The merger between Vallares Plc and Karamehmet's exploration firm Genel Energy International to form Genel Energy Plc will create a new independent oil firm valued at $4 billion.
Vallares is an investment vehicle set up by former BP Plc boss Tony Hayward, financier Nat Rothschild and banker Julian Metherell to acquire Genel, which will focus on exploration in the autonomous Kurdish region of Iraq.
The money earned from the deal and the quality of the new partners could help 67-year-old Karamehmet, one of Turkey's most powerful businessmen, improve an image dogged by controversy.
"This deal will strengthen his hand and increase his credibility," said an equity analyst at a foreign bank in Istanbul. "He is building a strong relationship with this deal, I think it's positive."
Karamehmet has a knack of picking great investment opportunities, but the Cukurova Group chairman has had less luck with partners recently.
He is embroiled in legal and boardroom struggles with his Russian and Swedish partners in Turkcell , Turkey's biggest cell network operator, that have blighted the share performance.
Having founded Turkcell in 1994, he was forced to quit as chairman last year, as partners Altimo, the telecom's arm of Russia's Alfa Group, and TeliaSonera tried to limit his influence.
He was forced to vacate the chairmanship after an Istanbul court sentenced him to almost 12 years for loans made to Cukurova by Pamukbank, the bank he had owned before it was taken over by the government in 2002 following a financial crisis that wreaked havoc in Turkey's then inadequately regulated banking sector.
In June, an appeal court overturned the ruling and referred the embezzlement case back to the lower court.
Karamehmet's Cukurova owns just 14 percent of Turkcell, though the stake carries controlling rights because of a complex management structure, and even after being ousted he was able to install Colin Williams as chairman.
TeliaSonera, which has a 37 percent stake, made an unsuccessful bid in April to remove the chairman for lack of independence, and last month the divided shareholders voted against paying a 2010 dividend, and the 2010 balance sheet and profit/loss statements have yet to be approved.
While Turkcell is appealing in a British court against a recent ruling in a Caribbean court, that gave Altimo an increased stake in the company. Turkcell expects the case to run for another year to 18 months.
Karamehmet's daughter Gulsun is on the Turkcell board and has been nominated as a non-executive director at Genel.
The disintegration earlier this year of a joint-venture with a Turkish partner, Mehmet Kazanci, to takeover energy utilities was another setback for Karamehmet.
Their MMEKA partnership last year won tenders, with bids totalling more than $8 billion, for power networks supplying electricity in Istanbul and Izmir, and a gas distribution network in Ankara.
Due to problems between the partners, MMEKA earlier this year failed to raise funds to make necessary payments, and the awards were cancelled for Istanbul and Ankara, while the competition board nixed the Izmir deal.
MODESTY BREEDS MYSTIQUE
Despite all these energy-sapping problems with partners, Karamehmet's businesses have continued to grow.
For all the controversies he is admired for his magnificent recovery from the ravages of the financial crisis a decade ago, when aside from losing Pamukbank, he was also forced to sell Yapi Kredi Bank to rival Koc Group.
The Turkish edition of Forbes magazine ranked him as the country's richest man, with an estimated worth of $4 billion, up from $2.9 billion in 2009.
"There is a perception in the market that if Karamehmet is entering a business it will make money," remarked an equity analyst at a foreign bank in Istanbul. "He knows what he's doing."
As Karamehmet's Cukurova Group and most of its affiliates are unlisted it is difficult to gauge the extent of his wealth.
The mystique around his "Midas touch" is reinforced by his own lack of public profile, and disinterest in the jet-setting lifestyles that many Turkish billionaires adopt.
"People who don't know might think he is a retired bureaucrat not one of Turkey's richest men," a journalist who works for one of the newspapers owned by Karamehmet's Cukurova told Reuters on condition of anonymity.
"For a long time even his employees did not see a photo of him."
He drives himself to work in a compact Renault Megane and lives in a modest two-story house in a gated community in a smart part of the Besiktas neighbourhood rather than a mansion on the Bosphorus that other members of the super rich call home.
Nor is he regarded as active on the political scene.
He does not belong to a new generation of Turkish businessmen who have benefitted from ties to Prime Minister Tayyip Erdogan's AK Party, though like most of the traditional big business houses, Karamehmet's has benefitted from the boom times brought by Erdogan's liberal economic policies.
The Cukurova group owns two newspapers, but they are both regarded as middle-of-the-road, politically neutral. A third paper which closed last year had towed a conservative line on nationalist and religious issues, but it had a tiny circulation.
In most Turkish homes, Cukurova is known for controlling Turkcell and bringing them entertainment and sports channels, satellite television, and internet provider Superonline.
The 87-year-old Cukurova group is a family concern, and Karamehmet represents the third generation.
With more than 152 affiliates, Cukurova has interests in finance, construction, telecom, media, transport and energy, and has foreign investments in the Middle East and several parts of the former Soviet bloc.
Born on April 1, 1944, in Mersin on Turkey's Mediterranean coast, Karamehmet was educated in Istanbul at Robert College, an exclusive high school where lessons are taught in English. From there he went to Britain's Dover College, which lists music magnate Simon Cowell among its old boys.