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Deals to Watch: PE Wants Into Shale, Paper Wants out of Content

NEW YORK ( TheStreet) -- After completing its $3.5 billion sale of Eagle Ford drilling and production assets to Marathon Oil (MRO - Get Report) earlier in November, KKR (KKR - Get Report) is reported by Bloomberg to be considering a $7 billion takeover of privately held shale driller Samson Investment, upping previous bid rumors by $2 billion according to unnamed sources familiar with talks.

If rumors prove to be true, it would be KKR's biggest private equity deal since the financial crisis. The buyout would also be the largest private equity buyout of the year, according to data compiled by Bloomberg, topping an October $6.3 billion takeover of Kinetic Concepts (KCI) by a consortium led by Apax Partners.

For KKR, which became a Wall Street buyout legend in the 1980s for its $25 billion takeover of RJR Nabisco, it would be a further push to shale drilling. In particular. The deal puts the firm into the Bakken shale in North Dakota and Marcellus shale in Pennsylvania. Its previous Hilcorp investment focused on oil and gas shale in 141 acres of the Eagle Ford in East Texas.

In 2009, KKR cut its first shale deal, investing $350 million in East Resources to get a foothold in the Marcellus shale. Eleven months later, KKR sold the investment in shale assets stretching from New York to West Virginia for $4.7 billion to Royal Dutch Shell (RDS), making it one of its most lucrative post-crisis investments.

According Bloomberg reports of Samson and KKR sale talks, the deal won't include its Gulf of Mexico operations. Itochu of Japan, Crestview Partners and NGP Energy Capital Management will join KKR in a Samson bid, according to separate reports from Reuters, citing unnamed sources. KKR is expected to take a 60% holding in Samson, while Itochu set to take a 25% stake, the sources said.

Founded in 1971 by Charles Schusterman, privately held Samson is headquartered in Tulsa, Okla., and has 1,200 employees that manage its oil and gas operations, which require in excess of $1 billion in annual capital expenditure, according to its Web site. The company derives 70% of its revenue from gas drilling and 30% from oil liquids, and has spent $4 billion in oil and gas asset acquisitions in recent years.

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