Kinder Morgan (KMI) to Consolidate in $71B Deal

Shares of Kinder Morgan Inc. (KMI) were trading up +5.46 or +15.12 percent to $41.58 per share in Monday's premarket, after the company announced on Sunday it would consolidate the three master limited partnerships under its control, the "Kinder Morgan family of companies" into one entity. Kinder Morgan Inc. stock closed at $36.12, up +0.75 or +2.12 percent in Friday's regular trading session.

Houston, Texas based Kinder Morgan Inc. is a North American energy company and general partner and owner of Kinder Morgan Energy Partners LP (KMP), Kinder Morgan Management LLC (KMR) and El Paso Pipeline Partners LP (EPB). Through the three limited partnerships, Kinder Morgan owns and/or operates over 82,000 miles of pipelines used to transport crude oil, natural gas and other petroleum products.
The company also owns approximately 180 terminals for the storage and handling of gasoline, coal and petroleum coke and a carbon dioxide division for oil recovery projects.

The terms of the deal will have Kinder Morgan Inc. buy all three master limited partnerships, Kinder Morgan Energy Partners LP, El Paso Pipeline Partners LP and Kinder Morgan Management LLP for a total of $71 billion. The deal is still subject to stockholder and regulatory approval and is expected to close by the end of this year. Kinder Morgan Inc. is set to pay a premium for each company and will fund the deal primarily with stock, thus allowing shareholders of the three companies to retain ownership.

In a statement following the announcement, Chief Executive Officer, Richard Kinder said that, "This combined entity will be the largest energy infrastructure company in North America and the third-largest energy company overall, with an estimated enterprise value of approximately $140 billion. Additionally, we will have a leading position in each of our business segments and operate in the rapidly growing North American energy infrastructure sector."

Kinder, who owns 24 percent of the energy empire through the parent company, will lower borrowing costs, consolidating the three M.L.P.s into one stock that can be used more easily in the acquisition of other companies. Due to recent discoveries, a new boom in North American shale drilling will open a potential $1.5 trillion in possible expansion and acquisition projects for Kinder Morgan.

In a presentation on its website, Kinder Morgan showed that potential takeover targets include over 120 energy M.L.P.s with a combined value of $875 billion. In addition, new discoveries in shale exploration and production will require approximately $640 billion in storage facilities and pipelines through 2035.

The three stocks are among the best performers in this morning's premarket, with Kinder Morgan Management LLP up +32.42 percent at $101.99 per share, Kinder Morgan Energy Partners up +25.32 percent to $100.68 per share, and El Paso Pipeline Partners LP up +31.70 percent to $44.25 per share. The market and Kinder Morgan shareholders are emphatically approving of the consolidation with all Kinder Morgan stocks making impressive gains this morning.

Other News About Kinder Morgan
Kinder Morgan to Boost Capacity of Oil Terminal Being Built in Canada
Kinder Morgan will double its capacity for rail loading crude oil in Canada.
Kinder Morgan to Expand the Edmonton Crude Oil Rail Terminal Now under Construction
Company enters into a 50-50 partnership with Imperial Oil.

Other Stocks in the News
Amazon Takes on Disney's Superheroes in Online Fight
Amazon challenges Disney for more control of online pricing.
Apple Dropped From Chinese Buy List for Missing on Pledge
Company's products dropped from Chinese government buying list for failing to submit documents.

Published on Aug 11, 2014
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2020. Content published with author's permission.

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