Samsung C&T Corp., the trading arm of Samsung Group, agreed to buy Parallel Petroleum Corp. from Apollo Global Management LLC in what may be the biggest overseas energy takeover by a South Korean company this year.
Samsung C&T will purchase a 90 percent stake in the Midland, Texas-based oil and gas producer, while state-owned Korea National Oil Corp. will buy the rest, according to a regulatory filing in Seoul today. Samsung C&T said it plans sell part of its stake in Parallel Petroleum to investors.
The two companies may pay about $780 million for Parallel Petroleum, said three people with knowledge of the matter who declined to be identified because the terms are private. Today’s filing didn’t disclose the price.
Rising raw material prices are spurring South Korean companies to boost investments in commodities ranging from oil and gas to copper, as they compete for supplies with China and India. Parallel Petroleum produces 8,400 barrels of oil a day and has reserves equivalent to 69 million barrels, according to Samsung C&T’s statement.
“The investment looks positive for Samsung C&T’s earnings,” said Ryan Nho, an analyst at Hyundai Securities Co. in Seoul, who has a buy recommendation on the stock. “The acquisition will boost its margins.”
Samsung C&T aims to increase revenue from its natural resources, energy and environment business to 46 percent of overall sales by 2015 from 31 percent in 2010, according to an investor relations presentation on its website.
In addition to changing Samsung C&T’s revenue mix, the purchase may also bolster the company’s construction business, James Chong, an analyst at Tong Yang Investment Bank in Seoul, said before the announcement. The investment will “enable the company to participate more in infrastructure projects needed in the development of resources,” he said.
Samsung C&T rose 0.6 percent to close at 66,100 won in Seoul, the highest since Nov. 17, while the benchmark Kospi index fell 0.5 percent.
JPMorgan Chase & Co. advised Samsung C&T, according to the Korean company.
At $780 million, the deal would be South Korea’s biggest overseas energy takeover, data compiled by Bloomberg show. State-owned KNOC bought a 95 percent stake in Altius Holdings Inc. for $515 million in March. KNOC also agreed to buy a 24 percent holding in a Texas shale-oil block from Anadarko Petroleum Corp. for $1.55 billion this year.
Apollo, based in New York, aims to raise as much as $1.5 billion for a fund that will invest in natural resources and is touting its record running companies including Parallel Petroleum and Noranda Aluminum Holding Corp. to prospective backers, a person familiar with the matter said in July.
Samsung C&T said in September it won a 658.8 billion won ($575 million) order to build a power plant in the United Arab Emirates. Perth-based Metals X Ltd. last week said it’s in talks with companies including Samsung C&T about funding and developing a nickel and cobalt project in Australia.