Apollo Global Management LLC,River Stone Holdings LLC +Other Investors Acquiring EP Energy in 2012

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Merger and Acquisition Assignment
On
Submitted to –Prof. Shiv Nath Sinha
Submitted by –Shubham Gupta
Roll no. -2015304
Section-DEF

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Case of Leverage Buyout
1. What is the Deal between EP Energy global LLC and Apollo Global management LLC,
River stone Holdings LLC and other investor and Co-investor?
EP Energy Global LLC has an asset base that allows it to transition from gas to oil and liquids
which will drive value over time. On May 24, 2012, affiliates of Apollo Global Management
LLC (together with its subsidiaries, Apollo), River stone Holdings LLC (River stone), Access
Industries (Access) and Korea National Oil Corporation (KNOC) (collectively, the Sponsors)
and other co-investors acquired the predecessor entity to EP Energy for approximately $7.2
billion in cash as contemplated by a merger agreement among El Paso Corporation (El Paso)
and Kinder Morgan, Inc. (KMI).
2. Why did the deal happen?
Attractive deal because of EP energy’s acreage in the Niobrara field in Colorado and the Eagle
Ford and Wolf camp fields in Texas, which produce more profitable oil and natural gas liquids
such as propane and butane. Other rationale is:-
a) Need for Reserves
b) Need to develop the field
c) Geographic diversification
d) Acquiring the Know –How
e) Taxes and regulation
3. Who is the Target Company?
El Paso Corporation was spinning off EP Energy, its exploration and production business,
as part of a $21bn acquisition by Kinder Morgan.
EP ENERGY GLOBAL LLC- is based in North America and is in Energy sector (Industry-Oil,
Gas and Coal).The focus is on Extraction, transmission, drilling, developing and exploration of
natural gas reserves in the United States, Brazil and Egypt. Their low-risk drilling inventory

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located predominantly in four areas: the Eagle Ford Shale (South Texas), the Wolf camp Shale
(Permian Basin in West Texas), the Altamont Field in the Uinta Basin (Northeastern Utah) and
the Haynesville Shale (North Louisiana).

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EP Energy’s sector
4. Who all are the acquirer companies?
i. Apollo Global Management, LLC is an American private equity firm, founded in 1990
by former Drexel Burnham Lambert banker Leon Black. The firm specializes
in leveraged buyout transactions and purchases of distressed
securities involving corporate restructuring, special situations, and industry
consolidations. Apollo is headquartered in New York City.
Apollo had assets under management of approximately $105 billion in private equity,
credit oriented capital markets and real estate funds invested across a core group of nine
industries where Apollo has considerable knowledge and resources. Apollo's team of
more than 200 seasoned investment professionals possesses a broad range of
transactional, financial, managerial and investment skills, which has enabled the firm to
deliver strong long-term investment performance throughout expansionary and
recessionary economic cycles.
ii. River stone Holdings LLC ("River stone"), founded in 2000, is an energy and power
focused private equity firm with over $22 billion of equity capital raised across seven
investment funds and coin vestments, including the world's largest renewable energy
fund. The firm focuses on oil and gas exploration, midstream pipeline, electric
generation, energy and power services as well as energy and power technology and also
invests in renewable energy infrastructure and technology.
iii. Korea National Oil Corporation (KNOC) was incorporated in 1979 to engage in the
development of oil fields, distribution of crude oil, maintenance of petroleum reserve

