the Permian Basin, and Roosevelt's project will be competing in this space.
• The estimated oil in place (OIP) of 71,000 to 84,000 boe/acre for Roosevelt's project is within the range of other San Andres carbonate plays.

Management Changes

Stakeholder Impact

• Arcadia shareholders will experience a significant dilution of their ownership stake.
• Arcadia employees may experience changes in their roles and responsibilities.
• Roosevelt employees will become part of a publicly traded company.
• Customers of Zola coconut water may see no immediate changes in the product or service.
• Suppliers and creditors of both companies will need to adapt to the new combined entity.

Next Steps

• Arcadia will file a Registration Statement on Form S-4 with the SEC.
• Arcadia will schedule a special meeting of stockholders to vote on the transaction.
• Arcadia will mail a proxy statement to shareholders.
• The transaction is expected to close in Q1 2025 or soon thereafter.

Key Dates

Keywords

merger, acquisition, business combination, oil and gas, Roosevelt Resources, Arcadia Biosciences, all-stock transaction, CO2 EOR, Zola coconut water, shareholders