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Kinder Morgan Group of Companies to Come Under One Roof - Analyst Blog

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Kinder Morgan Inc. ( KMI ) announced that the company will purchase all the outstanding equity securities of Kinder Morgan Energy Partners, L.P. ( KMP ), Kinder Morgan Management, LLC ( KMR ) and El Paso Pipeline Partners, L.P ( EPB ). The transaction is expected to close by end of 2014.

Per the agreement, KMP unitholders will be entitled to 2.1931 KMI shares and $10.77 in cash for each KMP unit. This is equivalent to a price of $89.98 per unit, a 12% premium based on the Aug 8, 2014 closing price. Also, this is a premium of 11.4% based on the closing price of Jul 16, used as the reference date by the parties during the negotiation of the transaction.

KMR shareholders will get 2.4849 KMI shares for each share of KMR. This results in a price of $89.75 per share, a 16.5% premium based on the closing prices as on Aug 8. This is a premium of 16% based on the Jul 16 reference date used by the parties for negotiating consideration for KMR shares and KMP units.

EPB unitholders will receive 0.9451 KMI shares and $4.65 in cash for each EPB unit. This corresponds to a price of $38.79 per unit, a 15.4% premium based on the closing prices as of Aug 8. This is a premium of 11.2% based on the Jul 16 reference date used by the parties in the negotiation.

Unitholders of both KMP and EPB will be able to elect cash or KMI stock consideration subject to proration. The cash portion of the transaction has secured committed financing by KMI.

Further, the acquisition will simplify the structure of Kinder Morgan group of companies, benefiting all shareholders and unitholders. Kinder Morgan is projected to return a dividend of $2.00 in 2015, up 16% from the estimated figure of $1.72 in 2014. Management expects the dividend to increase by about 10% each year from 2015 through 2020. Over the same period, excess coverage is anticipated to exceed $2 billion.

The combined entity, once operational, will represent the largest energy infrastructure company in North America and the third-largest energy company overall. The new company is estimated to have an enterprise value of about $140 billion.

The transaction provides KMI shareholders with significant tax benefits from the depreciation deductions related to the upfront purchase and future capital expenditures.

Additionally, the company will sport a leading position in each of its business segments, operating in the swiftly growing North American energy infrastructure sector.

Kinder Morgan currently carries a Zacks Rank #3 (Hold).

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KINDER MORG ENG (KMP): Free Stock Analysis Report

EL PASO PIPELIN (EPB): Free Stock Analysis Report

KINDER MORGAN (KMI): Free Stock Analysis Report

KINDER MORG MGT (KMR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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