M&A Deals of the Year
Introduction   Apple and partners-Nortel   Google and Motorola Mobility   Access Industries -Warner Music   Cumulus Media-Citadel   Comcast-NBC Universal   H&R Block-TaxAct   Caterpillar-Bucyrus   Ares and CPPIB-99 Cents Only Stores   Grupo Bimbo-Sara Lee baking assets   BHP Billiton-Petrohawk   Peabody Energy-Macarthur Coal   Selling off Bank of America   Dish Network-Blockbuster   Amgen-BioVex   KKR et al.-Samson Investment   Pearson-Connections Education   Alleghany-Transatlantic   Breaking up Dexia

It was as big as it was bold: the purchase of Houston oil and gas explorer Petrohawk Energy Corp. by mining giant BHP Billiton Ltd. for $15 billion. The deal was BHP's biggest ever and vaulted it into the top 10 natural gas producers worldwide. And it was the biggest gas sector deal since Exxon Mobil Corp. paid $34.9 billion for XTO Energy Inc. in 2009. "One of my predecessors used to say, 'We want to be on every aisle of the energy supermarket,' and this is an unchanged ambition," said BHP chief executive Marius Kloppers when he announced the deal.

While the 65% premium raised eyebrows, most analysts thought it was a fair price, based on Petrohawk's assets, assuming long-term oil prices of $90 per barrel and natural gas prices of $6 per thousand cubic feet equivalent. So far, the deal is smelling sweet on the oil front, with prices over $100, but not on gas, at less than $3. But Petrohawk's assets are well balanced between the two, and BHP is looking far out, as Mike Yeager, the mustachioed CEO of BHP's petroleum unit, said at an industry conference in Houston recently in what one observer called an "evangelical" speech: "We take a long-term view of how humankind will structure their lives, and natural gas, as it relates to shale, will be part of the solution."

"The Big Australian," as BHP is known, wanted Petrohawk badly. It had missed out on other deals, including its hostile $39 billion bid for Potash Corp. of Saskatchewan Inc., which the Canadian government thwarted in November 2010. It also twice failed to conclude deals with Rio Tinto Group. The energy giant was keen on expanding its position in U.S. oil and gas, after having bought Chesapeake Energy Corp.'s Fayetteville Shale gas assets for $4.75 billion in February 2011. To say BHP was a motivated buyer was an understatement.

Goldman, Sachs & Co. had been working with Petrohawk on and off for two years on potential strategic moves, from joint ventures to an outright sale. But Petrohawk CEO Floyd Wilson was known as someone who builds companies to sell them, not to parcel them out, and while various companies had come by and talked to him over the years, no one had stepped up to pay what he thought was an adequate price. In the meantime, Petrohawk sold more than $1 billion worth of noncore assets to focus on its more promising plays (including its more marginal oil and gas properties and infrastructure assets), which made it more attractive to buyers. "It was a combination of Petrohawk having a very concentrated, high-quality position and an asset portfolio that one of the largest energy companies coveted," says Greg Pipkin, the investment banker at Barclays Capital who got BHP and Petrohawk talking in early June.

So when BHP's Yeager showed up in mid-June with an offer, he got the board's attention and the ball rolling. "Petrohawk's management felt that there was a level of certainty and value in BHP's bid that was worth pursuing, and that the Petrohawk business and people could thrive at BHP," says Michael Carr, one of the Goldman investment bankers who advised Petrohawk.

According to Securities and Exchange Commission documents, Petrohawk turned down BHP's initial offer of $37.50 per share, despite a 50% premium over a 45-day period, and came back with $40. The two ended up compromising at $38.75 after two weeks of talks and due diligence. It was a friendly negotiation, and there were no other bidders. The deal was announced July 15 and closed six weeks later.

BHP may not be done yet. It was said to be among a handful of companies invited to look at Samson Investment Co., which was ultimately picked up for $7.2 billion by an investor group led by Kohlberg Kravis Roberts & Co. LP. Observers think BHP is looking at other targets as well.

Petrohawk's Wilson, meanwhile, is already onto his next thing: On Dec. 22 he led the $550 million recapitalization of RAM Energy Resources Inc., which has properties in Texas, Oklahoma and Louisiana, with his Halcon Resources LLC controlling 74% of RAM's stock.

Many were skeptical of the revolution going on in the U.S. oil and gas industry, believing that extracting oil and gas from shale was just a flash in the pan. But a lot of the plays have been proven out, and BHP is just the latest to jump in. Says Carr: "In our lifetime, I don't know how many game changers there will be, but this is certainly one of them."