Kinder Morgan to Take Over El Paso for $38 Billion (EP)(EPB)(KMI)

Kinder Morgan (NYSE: KMI) and El Paso (NYSE: EP) released an agreement for Kinder to acquire the outstanding shares of El Paso in a deal that will create the fourth largest energy company in North America. It will have 80,000 miles of pipelines. The total purchase price, which includes all debt at El Paso and the debt outstanding at El Paso Pipeline Partners (NYSE: EPB) is about $38 billion.

“This once in a lifetime transaction is a win-win opportunity for both companies,” said Kinder Morgan Chairman and CEO Richard D. Kinder. “The El Paso assets are primarily regulated interstate natural gas pipelines that produce substantial, stable cash flow and have access to key supply regions and major consuming markets. The natural gas pipeline systems of the two companies are very complementary, as they primarily serve different supply sources and markets in the United States. The transaction is expected to produce immediate shareholder value (upon closing) through strong cash flow accretion and offers significant future growth opportunities.”

The prices is a 47% premium over El Paso’s 20-day average trading price.

Douglas A. McIntyre