Kinder Morgan, Inc. and El Paso Corporation announced a definitive agreement whereby KMI will acquire all of the outstanding shares of EP. This transaction will create the largest midstream and the fourth largest energy company in North America with an enterprise value of approximately USD 94 billion and 80,000mi of pipelines. The total purchase price, including the assumption of debt outstanding at El Paso Corporation and including the debt outstanding at El Paso Pipeline Partners, L.P. is around USD 38 billion. The combined enterprise, which includes the associated master limited partnerships, Kinder Morgan Energy Partners, L.P. and EPB, will represent the biggest natural gas pipeline network in the United States, the biggest independent transporter of petroleum products in the United States, the biggest transporter of CO2 in the United States and the biggest independent terminal owner/operator in the United States. This transaction is beneficial for both companies as the El Paso assets are primarily regulated interstate natural gas pipelines that generate significant, stable cash flow and have access to major supply regions and key consuming markets. The natural gas pipeline systems of both companies are very complementary, as they mainly serve different supply sources and markets in the United States. The consideration to be received by the EP shareholders is valued at USD 26.87 per EP share based on KMI’s closing price as of 14 Oct 2011, representing a 47% premium to the 20 day average closing price of EP common shares and a 37% premium over the closing price of EP common shares on 14 Oct 2011. The offer is made up of USD 14.65 in cash, 0.4187 KMI shares (valued at USD 11.26 per EP share) and 0.640 KMI warrants (valued at USD 0.96 per EP share) based on KMI’s closing price on 14 Oct 2011. Upon closing, KMI shareholders can expect to own approximately 68% of the combined company while EP shareholders are expected to own the remaining 32%.
