A consortium led by private equity firm Apollo Global Management struck a deal to acquire El Paso Corp's oil and gas exploration and production business for about $7.15 billion, in the largest leveraged buyout deal of the year so far.
The Apollo group also includes private equity firm Riverstone Holdings, billionaire Len Blavatnik's Access Industries and other parties, El Paso said in a statement on Friday.
Kinder Morgan Inc is selling off the business, which it would have picked up as part of its $21 billion deal to buy rival El Paso late last year. Because Kinder Morgan was only interested in El Paso's pipeline assets, it promptly put the E&P business on the block, hoping to use proceeds from the sale to reduce the cost of the original deal.
The Apollo deal is contingent on the completion of the Kinder Morgan, El Paso deal, which is expected to close in the second quarter. The $7.15 billion price tag is lower than many expected when Kinder Morgan agreed to buy El Paso in October. Analysts had projected then that the unit could be worth over $8 billion.
According to one source familiar with the matter, bidding on the unit opened at around $7.5 billion. But natural gas prices have fallen more than 30 percent since October to $2.55 per million British thermal units, driving down the value of the unit.
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