Barclays May Split $22 Million for Advising on El Paso

Barclays Plc and Evercore Partners Inc. may split as much as $22 million in fees for advising Kinder Morgan Inc. on the $7.15 billion sale of El Paso Corp.’s oil-exploration business, according to researcher Freeman & Co.

Houston-based Kinder Morgan, which is selling the unit to help finance its $21.1 billion takeover of El Paso, agreed to sell the oil and gas exploration and production division to a group led by Apollo Global Management LLC, according to a statement Feb. 24. Advisers to the Apollo-led group may get as much as $20 million, said Lam Nguyen, a director at New York-based Freeman.

Barclays may be capitalizing on its strength in energy to gain some ground in mergers and acquisitions adviser rankings. After finishing 2010 as the top adviser on oil and gas deals, it finished last year in second place, according to data compiled by Bloomberg. The London-based firm acquired one of the biggest investment banks in the oil sector through its 2008 purchase of Lehman Brothers Holdings Inc.’s North American operations.

“This is the most vigorous segment in an otherwise somewhat quiet M&A environment,” said Colin Blaydon, director of the Center for Private Equity and Entrepreneurship at Dartmouth College’s Tuck School of Business in Hanover, New Hampshire. “The investment banks are very interested in helping make these deals come to pass because it is currently their best bet for advising on large transactions.”

$68 Billion in Deals

Barclays, whose investment-banking chief is oil and gas banker Hugh “Skip” McGee, had advised on 21 deals worth more than $68 billion this year before the deal was announced, Bloomberg data show.

Greg Pipkin, co-head of energy investment banking at Barclays, who advised a group led by KKR & Co. on its $7.2 billion takeover of oil and natural-gas producer Samson Investment Co. last year, worked with Kinder Morgan on the sale of the El Paso unit. Bankers Christopher Watson, Lee Jacobe and Bradley Hutchinson joined him on the deal.

Robert Pacha, a senior managing director at Evercore who was hired from Bank of America Corp. in 2009 to set up a new Houston office, also advised Kinder Morgan. Raymond Strong, Shaun Finnie, Lance Dardis and Chris Juban worked with him on the sale. Evercore, which didn’t have a focused oil and gas advisory effort until it brought in Pacha, finished 14th in the league table last year and was boosted by its work for Kinder Morgan and other clients in the sector.

Debt Financing

Apollo, Riverstone Holdings LLC, Access Industries Holdings Inc. and other investors are buying the El Paso oil and gas unit, according to the Feb. 24 statement. They are planning $5.5 billion of debt financing for the purchase, people with knowledge of the transaction said last week. Apollo has been more active in energy investing after hiring Greg Beard in 2010 from Riverstone, a New York-based private equity firm that specializes in the sector.

RBC Capital Markets and JPMorgan Chase & Co. advised Apollo. Tudor, Pickering, Holt & Co. also worked with the buyers.

Separately, Barclays and Evercore may each get $15 million in fees for advising Kinder Morgan on its purchase of El Paso, according to a regulatory filing, the largest deal announced last year.

El Paso’s board agreed to a $650 million termination fee if its acquisition by Kinder Morgan is not completed. Kinder Morgan may pay a $400 million breakup fee if the sale of the oil-exploration unit fails, according to a regulatory filing.

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