Apollo Looking For Quick Flip Of EP Energy As Energy IPO Flood Appears Imminent
EP Energy, the oil company bought by a consortium of private equity firms led by Apollo Global Management (NYSE: APO) less than a year ago could already be set to go public again.
Sources close to Reuters claim that Apollo could look to cash in on high equity valuations after reporting a 20 percent gain on the investment as of March.
E.P. Energy, the former exploration and production arm of El Paso Corp., was acquired by a consortium of private equity firms led by Apollo back in May 2012. The deal took place after Kinder Morgan (NYSE: KMI) acquired El Paso in 2012 for $21 billion. However, Kinder Morgan only wanted El Paso's pipeline assets and spun off the E&P assets to the private equity firms.
Apollo invested $809 million into the deal and already valued the investment at $971 million as of March, implying an unrealized gain of just over 20 percent over a period of 10 months. Further, EP Energy earlier this month reached three separate deals to sell $1.3 billion in assets to raise cash. Thus, demand for oil assets is strong and the PE firms could be looking to cash out in a strong market.
Strong Year For IPO's
Since the financial crisis, private equity firms have struggled to take companies public as prices were not high enough for these companies to realize profits. However, 2013 has seen a flood of private equity-backed IPO's, including Apollo finishing or filing for eight deals.
So far this year, Apollo has successfully sold off stakes in Norwegian Cruise Line Holdings (NASDAQ: NCLH) and real estate services provider Realogy (NYSE: RLGY). Apollo has been taking advantage of the strong equity markets of the first few months of 2013 by exiting from legacy positions and raising cash to return to shareholders and close out funds that may have underperformed post-crisis.
Oil IPO Pipeline
EP Energy would be just one of several companies to enter the pipeline of energy IPO's for this year. Already, another Apollo-backed oil company Athlon Energy filed for a $345 million IPO earlier in June.
Meanwhile, Antero Resources Corp, an oil and natural gas company controlled by another private equity firm, Warburg Pincus LLC, also unveiled plans for a $1 billion IPO this month.
Apollo shares gained 4.37 percent Tuesday to $22.71 per share.
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