Nine Energy Service has entered into a definitive agreement to acquire Magnum Oil Tools International in a cash and stock deal worth $493m.
Image: Nine Energy Service to acquire Magnum Oil Tools International for $493m. Photo courtesy of rawpixel on Unsplash.
Magnum Oil Tools has been downhole technology provider serving the global oil and gas industry for over a decade.
Its offerings consists of proprietary downhole completions products, including dissolvable and composite frac plugs, as well as a number of other patented consumables.
The acquisition of Magnum Oil Tools is expected to position Nine as a major provider of differentiated technology and conveyance with ability to service the entire addressable North American completion tool market.
Nine expects the acquisition of Magnum’s portfolio of completion tools to help operators reduce risk and cycle times as completions continue to become more complex with longer laterals, more stages and mega-well pads.
The acquisition cost includes a combination of nearly $334m of cash, as well as 5 million shares of Nine common stock. Magnum does not hold any debt.
Nine Energy Service intends to fund the cash portion of the transaction with the net proceeds of a notes offering, borrowings under a new credit facility and cash on hand.
The transaction is subject to antitrust approval and other customary closing conditions.
Nine’s president and chief executive officer Ann Fox said: “We could not be more thrilled to partner with Magnum. At Nine, we constantly focus on adding differentiated technology to our portfolio of completion tools to enable operators to more reliably and effectively complete the horizontal wellbores of tomorrow.
“The evolution of technology in the oil field demands a team with a demonstrated track record and ability to transform their offerings and think-forward. This particular team is exceptional.
‘Magnum will propel Nine to a more balanced profile of completion tools, creating excellent barriers to entry while simultaneously building a business that is less labor and less capital intensive and more free cash flow generative.’
While J.P. Morgan Securities served as exclusive financial advisor to Nine, Kirkland & Ellis acted its legal counsel in the transaction.