BANGALORE, Sept 15 - Apollo Global Management LLC said it will buy independent oil and gas company Parallel Petroleum Corp (PLLL.O) in a cash deal worth about $483 million, including debt.
The alternative asset manager, which is run by investor Leon Black, offered $3.15 in cash for each Parallel Petroleum share, representing a premium of 11 percent to its Monday's close of $2.84 on Nasdaq.
The total deal value includes assumption of $351 million of Parallel's debt.
However, the news failed to impress industry observers.
"It's just a distressed asset sale. These guys were in a pretty tough spot," Raymond James analyst John Freeman said.
Parallel said it had considered other alternatives, including continuation as an independent company, an equity offering, sale of assets and mergers, but found Apollo's offer the best option.
Freeman said this was the best option Parallel had left due to an impending redetermination of their borrowing base.
"I don't think anybody is too happy at selling the company at three bucks that was four times that about a year ago," he said.
The deal comes at a time when oil prices have almost doubled from the lows touched earlier this year, while gas prices have almost remained flat. Parallel Petroleum is more levered towards oil and about 72 percent of its total reserves is oil.
"Even though they are getting the 11 percent premium, it is below the target price we have... I find the deal to be a little less favourable to shareholders than I would have liked," Capital One Southcoast analyst Richard Tullis said by phone.
The offer by Apollo is about 20 percent below Tullis' $4 price target on the stock.
However, Tullis said Apollo would benefit from a big increase in Parallel's production as around eight of its new wells are coming online in the Permian basin.
Apollo did not immediately return a call seeking comment.
Parallel Petroleum shares -- like many of its peers -- are down significantly from the highs hit last year as the recession strangled demand for oil and gas. The stock has traded in a range of $0.68 to $11.13 in the last one year.
According to Thomson Reuters data, Parallel's market capitalization was $105.4 million, based on 41.7 million outstanding shares as of July 30, 2009.
"Funds managed by Apollo have committed to provide $283.2 million of equity to complete the transaction," Parallel said in a statement.
As a part of the transaction, Parallel said it will offer to repurchase all $150 million of its senior notes due 2014, at 101 percent of face value.
Shares of the Midland, Texas-based company closed up 10 percent at $3.13 Tuesday on Nasdaq. They had touched a high of $3.19 earlier in the day.
The alternative asset manager, which is run by investor Leon Black, offered $3.15 in cash for each Parallel Petroleum share, representing a premium of 11 percent to its Monday's close of $2.84 on Nasdaq.
The total deal value includes assumption of $351 million of Parallel's debt.
However, the news failed to impress industry observers.
"It's just a distressed asset sale. These guys were in a pretty tough spot," Raymond James analyst John Freeman said.
Parallel said it had considered other alternatives, including continuation as an independent company, an equity offering, sale of assets and mergers, but found Apollo's offer the best option.
Freeman said this was the best option Parallel had left due to an impending redetermination of their borrowing base.
"I don't think anybody is too happy at selling the company at three bucks that was four times that about a year ago," he said.
The deal comes at a time when oil prices have almost doubled from the lows touched earlier this year, while gas prices have almost remained flat. Parallel Petroleum is more levered towards oil and about 72 percent of its total reserves is oil.
"Even though they are getting the 11 percent premium, it is below the target price we have... I find the deal to be a little less favourable to shareholders than I would have liked," Capital One Southcoast analyst Richard Tullis said by phone.
The offer by Apollo is about 20 percent below Tullis' $4 price target on the stock.
However, Tullis said Apollo would benefit from a big increase in Parallel's production as around eight of its new wells are coming online in the Permian basin.
Apollo did not immediately return a call seeking comment.
Parallel Petroleum shares -- like many of its peers -- are down significantly from the highs hit last year as the recession strangled demand for oil and gas. The stock has traded in a range of $0.68 to $11.13 in the last one year.
According to Thomson Reuters data, Parallel's market capitalization was $105.4 million, based on 41.7 million outstanding shares as of July 30, 2009.
"Funds managed by Apollo have committed to provide $283.2 million of equity to complete the transaction," Parallel said in a statement.
As a part of the transaction, Parallel said it will offer to repurchase all $150 million of its senior notes due 2014, at 101 percent of face value.
Shares of the Midland, Texas-based company closed up 10 percent at $3.13 Tuesday on Nasdaq. They had touched a high of $3.19 earlier in the day.
