Apollo Global Management LLC (APO), seeking to catch up with KKR & Co. and Blackstone Group LP (BX) in the buyout industry’s race for energy assets, agreed to acquire El Paso Corp. (EP)’s oil- and gas-exploration unit for $7.15 billion.
The only similar deal by New York-based Apollo was its $483 million acquisition of Midland, Texas-based Parallel Petroleum Corp. in 2009, which it sold last year for $771.5 million. KKR, by comparison, executed one of its first oil and gas transactions in 1985 and last year undertook the biggest leveraged buyout in the industry’s history.
LBO firms such KKR and Blackstone are snapping up energy assets as the price of oil climbs and the world’s largest energy companies unload mature oil and gas fields to finance new exploration.
The value of private equity deals in the energy industry almost doubled last year to $32.2 billion from $16.5 billion in 2010, according to data compiled by Bloomberg.
“Apollo is motivated by seeing the potential returns,” said Colin Blaydon, director of the Center for Private Equity and Entrepreneurship at Dartmouth College’s Tuck School of Business in Hanover, New Hampshire.
“The fact that other major players see that same possibility makes it not surprising that a number of them are pursuing it.”
The El Paso deal rivals last year’s $7.2 billion takeover of Samson Investment Co. by New York-based KKR in what was the largest corporate leveraged buyout since 2007.
Kinder Morgan Inc., whose owners include Carlyle Group, a Washington-based buyout firm, and Goldman Sachs Group Inc. of New York, agreed to purchase El Paso for $21.1 billion in October with plans to sell the oil and gas unit to help finance the takeover.
Trumpeting Records
Apollo is leading a group that includes Riverstone Holdings LLC and Russian billionaire Len Blavatnik’s Access Industries Holdings Inc. in purchasing El Paso’s assets.
They are planning $5.5 billion of debt financing for the purchase, said four people with knowledge of the transaction, who asked not to be named because the information is private. The deal includes $3 billion of equity, one of the people said.
The financing will feature $3.5 billion of bonds and a $2 billion loan, about a $1 billion of which will be funded at closing, said the people.
Private equity firms have been trumpeting their energy track records in an effort to attract capital from clients who are clamoring for more opportunities to invest in the industry.
Blackstone is seeking to raise as much as $3 billion for its first energy-focused fund. If successful, New York-based Blackstone would surpass both Apollo’s and KKR’s efforts to attract capital to dedicated energy pools.
Kosmos Energy
During a conference call with analysts in July, Stephen Schwarzman, Blackstone’s co-founder, offered Kosmos Energy LLC as an example of a successful energy investment.
The Dallas- based oil- and gas-exploration company, whose assets include a stake in West Africa’s biggest offshore discovery in a decade, went public at a price equal to six times Blackstone’s initial cost in 2004, Schwarzman said.
Apollo, after hiring Greg Beard in 2010 from Riverstone, a New York-based private equity firm that specializes in energy investing, has been more active in the sector. In August, it announced a partnership with Vancouver-based Athlon Energy Ltd. to acquire mature oil and gas assets.
The firm is also trying to raise as much as $1.5 billion for a fund that will invest in natural resources, said a person familiar with the matter.
Marathon Oil
The pool will make long-term bets on metals, mining and energy prices. Apollo is touting its record running companies such as Noranda Aluminum Holding Corp., Metals USA Holdings Corp. and Parallel Petroleum in its pitch to prospective backers, the person said.
KKR did one of its first oil- and gas-production deals in 1985, buying a 50 percent stake in Allied Corp.’s Union Texas Petroleum unit for about $250 million, according to “The New Financial Capitalists” by George Pierce Baker.
In June, KKR and Hilcorp Energy Co. reached a $3.5 billion agreement to sell oil and gas leases in southern Texas to Marathon Oil Corp. The deal almost tripled the value of KKR’s $400 million investment in a year.
bloomberg.com
The only similar deal by New York-based Apollo was its $483 million acquisition of Midland, Texas-based Parallel Petroleum Corp. in 2009, which it sold last year for $771.5 million. KKR, by comparison, executed one of its first oil and gas transactions in 1985 and last year undertook the biggest leveraged buyout in the industry’s history.
LBO firms such KKR and Blackstone are snapping up energy assets as the price of oil climbs and the world’s largest energy companies unload mature oil and gas fields to finance new exploration.
The value of private equity deals in the energy industry almost doubled last year to $32.2 billion from $16.5 billion in 2010, according to data compiled by Bloomberg.
“Apollo is motivated by seeing the potential returns,” said Colin Blaydon, director of the Center for Private Equity and Entrepreneurship at Dartmouth College’s Tuck School of Business in Hanover, New Hampshire.
“The fact that other major players see that same possibility makes it not surprising that a number of them are pursuing it.”
The El Paso deal rivals last year’s $7.2 billion takeover of Samson Investment Co. by New York-based KKR in what was the largest corporate leveraged buyout since 2007.
Kinder Morgan Inc., whose owners include Carlyle Group, a Washington-based buyout firm, and Goldman Sachs Group Inc. of New York, agreed to purchase El Paso for $21.1 billion in October with plans to sell the oil and gas unit to help finance the takeover.
Trumpeting Records
Apollo is leading a group that includes Riverstone Holdings LLC and Russian billionaire Len Blavatnik’s Access Industries Holdings Inc. in purchasing El Paso’s assets.
They are planning $5.5 billion of debt financing for the purchase, said four people with knowledge of the transaction, who asked not to be named because the information is private. The deal includes $3 billion of equity, one of the people said.
The financing will feature $3.5 billion of bonds and a $2 billion loan, about a $1 billion of which will be funded at closing, said the people.
Private equity firms have been trumpeting their energy track records in an effort to attract capital from clients who are clamoring for more opportunities to invest in the industry.
Blackstone is seeking to raise as much as $3 billion for its first energy-focused fund. If successful, New York-based Blackstone would surpass both Apollo’s and KKR’s efforts to attract capital to dedicated energy pools.
Kosmos Energy
During a conference call with analysts in July, Stephen Schwarzman, Blackstone’s co-founder, offered Kosmos Energy LLC as an example of a successful energy investment.
The Dallas- based oil- and gas-exploration company, whose assets include a stake in West Africa’s biggest offshore discovery in a decade, went public at a price equal to six times Blackstone’s initial cost in 2004, Schwarzman said.
Apollo, after hiring Greg Beard in 2010 from Riverstone, a New York-based private equity firm that specializes in energy investing, has been more active in the sector. In August, it announced a partnership with Vancouver-based Athlon Energy Ltd. to acquire mature oil and gas assets.
The firm is also trying to raise as much as $1.5 billion for a fund that will invest in natural resources, said a person familiar with the matter.
Marathon Oil
The pool will make long-term bets on metals, mining and energy prices. Apollo is touting its record running companies such as Noranda Aluminum Holding Corp., Metals USA Holdings Corp. and Parallel Petroleum in its pitch to prospective backers, the person said.
KKR did one of its first oil- and gas-production deals in 1985, buying a 50 percent stake in Allied Corp.’s Union Texas Petroleum unit for about $250 million, according to “The New Financial Capitalists” by George Pierce Baker.
In June, KKR and Hilcorp Energy Co. reached a $3.5 billion agreement to sell oil and gas leases in southern Texas to Marathon Oil Corp. The deal almost tripled the value of KKR’s $400 million investment in a year.
bloomberg.com
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