(Adds details on deal, concerns about MLPs, background)
Aug 10 Top U.S. pipeline company Kinder Morgan
Inc said on Sunday it will put all its publicly traded
units under one roof in a $70 billion deal that responds to
investor concerns about its growth prospects and complicated
The oil and gas pipeline company said it would shed the
tax-advantaged legal structure it had popularized during the
U.S. shale boom, the Master Limited Partnership (MLP), and fold
its units into one company with a market capitalization of $92
billion organized as a C-corporation.
The affected units include Kinder Morgan Energy Partners LP
, Kinder Morgan Management, and El Paso Pipeline
Chairman and Chief Executive Officer Rich Kinder had been
under pressure from investors and last month on Kinder Morgan
Partners' second-quarter earnings call said combinations of the
Kinder companies were being evaluated.
A source familiar with the deal said Kinder Morgan's overall
valuation had suffered because it traded as four entities and
the market struggled to understand it.
The MLP structure also required the units to hand over much
their cash to general partners, hurting its ability to make
acquisitions that will now be easier to carry out, the source
More broadly, MLPs have been coming under greater scrutiny.
The Internal Revenue Service this year halted approvals for new
ones that strayed from the traditional pipeline model, while
some investors have said their weak corporate governance
standards expose minority investors to added risks.
The company expects the deal to close by the end of the
"This combined entity will be the largest energy
infrastructure company in North America and the third largest
energy company overall," CEO Kinder said in a statement.
In a July note to clients, analysts at Houston-based
investment bank Tudor, Pickering Holt said the Kinder companies
had underperformed for the last two years, held back by a
"stubbornly high cost of capital" even though since 2012 about
$40 billion in deals were struck that were intended to
An email sent to clients of independent research firm
Hedgeye Risk Management last year called Kinder Morgan and its
associated companies "a house of cards."
Barclays and Citi acted as financial advisors to KMI,
Barclays is providing committed financing for the transaction,
and Weil Gotshal & Manges and Bracewell & Giuliani acted as
legal counsel to KMI, according to the statement.
Jefferies acted as financial advisor to KMP and KMR and
Baker Botts acted as legal counsel to KMP and KMR. Tudor,
Pickering, Holt & Co acted as financial advisor to EPB and
Vinson & Elkins acted as legal counsel to EPB.
(Reporting by Mike Stone, Liana B. Baker and Luciana Lopez in
New York, and Anna Driver and Terry Wade in Houston; Editing by