Bloomberg News

KKR Said to Be Near $7 Billion Deal to Buy Most of Samson

November 23, 2011

(Adds financing package in the second paragraph.)

Nov. 22 (Bloomberg) -- A KKR & Co.-led group is near an agreement to buy most of Samson Investment Co., a family-owned oil and gas producer, for about $7 billion, according to two people with knowledge of the matter.

A purchase would exclude Samson’s Gulf of Mexico operations, said the people, who declined to be identified because the discussions are private. The deal, which may be announced as soon as today, is backed by $4.5 billion in committed financing from 11 lenders led by JPMorgan Chase & Co., according to another person, who asked not to be identified because the deal isn’t completed. Talks could still break down and an agreement may not be reached.

The deal would be the biggest corporate takeover by a private-equity firm this year, according to data compiled by Bloomberg. It would top the $5.7 billion takeover of Kinetic Concepts Inc., a maker of wound-care products and hospital beds, by a group led by Apax Partners LLP, completed earlier this month.

The purchase price for a deal was reported earlier today by CNBC. A spokesman for Samson declined to comment.

Japan’s Itochu Corp. and private-equity firms Crestview Partners LP and NGP Energy Capital Management LLC are backing the KKR offer, two people with knowledge of the matter said. Spokespeople for the three companies either declined to comment or weren’t immediately available.

Itochu will own 25 percent of the company buying the Samson assets while KKR will hold 60 percent, Reuters reported earlier today, citing unidentified people.

Leveraged Buyout

KKR, led by Henry Kravis and George Roberts, beat out oil and gas companies to enter exclusive talks with Samson, people familiar with the matter said this month. Samson, based in Kravis’s hometown of Tulsa, Oklahoma, has been working for months with Jefferies Group Inc. to seek buyers or joint-venture partners, the people said.

The deal would be the biggest leveraged buyout ever attempted in the oil and gas production industry, whose vulnerability to commodity price swings makes it difficult for private-equity buyers to borrow against. No LBO worth more than $1 billion has been completed in the industry since Bloomberg began tracking the data more than a decade ago.

KKR did one of the first such deals in the oil and gas production industry 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.

Samson has more than 1,200 employees and operates more than 4,000 wells, according to its website. It produces in regions and basins including eastern Texas, the Gulf Coast, Powder River in the Mountain West and San Juan in the Southwest.

Samson’s Acquisitions

From 1992 to 2007, the company spent at least $885 million buying oil and natural-gas assets in the U.S. and Canada, according to data compiled by Bloomberg. Since then, it sold non-U.S. assets and has spent $4 billion on drilling and acquisitions, according to its website.

KKR earlier this month hired Claire Scobee Farley and David Rockecharlie, energy-industry bankers from Jefferies & Co., as managing directors focusing on the firm’s oil and gas investments. Farley and Rockecharlie founded Houston-based RPM Energy LLC, which helps manage those investments.

The value of private-equity deals in the energy industry this year has climbed almost 75 percent to $22.3 billion over a year earlier, according to data compiled by Bloomberg. The surge was led by the $3.5 billion agreement in June by KKR and Hilcorp Energy Co. 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.

Shale Gas

KKR made a fourfold return on its first shale-gas investment, in Warrendale, Pennsylvania-based East Resources Inc., when the company was sold to Royal Dutch Shell Plc in May 2010. KKR, one of the first buyout firms to enter the oil and gas production business with its 1985 acquisition of Union Texas Petroleum, has also attracted more than $1 billion for its natural-resources fund, exceeding the target.

Samson was founded in 1971 by Tulsa petroleum engineer Charles Schusterman, who died in 2000. His daughter, Stacy Schusterman, became co-chief executive in 1999 and assumed full control in 2005, according to the company’s press releases.

--With assistance from Jessica Resnick-Ault in New York. Editors: Jennifer Sondag, Amit Prakash, Steven Crabill

To contact the reporters on this story: Zachary R. Mider in New York at zmider1@bloomberg.net; Cristina Alesci in New York at calesci2@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net


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