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stock and improvement of the petroleum distribution structure under the Korea National
Oil Corporation Act. KNOC is wholly owned by the Korean government and located in
Anyang, Gyeonggido in Korea. KNOC also has nine petroleum stockpile offices, one
domestic gas field management office, 13 overseas offices in Vietnam and other
countries and numerous overseas subsidiaries and affiliates in the United States and other
countries. The company has oil reserves of around 600 million barrels
(95,000,000 m3
) and gas reserves of 10 billion m3
.
iv. Access Industries, Inc. Is an industrial conglomerate that operates in natural resources
and chemicals, media and telecommunications, technology and e-commerce, and real
estate sectors worldwide its headquarters is in New York City. It manufactures cement
and paper products; provides logistics services; retails fashion products; develops drugs;
produces domestic oil and natural gas, as well as polymers, petrochemicals, and fuels;
operates conversion refineries; produces aluminum; engages in the production, financing,
sale, and distribution of films; provides mobile broadband Internet access, VoIP
telephony, and machine-to-machine solutions for consumers and businesses; and
produces television series.
v. Other Unnamed co-investors participated in the Acquisition
Other deals in Energy sector-Please refer to attached the excel sheet

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Exchange Offer consisted of exchange up to $750,000,000 aggregate principal amount of EP
Energy senior secured exchange notes# through group of underwriters led by JP Morgan, up to
$2,000,000,000 (loan)aggregate principal amount of our senior 2020 exchange notes and up to
$350,000,000(bond) aggregate principal amount of our senior 2022 exchange notes for a like
aggregate principal amount of EP Energy initial senior secured notes, initial 2020 senior notes
and initial 2022 senior notes, respectively.
In order to exchange your initial notes, you must properly tender them and we must accept your
Tender. We will exchange all outstanding initial notes that are validly tendered and not validly
Withdrawn. Initial notes may be exchanged only in denominations of $2,000 and integral
Multiples of $1,000 in excess thereof.
#senior notes are debt securities, or bonds, that take precedence over other unsecured notes in
the event of bankruptcy. Senior notes must be paid first if assets are available in the event of a
company liquidation. A senior note pays a lower coupon rate of interest compared to junior
unsecured bonds, since the senior debt has a higher level of security and a reduced risk
of default. Some senior notes are convertible into shares of the issuer's common stock. The
investor can choose to hold the senior note until maturity or convert the note into a specific
number of common stock shares.

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Interest Rate
Interest on the senior secured exchange notes will accrue from April 24, 2012 at a rate of 6.875%
Per annum and will be payable in cash.
Denominations
Minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof; Provided
That notes may be issued in denominations of less than $2,000 solely to accommodate book
entry Positions that have been created by a DTC participant in denominations of less than
$2,000.
Corporate structure
1. EPE Holdings LLC has made a nonrecourse pledge of the equity of the Issuer to secure
the RBL Facility.
2. As of September 1, 2012, $350 million was drawn and outstanding under the RBL
Facility and EP energy borrowings are limited to $1,913 million due to borrowing base
restrictions under the agreement.

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3. All wholly owned material domestic subsidiaries of the Issuer guarantee and pledge
certain assets under the RBL* Facility, our senior secured term loan and the senior
secured notes. These subsidiaries also guarantee the senior notes on a senior unsecured
basis.
4. As of June 30 2012, on a pro forma basis after giving effect to the Refinancing
Transactions, non-wholly owned subsidiaries, foreign subsidiaries and other subsidiaries
of the Issuer that do not guarantee the notes hold approximately 2% of our consolidated
assets and had no outstanding indebtedness, excluding intercompany obligations. During
the six months ended June 30, 2012, on a pro forma basis after giving effect to
Refinancing Transactions, these non -guarantor subsidiaries generated approximately 5%
of our total revenue and 2% of our Adjusted EBITDAX.
5. Includes our foreign operations in Brazil.
*Reserve based lending (RBL) is a type of financing where a loan is secured by the
undeveloped reserves of oil and gas of a borrower. The facility is repaid using the proceeds that
derive from sales in the field or portfolio of fields in production.
In 2014-EP Energy raised $704 million in its IPO, by pricing 35.2 million shares at $20 per
share (below $23-$27 per share range). It is traded on the NYSE under ticker symbol EPE, while
Credit Suisse and J.P. Morgan serve as lead underwriters.
In 2015-Apollo’s investment in oil producer EP Energy Corp. rose by $9 million, or 3.2 percent,
after plummeting by 66 percent in last year’s second half.
In 2016-A buyout group’s stake in EP Energy Corp is down more than $4 billion as the Houston
energy producer’s shares have fallen 87%. The group led by Apollo Global
Management and River stone Holdings hedged nearly all of EP’s output this year and last to

