By Mike Lee - Oct 17, 2011 3:20 AM GMT+0700
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Storage tanks at the El Paso Corp. liquified natural gas Elba Island terminal near Savannah, Georgia. Photographer: Stephen Morton/Bloomberg
El Paso Corp. headquarters in Houston, Texas. Photographer: Brett Coomer/Bloomberg
Kinder Morgan Chief Executive Officer Richard Kinder. Source: Kinder Morgan Inc. via Bloomberg
Kinder Morgan Inc. agreed to buy El Paso Corp. (EP) for about $21.1 billion in cash and stock, creating the largest U.S. natural-gas pipeline network in the energy industry’s biggest transaction in more than a year.
The offer is valued at $26.87 per El Paso share, or 37 percent more than their Oct. 14 closing price, Houston-based Kinder Morgan said in a statement today. The offer is comprised of $14.65 in cash, 0.4187 shares of Kinder Morgan, and 0.64 Kinder Morgan warrants, the statement said.
The takeover is the largest ever proposed of a pipeline company, surpassing the 2007 leveraged buyout of Kinder Morgan itself by a group including Richard Kinder and Goldman Sachs Group Inc. The combined company would have 67,000 miles (107,000 kilometers) of gas lines and eclipse Enterprise Products Partners LP as the biggest U.S. pipeline operator.
“This once in a lifetime transaction is a win-win opportunity for both companies,” Kinder, who will be chairman and chief executive officer of the combined company, said in the statement. He said the deal, once closed, would create immediate shareholder value because of its cash flow.
The total value including assumed debt from El Paso is $37.8 billion, Kinder Morgan said in a document prepared for investors. The acquisition is the ninth-largest ever proposed in the energy industry and the biggest in more than a year, according to data compiled by Bloomberg.
Kinder Morgan intends to sell the exploration and production assets of El Paso, the statement said. El Paso had announced in May that it would spin off the unit to its shareholders. The combination will save about $350 million a year, the statement said.
2012 Closing
Kinder Morgan and Houston-based El Paso said they expect the transaction to close in the second quarter of 2012, creating the fourth-largest energy company in North America. Enterprise Products has about 50,000 miles of pipeline.
Evercore Partners Inc. and Barclays Plc served as financial advisers for Kinder Morgan; Weil Gotshal & Manges LLP and Bracewell & Giuliani LLP acted as legal advisers.
Morgan Stanley acted as financial adviser for El Paso; Goldman Sachs Group Inc. was advising El Paso on its previous spinoff. Wachtell, Lipton, Rosen & Katz was El Paso’s legal adviser.
To contact the reporter on this story: Mike Lee in Dallas at mlee326@bloomberg.net
To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net
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