Apollo offers $435m for oil and gas company

The mega-buyout firm, which has been struggling with some of its larger portfolio companies in the financial crisis, is offering a 51% premium to Legacy Reserves’ unitholders over the average closing price of the units over the last 30 days.

Apollo Global Management has offered to pay $435 million, or $14 per share, to acquire oil and gas company Legacy Reserves.

Apollo will keep Texas-based Legacy’s management team in place post-acquisition, according to a statement from Legacy. Also, Legacy’s chief executive officer Cary Brown and senior management team will invest in the transaction alongside Apollo if the company’s board of directors approves the bid. Brown and his team own about 21 percent of the company’s outstanding units.

The company entered a three-year, $600 million secured revolving credit agreement in late March as a way to restructure its debt load. Legacy reported a loss for 2008 of $158.2 million because of low year-end prices of oil and natural gas and increased production and capital costs.

“We believe that our proposal is fair and in the best interest of the partnership and its public unitholders,” Apollo said in a statement. “The proposed purchase price represents a premium of 42 percent over the closing price of the partnership’s units on 2 April, 2009, and a premium of 51 percent over the average closing price of the units over the last 30 trading days.”

Apollo made the bid from its $14.7 billion seventh buyout fund, which closed at the end of last year. The firm has struggled with some of its larger investments in the economic downturn, including real estate broker Realogy, and casino operator Harrah’s.

Apollo acquired Realogy in 2007 in a deal valued at about $8.5 billion and the company reported a loss of $1.91 billion for the full-year 2008. Apollo and co-investors used about $2 billion of cash in the acquisition.

Harrah’s Entertainment, which Apollo and TPG acquired in 2008 for about $27 billion, reported a loss of $4.3 billion last year. Apollo used about $1.3 billion of equity in the deal.The company has been working to restructure its debt, and recently tendered nearly $5 billion in bonds, allowing Harrah’s to push back the maturity dates of its near-term debt.