Kinder Morgan to join its units

Kinder Morgan, Kinder Morgan Energy Partners, Kinder Morgan Management and El Paso Pipeline Partners announced that KMI will acquire all of the outstanding equity securities of KMP, KMR and EPB in a deal valued at $70 billion.

“All shareholders and unitholders of the Kinder Morgan family of companies will benefit as a result of this combination,” said Chairman and CEO Richard D. Kinder. “Everyone will hold a single, publicly traded security – KMI – which will have a projected dividend of $2.00 in 2015, a 16 percent increase over the anticipated 2014 dividend of $1.72. We expect to grow the dividend by approximately 10 percent each year from 2015 through 2020, with excess coverage anticipated to be greater than $2 billion over that same period. 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.”

KMI has reviewed the proposed transaction with the rating agencies and expects the combined entity will be investment grade. The Kinder Morgan companies will put in place cross guarantees among and between the Kinder Morgan entities (with limited exceptions) to be effective on closing of the transaction in order to create a single creditor class and eliminate the structural subordination.

“This transaction dramatically simplifies the Kinder Morgan story, by transitioning from four separately traded equity securities today to one security going forward, and by eliminating the incentive distribution rights and structural subordination of debt,” Kinder said. “Further, we believe that KMI will be a valuable acquisition currency and have a significantly lower hurdle for accretive investments in new energy infrastructure. In the opportunity-rich environment of today’s energy infrastructure sector, we believe this transaction gives us the ability to grow KMI for years to come.” The transaction also provides significant tax benefits for KMI shareholders from depreciation deductions associated with the upfront purchase and future capital expenditures.

The transaction is expected to close by the end of 2014.

Press Release, August 11, 2014; Image: Kinder Morgan