Kinder Morgan, the giant oil pipeline company, which has proposed building a second bitumen pipeline from Alberta to Kitimat, Sunday announced it was buying El Paso Corp, America’s largest natural gas pipeline operator.
The Associated Press says the deal is worth $20.7 billion, Bloomberg says it is worth $21.1 billion.
Kinder Morgan already operates a pipeline from Alberta through British Columbia to the port of Vancouver and there are plans to expand that pipeline.
Kinder Morgan’s move comes after Enbridge also said it was interested in moving into the natural gas pipeline business. Both companies are moving to take advantage of the natural gas found in shale deposits and the growing demand for natural gas in both North America and Asia.
The takeover is the largest ever proposed of a pipeline company, surpassing the 2007 leveraged buyout of Kinder Morgan itself by a group including Richard Kinder and Goldman Sachs Group Inc. The combined company would have 67,000 miles (107,000 kilometers) of gas lines and eclipse Enterprise Products Partners LP as the biggest U.S. pipeline operator.
“This once in a lifetime transaction is a win-win opportunity for both companies,” Kinder, who will be chairman and chief executive officer of the combined company, said in the statement. He said the deal, once closed, would create immediate shareholder value because of its cash flow.
The Associated Press says
Kinder Morgan will more than double the size of its pipeline network by purchasing El Paso. The new pipeline system would stretch 80,000 miles — long enough to wind around the globe three times. Kinder Morgan’s pipelines in the Rocky Mountains, the Midwest and Texas will be woven together with El Paso’s expansive network that spreads east from the Gulf Coast to New England, and to the west through New Mexico, Arizona, Nevada and California.
“We believe that natural gas is going to play an increasingly integral role in North America,” said Richard Kinder, Kinder Morgan Inc.’s chief executive, said on Sunday when the deal was announced.
Robert McFadden, a Houston-based natural gas pipeline consultant, said the expanded network will make it easier to move natural gas from new fields that have mushroomed across the U.S. in the past few years.
The take over deal came on the same weekend that the “Occupy” movement was demonstrating around the world against the greed of financial institutions.
The investment banks advising on Kinder Morgan Inc’s $21 billion purchase of El Paso Corp are set to rake in a total of $100 million to $145 million in M&A fees, according to Freeman & Co on Sunday.
Evercore Partners and Barclays Capital , which are advising Kinder Morgan on the deal, would earn $45 million to $65 million in fees, Freeman estimates show.
Morgan Stanley and Goldman Sachs , which are on El Paso’s side, would split another $55 million to $80 million in fees, depending on the role they played, the estimates show.