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ensure enough revenue to cover interest payments on the company’s $4.9 billion of debt, most of
which was taken on to fund the buyout.
Future Prediction-Moody’s Investors Service last week downgraded- EP deeper into junk
territory, citing an “expectation that its cash flow metrics will deteriorate substantially in 2017”
when only about a quarter of its expected output has been pre-sold at above-market prices. EP’s
annual interest expenses are about $330 million, which added $8.54 to the cost of every barrel of
oil it produced in the third quarter, Moody’s said.
The Acquisition was financed with the following:
• A cash equity investment by the Sponsors* and their co-investors in Parent of
approximately $3,300 million;
• The net proceeds from the incurrence by the Issuers of $750 million of the initial senior
secured notes;
• The net proceeds from the incurrence by the Issuers of $2,000 million of the initial 2020
senior notes;
• borrowing of $750 million by the Issuer under its new $750 million senior secured term
loan facility; And
• Borrowings of $750 million by the Issuer under its new $2,000 million senior secured
reserve based revolving credit facility.
*Sponsors" means (i) affiliates of each of Apollo Global Management, LLC, Access Industries,
Inc. and River stone Holdings, L.P. and (ii) any Person that forms a group (within the meaning of
Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act, or any successor provision) with the Equity Investor; Provided that the Equity
Investor (x) owns a majority of the voting power and (y) controls a majority of the Board of
Directors of Holdings.

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The Refinancing Transactions- collectively refer to the offering of the initial 2022 senior notes
and the reprising of the senior secured term loan
7.750% Senior Notes due 2022
On August 13, 2012, the Issuers issued $350.0 million aggregate principal amount of 7.750%
senior notes due 2022 (the "initial 2022 senior notes") through a private placement. We used the
proceeds of the notes to repay a portion of our borrowings under the RBL Facility.
Term Loan Reprising
On August 21, 2012, we completed a reprising amendment of our senior secured term loan that
reduced the LIBOR floor to 1.00% and the applicable margin applicable to the loans to 4.00%. In
connection with the reprising amendment, EP energy the lenders a fee equal to1.00% of the
principal amount of the loans affected by such amendment.
RBL Facility Amendment
On August 17, 2012, EP energy requisite lenders' consent and amended the RBL Facility to
increase the general lien basket by $350 million in order to make the lien capacity thereunder
consistent with the lien capacity under the notes and their other indebtedness, including the
senior secured term loan.
Sale of Egypt, Gulf of Mexico and Indiana Assets
In June 2012, EP energy completed the sale of our Egyptian operations, which were comprised
of 774,000 net acres of nonproducing properties, for approximately $22 million in proceeds,
representing an exit of our Egyptian exploration activities. In July 2012, they completed the sale
of their Gulf of Mexico assets for approximately $79 million in proceeds, (a gross sales price of
$103 million, less $24 million of purchase price adjustments.) In addition, in July 2012, they sold
their Indiana assets for approximately $6 million in proceeds.
EP energy got listed in 2014 and on the basis of its annual report audited by Ernst and Young
LLP following ratio is calculated-There was no goodwill associated with the transaction

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Before the merger EP energy’s Comprehensive income-
Graph showing the net gain/loss from 2009 till 2011.Merger happened in 2012
2011 2010 2009
Net Gain/loss $269 $450 -1170
($1,400)
($1,200)
($1,000)
($800)
($600)
($400)
($200)
$0
$200
$400
$600
Net Gain/loss (in millions dollars)

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The Quarterly net income of EP Energy after the merger in 2012
PE ratio of EP energy after being listed

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Reference-
1. http://www.investopedia.com/
2. www.fortune.com
3. www.epenergy.com
4. www.bloomberg.com
5. http://www.efinancialnews.com/
6. www.nasdaq.com
7. www.reuters.com