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Last Update: 17-Oct-11 09:06 ET
Kinder Morgan (KMI) to Purchase El Paso (EP) for $26.87/share
Kinder Morgan (KMI $26.89) and El Paso (EP $19.59) announced a definitive agreement whereby KMI will acquire all of the outstanding shares of EP in a transaction that will create the largest midstream and the fourth largest energy co in North America with an enterprise value of approx. $94 billion and 80,000 miles of pipelines. The total purchase price, including the assumption of debt outstanding at El Paso and including the debt outstanding at El Paso Pipeline Partners (EPB) is approx. $38 billion.
The consideration to be received by the EP shareholders is valued at $26.87 per EP share based on KMI's closing price as of Oct. 14, 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 Oct. 14, 2011. The offer is comprised of $14.65 in cash, 0.4187 KMI shares (valued at $11.26 per EP share) and 0.640 KMI warrants (valued at $0.96 per EP share) based on KMI's closing price on Oct. 14, 2011. The warrants will have an exercise price of $40 and a five-year term. EP shareholders will be able to elect, for each EP share held, either (i) $25.91 in cash, (ii) 0.9635 shares of KMI common stock, or (iii) $14.65 in cash plus 0.4187 shares of KMI common stock. All elections will be subject to proration and in all cases EP shareholders will receive 0.640 KMI warrants per share of EP common stock.
The transaction is expected to be immediately accretive to dividends per share at KMI, distributions per unit at KMP, dividends per share at Kinder Morgan Management (KMR) and distributions per unit at EPB. Part of these benefits will be driven by cost savings, which are expected to be ~$350 mln per year, or about 5% of the combined system's EBITDA.
The consideration to be received by the EP shareholders is valued at $26.87 per EP share based on KMI's closing price as of Oct. 14, 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 Oct. 14, 2011. The offer is comprised of $14.65 in cash, 0.4187 KMI shares (valued at $11.26 per EP share) and 0.640 KMI warrants (valued at $0.96 per EP share) based on KMI's closing price on Oct. 14, 2011. The warrants will have an exercise price of $40 and a five-year term. EP shareholders will be able to elect, for each EP share held, either (i) $25.91 in cash, (ii) 0.9635 shares of KMI common stock, or (iii) $14.65 in cash plus 0.4187 shares of KMI common stock. All elections will be subject to proration and in all cases EP shareholders will receive 0.640 KMI warrants per share of EP common stock.
The transaction is expected to be immediately accretive to dividends per share at KMI, distributions per unit at KMP, dividends per share at Kinder Morgan Management (KMR) and distributions per unit at EPB. Part of these benefits will be driven by cost savings, which are expected to be ~$350 mln per year, or about 5% of the combined system's EBITDA.
