Farewell Kinder Morgan, Or At Least Catch You Later (KMI, KMP, KMR)

Today was the last trading session for Kinder Morgan Inc. (KMI). The acquisition of KMI by investors including Chairman and CEO Richard D. Kinder has closed. Additional investors include co-founder Bill Morgan, board members Fayez Sarofim and Mike Morgan, affiliates of Goldman Sachs Capital Partners, American International Group, The Carlyle Group, and Riverstone Holdings LLC.

As a reminder, this merger is closing at $107.50 in cash today.  The deal comprised a total of more than $14 Billion if you count the shares held by founders, or at least well over $10 Billion if you count the shares held by outside money money managers and Joe Q. Public.  The total size of the deal after the debt and financings worked out to roughly $23 Billion.

The buyout is perhaps the largest of its kind and goes to prove a point: a Billion Dollars just isn’t quite what it used to be.  It is hard to know if upon the completion that there will be more deals of its kind, but it is hard to believe that private equity hasn’t been reviewing asset sales and takeovers galore in a world where the high energy prices are given the prevailing thought that relatively high energy prices are here to stay.

You’ll probably see some spin-offs from this, particularly as large as this investment group is.  KMI is owns the general partner interest of Kinder Morgan Energy Partners, L.P. (KMP), one of the largest public pipeline LP’s out there.

Shares of KMI are up more than 150% over the last 5-years and KMP shares are up some 66% over the corresponding time period.  The limited partner of KMP is Kinder Morgan Management, LLC (KMR) whose shares are also up more than 60% in the corresponding time period.

Jon C. Ogg
May 30, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.