Kinder Morgan Inc. reached an agreement to acquire El Paso Corp. for $38 billion for a combination of cash and stock. The agreement will create the largest midstream company and the fourth largest energy company in North America with a total value of $94 billion.
With some 80,000 miles of pipeline, the company will have the largest natural gas pipeline network, be the largest independent transporter of petroleum products and CO2, and be the largest independent terminal owner and operator in the nation.
"This once in a lifetime transaction is a win-win opportunity for both companies," Kinder Morgan chair and chief executive Richard D. Kinder said in a public statement.
"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 U. S. The transaction is expected to produce immediate shareholder value (upon closing) through strong cash flow accretion and offers significant future growth opportunities."
El Paso shareholders will receive $26.87 share, a 37% premium to its closing price on October 14. The offer is comprised of $14.65 in cash, 0.4187 Kinder Morgan shares and 0.640 Kinder Morgan warrants based on Kinder Morgan's closing price on October 14, 2011. Upon closing, Kinder Morgan shareholders are expected to own about 68% of the combined company and El Paso shareholders are expected to own the remaining 32%.
"El Paso's board and management have been highly focused on delivering value for our shareholders, and we believe that our agreement with Kinder Morgan will provide even greater value for our shareholders than we expected through the planned spin-off of our exploration and production business," Doug Foshee, chair, president and chief executive of El Paso, said in the public statement. "We are very pleased to become a significant part of this combined enterprise and offer our shareholders the opportunity to participate in what we believe will be North America's preeminent infrastructure company."
Upon closing, which is expected in second- quarter 2012, El Paso will be operated as a subsidiary of Kinder Morgan.
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