Merrill Lynch & Co. agreed to buy Petrie Parkman & Co., the Denver-based investment bank headed by former oil analyst Thomas A. Petrie, to win more assignments advising energy companies on mergers.
Terms weren’t disclosed in a statement Merrill released today announcing the transaction. A month ago, closely held Petrie Parkman said it planned to sell as much as $115 million of its shares in an initial public offering.
Petrie co-founded the firm in 1989 after leaving First Boston Corp., where he was the No. 1 oil analyst for eight consecutive years in Institutional Investor’s annual survey. The purchase may help Merrill close a gap with rivals including Goldman Sachs Group Inc. in advising energy companies, where higher oil and gas prices have led to a 55 percent increase in the value of announced mergers this year.
“Merrill is trying to build out its product lines in a very rational manner,” said Steve Roukis, managing director at New York-based Matrix Asset Advisors, which owned about 530,000 Merrill shares as of June 30. “Energy is a big sector, and there’s big money there.” Petrie, 61, is a graduate of the U.S. Military Academy at West Point and served as an Army captain in Germany and Vietnam. He owns 38 percent of the company and earned $14 million in compensation last year, according to the SEC filing.
Petrie will join Merrill as a vice chairman and become a member of the executive client coverage group, a cadre of senior officials who call on the firm’s most important clients.
Merrill is “buying relationships and that’s the key to Petrie,” Matrix’s Roukis said. Petrie didn’t immediately return a message left at his office in Denver.
Petrie Parkman advised Western Gas Resources Inc. on its $4.7 billion purchase by Anadarko Petroleum Corp. this year and helped Pacific Energy Partners LP arrange its pending $2 billion acquisition by Plains All American Pipeline LP.
Goldman Sachs is the No. 1 adviser on energy mergers announced this year, with a 30 percent market share, according to Bloomberg data. Petrie Parkman was 11th, with a 6.8 percent share, and Merrill was 13th with 3.5 percent. Combined, Merrill and Petrie Parkman would have ranked eighth.
Merrill is the fifth-biggest adviser of all announced mergers this year, with a 22 percent market share.
The purchase may complement Merrill’s Houston-based energy- trading business, which it bought for $800 million in November 2004 from Entergy-Koch LP. Petrie Parkman’s investment-banking clients will benefit from the “seamless ability to effectively mitigate commodity price and other risks,” Merrill said today.
Petrie Parkman’s team of stock analysts also will join the firm, Merrill said.
Petrie Parkman employs more than 50 people in Houston, Denver and London. It earned $4.2 million in 2005, a 33 percent increase from the previous year, according to the Sept. 13 regulatory filing that disclosed plans for the IPO.
The firm said then that it wanted to raise capital to expand and “permit the realization over time of equity value by our principal owners.” Co-founder and former President James E. Parkman, another First Boston alumnus, owns 29 percent of Petrie Parkman. He earned $9.37 million last year. Parkman, 56, agreed to leave the firm in June 2006. He remains on the board of directors, according to the SEC filing.
Merrill’s stock price climbed $1.09 to $85.27 as of 10:42 p.m. Rocky Mountain time in New York Stock Exchange composite trading. The shares have gained about 26 percent this year.
Keefe Bruyette & Woods Inc., which had been tapped by Petrie Parkman to underwrite the IPO, advised the firm in its negotiations with Merrill Lynch, according to today’s statement.
Merrill’s acquisition is scheduled to close in the fourth quarter, the statement said. The firm is a passive minority investor in Bloomberg LP, the parent of Bloomberg News.
