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February 25, 2012 3:10 PM

Nine Am Law 100 Firms Take Lead on Apollo-Led $7.2 Billion LBO

Posted by Brian Baxter

UPDATE: 2/27/12, 10:45 a.m. The names of the lawyers from Bracewell & Giuliani, Locke Lord, Paul Hastings, and Vinson & Elkins have been added to this story. CORRECTION: 2/27/12, 1:55 p.m. The last sentence of this story initially misidentified the name of the firm advising KKR on the Capital Safety acquisition. We regret the error.

A private equity consortium led by Apollo Global Management has agreed to acquire El Paso Corporation's oil and gas exploration and production units in a $7.15 billion leveraged buyout that Bloomberg reports is the second-largest private equity takeover of an energy producer.

El Paso, a company founded in 1928 by Houston lawyer Paul Kayser, announced late Friday that it had reached an agreement to sell the businesses to a group composed of Apollo, Access Industries, and Riverstone Holdings.

The deal is designed to expedite the sale of El Paso to Houston-based energy company Kinder Morgan, which announced in November it would acquire its oil and gas rival for $38 billion, including debt. That transaction, which is scheduled to close in the second quarter of this year, will create the largest natural gas pipeline network in the U.S. and the fourth-largest energy company in North America.

When El Paso announced plans last year to sell off its exploration and production businesses, it retained Wachtell, Lipton, Rosen & Katz to advise on the process. But with Kinder Morgan, represented by Bracewell & Giuliani and Weil, Gotshal & Manges, now in line to acquire El Paso, its lawyers have taken over the transactional work related to the sale.

Weil corporate partners Jay Tabor, Rodney Moore, and Shayla Harlev, antitrust head Steven Newborn, antitrust partner Laura Wilkinson, employee benefits head Andrew Gaines, finance partner Kelly Dybala, and environmental partner and climate change practice head Annemargaret Connolly are advising Kinder Morgan on the divestiture of El Paso's exploration and production units.

Bracewell oil and gas partner W. James "J.J." McAnelly, tax and finance partner Gregory Bopp, energy and finance partner Aaron Roffwarg, and environmental and natural resources head Timothy Wilkins are also advising Kinder Morgan.

Locke Lord corporate partner Joe Perillo, oil and gas partner Terry Radney, and tax partner Mike Rutledge are representing El Paso on the current deal. The firm has previously handled work for El Paso.

Lawyers from Debevoise & Plimpton, O'Melveny & MyersPaul, Weiss, Rifkind, Wharton & Garrison, Vinson & Elkins, and Willkie Farr & Gallagher are advising the private equity consortium on its purchase of El Paso assets.

Apollo, which is planning $5.5 billion in debt financing for the acquisition, tapped Paul Weiss to serve as counsel to the investor group on the proposed transaction. M&A partner John Scott, finance partners Gregory Ezring and Mark Wlazlo, tax partner Brad Okun, deputy corporate chair Marco Masotti, corporate partner James Schwab, and M&A counsel Brian Finnegan are leading a team from Paul Weiss working on the deal.

The firm's work for Apollo got a huge boost last year when it recruited seven corporate partners from O'Melveny, including current Paul Weiss partners Ezring, Wlazlo, Okun, and Scott, all of whom handled Apollo work. Apollo's general counsel, John Suydam, is the former head of O'Melveny's M&A practice.

In December, Paul Weiss, which recently released its 2011 review of strategic M&A transactions, advised Apollo on its acquisition of investment manager Stone Tower Capital. That transaction came just a few weeks after the private equity firm turned to Akin Gump Strauss Hauer & Feld for counsel on its $772 million sale of Parallel Petroleum to Samsung and Korea National Oil.

O'Melveny environmental practice chair Eric Rothenberg in New York is serving as special counsel to Apollo on energy and environmental matters related to the divestitures by El Paso. Last year O'Melveny teamed with Paul Weiss in advising Apollo on its $510 million acquisition of entertainment company CKX. O'Melveny also handled a $565 million initial public offering for Apollo last year, according to our previous reports.

New York–based Access, which is controlled by Russian billionaire Len Blavatnik, is being advised by a team of Debevoise lawyers led by M&A partners Kevin Rinker and Jeffrey Ross and tax partner David Schnabel. The firm advised Access last year on its $3.3 billion acquisition of Warner Music Group. Alejandro Moreno serves as general counsel for Access.

Willkie Farr corporate partners Bruce Herzog and Adam Turteltaub in New York are representing Riverstone in the matter. Serving as cocounsel to Riverstone and Apollo are a team of more than 50 Vinson lawyers led by M&A partners James Fox, David Cohen, and Fielding "Tres" Cochran III, and employee benefits partner David D'Alessandro.

Stephen Coats, a former Vinson partner, serves as Riverstone's general counsel. The New York-based private equity firm was part of a group that took Kinder Morgan private in a $15 billion buyout in 2006.

Kinder Morgan became a public company again a year ago this month after it completed a nearly $3 billion IPO, the largest private equity–backed IPO in U.S. history and the largest energy sector offering since 1998. (Bracewell took the lead for Kinder Morgan on that listing, according to our previous reports.)

Joseph Listengart serves as general counsel for Kinder Morgan, while Henry Cornell, who once practiced at Davis Polk & Wardwell, serves on the company's board of directors. El Paso's general counsel is Robert Baker. Anthony Hall, Jr., a former partner at Jackson Walker, is a member of El Paso's board.

Completion of the sale of El Paso's exploration and production units is dependent upon the successful close of the company's acquisition by Kinder Morgan. Paul Hastings leveraged finance partners Michael Baker and Richard Farley and corporate parter Michele Cohen are advising RBC Capital Markets in connection with a debt financing commitment to support the leveraged buyout.

One potential complication is a lawsuit filed in Delaware by El Paso shareholders claiming that the sale is flawed because of an alleged conflict involving Goldman Sachs. The New York Times’s DealBook has a breakdown on some of the issues at play in the litigation before Delaware's Chancery Court.

Weil and Delaware's Seitz Ross Aronstam & Moritz are representing Kinder Morgan in the suit, while El Paso has turned to Wachtell and Delaware's Potter Anderson & Corroon. Court records show that Sullivan & Cromwell and Delaware's Richards, Layton & Finger are representing Goldman.

The proposed private equity buyout of El Paso's assets comes on the heels of another large oil and gas LBO announced in November: a KKR-led consortium's $7.2 billion acquisition of privately held Samson Investment Company.

Davis Polk, Latham & Watkins, and Simpson Thacher & Bartlett advised the investor group on that takeover, according to our previous reports. Latham followed up that deal a week later by advising KKR on its $1.1 billion acquisition of Capital Safety, a maker of safety equipment for the construction and energy industries.

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Latham actually represented KKR on the Capital Safety acquisition. STB represented the Seller.

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