KKR-led group has deal to buy Samson for $7.2 billion

Thu Nov 24, 2011 2:45am EST

(Reuters) - A consortium led by private equity firm KKR & Co (KKR.N) clinched a deal to buy oil and gas group Samson Investment Co for $7.2 billion, KKR said on Wednesday.

The deal is the second-largest global private equity transaction of the year, and its structure underscores how challenging debt markets are leading buyers to find partners to fund larger equity transactions.

KKR has a 60 percent participation in the consortium, people familiar with the matter previously told Reuters. The group includes Japanese trading house Itochu Corp (8001.T), which will invest $1 billion to take a 25 percent stake, as well as two smaller private equity houses.

Natural resources assets are a way for investors to beat the commodities cycle as commodity exchange-traded funds have generally underperformed spot commodity prices.

Samson, founded by the late Charles Schusterman in 1971, offers its new owners rich pickings for their natural resources portfolio. It has interests in more than 10,000 wells, including in oil-abundant areas such as the Bakken and Powder River.

COMING HOME

KKR co-founder and Chief Executive Henry Kravis sealed the deal in his native Tulsa, Oklahoma.

"For Samson, Tulsa is home. It has always been a Tulsa company and it will remain a Tulsa company," Kravis, who leads KKR together with co-founder George Roberts, said in a statement.

Some areas in which Samson is active are estimated to hold vast quantities of oil and gas locked in shale or other underground formations. These spots are also more expensive to tap than traditional oil and gas fields.

Itochu said the deal would help it achieve its goal to double its oil rights volume to 70,000 barrels per day by 2015, up from its current 34,000 barrels.

The deal ranks as the second-largest global private equity transaction of the year, behind Blackstone Group's (BX.N) $9.4 billion agreement to buy nearly 600 shopping malls from Australia's Centro Properties CNP.AX.

The deal excludes Samson's onshore Gulf Coast and offshore deepwater Gulf of Mexico assets, which carry more risk to develop and will remain with the Schusterman family. Samson Chief Operating Officer David Adams will be promoted to chief executive.

KKR's group will splash out some $4 billion in equity since a $2.35 billion asset-based loan arranged for the deal is not expected to be drawn down in its entirety, financing sources said. There is also $2.25 billion of high-yield bonds arranged, these sources added.

The agreement, subject to regulatory approval, is expected to be completed by the end of the fourth quarter, the consortium said in the statement.

Jefferies & Company and Jones Day advised Samson while Mizuho and Evercore Partners advised Itochu alongside Simpson Thacher & Bartlett LLP. Tudor, Pickering, Holt & Co. LLC advised KKR.

(Reporting by Greg Roumeliotis in New York; Additional reporting by Michelle Sierra and Smita Madhur in New York and Mayumi Negishi in Tokyo; Editing by John Wallace, Steve Orlofsky Bernard Orr and Edwina Gibbs)

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