Magnolia Oil & Gas (MGY) agreed to acquire privately-held WildFire Energy in a roughly $4.06 billion deal, including debt, that will give it a dominant position in the Giddings field in South Texas.
WildFire shareholders will receive 32.2 million Magnolia's common shares, the oil and gas exploration and production company said Monday in a statement. It will assume WildFire's $600 million of notes due 2029, with the remaining amount to be funded through cash, debt, and new equity, according to the statement.
"The acquisition of the WildFire oil and gas properties and acreage is a natural and strategic fit and most notably, it makes our business better by extending our runway of advantaged profitability and significant free cash flow generation," Magnolia Chief Executive Chris Stavros said.
The deal adds about 810,000 net acres in Giddings to Magnolia's existing position and includes a sand mine that supplies about 80% of its annual sand consumption.
"With more than 1.25 million net acres and upside development opportunities across multiple benches including the Austin Chalk, Eagle Ford and Woodbine, this transaction creates a premier position in South Texas by combining two high-quality and complementary assets near Gulf Coast markets which offer premium pricing for our products," Stavros added.
Magnolia expects the acquisition to be immediately and highly accretive to its cash flow and earnings per share, while generating more than $100 million in annual run-rate synergies by the end of 2027. The company said the deal supports a 9% increase in quarterly dividend to $0.18 per share, payable in the third quarter of this year.
The transaction is expected to close toward the end of the third quarter of this year, Magnolia said. WildFire didn't respond to' emailed request for comment.
Shares of Magnolia were down 2.3% in Monday trade.
The equity component of the deal's structure amounts to a roughly 17% dilution to Magnolia's share count, according to Wedbush Securities analyst Michael Piccolo.
"We'd expect a broadly positive to neutral reaction," Piccolo said in a note Monday. "The initial selloff on unconfirmed reports already discounted some deal risk, and the all-in structure is a key swing factor for how accretive the deal proves per share."
Last month, Bloomberg reported that Magnolia had emerged as the front-runner to acquire WildFire for more than $4 billion, citing people familiar with the matter.
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