Black Hills Corp. to purchase Mallon resources for 1.09 times revenue
The Deal: Black Hills Corporation has entered into a definitive merger agreement to acquire Mallon Resources Corporation. The total cost of the transaction is approximately $52 million, including the assumption of Mallon’s debt to Aquila Energy Capital Corporation and the settlement of outstanding hedges, amounting to $30.5 million. Mallon shareholders will receive 0.044 shares of Black Hills for each Mallon share. The deal has been approved by the boards of both companies, but still requires shareholder approval. The transaction is expected to close in the first quarter of 2003.
Discussion: Mallon Resources is an independent energy company engaged in oil and natural gas exploration, development and production. The company operates through subsidiary Mallon Oil. Mallon Oil operates primarily in the New Mexico, but also holds acreage in Alabama, Colorado, North Dakota, Oklahoma, and Wyoming.
Black Hills is a diverse energy and communications company. The company’s independent energy unit markets coal, natural gas, and crude oil throughout the United States. The company’s Black Hills Power unit markets electricity from its independent power project investments. Black Hills owns 51 percent of Black Hills FiberCom, which operates a 242-mile fiber-optic network and a 737-mile hybrid fibercoaxial network. Black Hills uses these networks to provide telecom services to areas in South Dakota.
The acquisition is expected to increase Black Hills’ natural gas and oil production by about 60 percent. The deal will more than double Black Hills’ oil and gas reserves.
Copyright NVST, Inc. Oct 14, 2002
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