American fuel maker XCF Global Capital has agreed to go public via a merger with special purpose acquisition company (SPAC) Focus Impact BH3 Acquisition, in a deal that values the sustainable fuels producer at $1.75 billion, the SPAC said on Friday. New York-based XCF Global, which owns multiple facilities in North America, produces renewable diesel and has planned a strategic expansion into sustainable aviation fuel and other biofuels.

SPACs have largely fallen out of favor following a frenzy of deals in 2020 that invited intense scrutiny from the U.S. securities regulator. But smaller private companies still prefer mergers with SPACs, since this lets them sidestep a lengthy initial public offering (IPO) process. Last week, Powermers Smart Industries, a commercial transportation and industrial equipment maker focused on reducing greenhouse gas emissions, also agreed to go public in a SPAC deal valued at around $2 billion. Also called blank-check firms, SPACs use proceeds from their IPOs to merge with private firms. 

XCF controls multiple plants in North America that will produce renewable diesel, sustainable aviation fuel, and other biofuels. The transaction, which values XCF at $1.75billion, is subject to the completion of due diligence, negotiation of and entry into definitive documentation and will be subject to customary closing conditions. There can be no assurances that a transaction will be executed or consummated.

“We are excited to announce this LOI with XCF,” said Carl Stanton, CEO of Focus Impact BH3. “XCF is emerging as a leader in the production of sustainable fuels, and we believe that this transaction will position us to capitalize on the growing demand for clean energy and amplify our mission to enhance social impact and grow leading businesses.” XCF is currently a leading North American producer of renewable diesel, with a planned strategic expansion into sustainable aviation fuel.

The company’s fuels are made from renewable sources and can be used to reduce greenhouse gas emissions from transportation. “We are excited to enter this partnership to meet our commitment to reduce the global carbon footprint with production of renewable diesel that meet domestic and global mandates said Mihir Dange, CEO of XCF. “This partnership into the public markets broadens our investor base and the combined company will have a strong platform to grow in the rapidly expanding market for sustainable fuels.”

(With Reuters inputs)