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Dividends#1
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Self directed individual investor. I surpassed my own goals and expectations. I have been investing in the stock market since 1992. I used to day trade. Then I swing traded. Now I invest in dividend stocks with the focus on having the income significantly exceed our needed expenses. I started... More
  • Kinder Family Consolidation, Please Post Your Informed Comments.  15 comments
    Aug 10, 2014 9:08 PM | about stocks: KMR, KMP, KMI, EPB

    Kinder Morgan, Inc. to Purchase KMP, KMR and EPB; 2015 KMI Dividend to Increase to $2 per Share
    • KMI expects 10% annual growth in dividend 2015-2020 with significant excess coverage
    • Combination eliminates Incentive Distribution Rights
    • Approximately $70 billion total transaction value
    • Investment grade rating expected
    • Closing anticipated by year end

    HOUSTON--(BUSINESS WIRE)--Aug. 10, 2014-- Kinder Morgan, Inc. (NYSE: KMI), Kinder Morgan Energy Partners, L.P. (NYSE: KMP), Kinder Morgan Management, LLC (NYSE: KMR) and El Paso Pipeline Partners, L.P. (NYSE: EPB) today announced that KMI will acquire all of the outstanding equity securities of KMP, KMR and EPB.

    • KMP unitholders will receive 2.1931 KMI shares and $10.77 in cash for each KMP unit. This results in a price of $89.98 per unit, a 12 percent premium based on the Aug. 8, 2014, closing prices. This is a premium of 11.4 percent based on the July 16 closing price reference date used by the parties during the negotiation of the transaction.
    • KMR shareholders will receive 2.4849 KMI shares for each share of KMR. This results in a price of $89.75 per share, a 16.5 percent premium based on the Aug. 8, 2014, closing prices. This is a premium of 16 percent based on the July 16 reference date used by the parties in the negotiation. The parties negotiated consideration for KMR shares equal to the consideration for KMP units, using the July 16 reference date.
    • EPB unitholders will receive .9451 KMI shares and $4.65 in cash for each EPB unit. This results in a price of $38.79 per unit, a 15.4 percent premium based on the Aug. 8, 2014, closing prices. This is a premium of 11.2 percent based on the July 16 reference date used by the parties in the negotiation.
    • Both KMP and EPB unitholders will be able to elect cash or KMI stock consideration subject to proration.

    KMI has secured committed financing for the cash portion of the transaction.

    "All shareholders and unitholders of the Kinder Morgan family of companies will benefit as a result of this combination," said Chairman and CEO Richard D. Kinder. "Everyone will hold a single, publicly traded security - KMI - which will have a projected dividend of $2.00 in 2015, a 16 percent increase over the anticipated 2014 dividend of $1.72. We expect to grow the dividend by approximately 10 percent each year from 2015 through 2020, with excess coverage anticipated to be greater than $2 billion over that same period. This combined entity will be the largest energy infrastructure company in North America and the third largest energy company overall with an estimated enterprise value of approximately $140 billion. Additionally, we will have a leading position in each of our business segments and operate in the rapidly growing North American energy infrastructure sector."

    KMI has reviewed the proposed transaction with the rating agencies and expects the combined entity will be investment grade. The Kinder Morgan companies will put in place cross guarantees among and between the Kinder Morgan entities (with limited exceptions) to be effective on closing of the transaction in order to create a single creditor class and eliminate the structural subordination.

    "This transaction dramatically simplifies the Kinder Morgan story, by transitioning from four separately traded equity securities today to one security going forward, and by eliminating the incentive distribution rights and structural subordination of debt," Kinder said. "Further, we believe that KMI will be a valuable acquisition currency and have a significantly lower hurdle for accretive investments in new energy infrastructure. In the opportunity-rich environment of today's energy infrastructure sector, we believe this transaction gives us the ability to grow KMI for years to come." The transaction also provides significant tax benefits for KMI shareholders from depreciation deductions associated with the upfront purchase and future capital expenditures.

    KMP, KMR and EPB were represented in the negotiations by committees comprised exclusively of the independent members of the boards of the respective entities. The boards of all the Kinder Morgan companies have voted to recommend the transaction to their respective unitholders and shareholders. Each transaction is conditioned on the closing of the other transactions. Following unitholders and shareholder votes and standard regulatory notifications and approvals, the transaction is expected to close by the end of 2014. More information on the transaction, including the investor presentation, may be found in the Investor section of the Kinder Morgan website at www.kindermorgan.com.

    Block & Leviton LLP Investigates Kinder Morgan Energy Partners, El Paso Pipeline Partners LP and Kinder Morgan Management LLC for Possible Breaches of Fiduciary Duty in Connection with Their Proposed Acquisition by Kinder Morgan Inc.

    7:12 PM ET, 08/10/2014 - PR Newswire

    BOSTON, Aug. 10, 2014 /PRNewswire/ -- Block & Leviton LLP (www.blockesq.com), a Boston-based law firm representing investors nationwide, is investigating possible breaches of fiduciary duty by the Boards of Directors of Kinder Morgan Energy Partners (NYSE: KMP), El Paso Pipeline Partners LP (NYSE: EPB) and Kinder Morgan Management LLC (NYSE: KMR) (collectively the "Companies") concerning the proposed acquisition of the Companies by Kinder Morgan Inc. ("KMI") (NYSE: KMI).

    Under the terms of the proposed consolidation transactions, shareholders of the Companies will receive a mix of cash and shares of KMI, and representing premiums to investors ranging from only 12 to 16.5%, even factoring in the recent temporary drops in the stock of the Companies. These premiums are far below those received in recent similar industry transactions. The new entity's enterprise value is estimated to be approximately $140 billion, and the consolidation transactions are expected to close by the end of 2014.

    Upon the consolidation, many investors will receive a smaller distribution. Many industry experts believe that the consolidation transaction is an attempt to cover up growth difficulties of the master limited partnership structure employed by KMI.

    Block & Leviton's investigation seeks to determine, among other things, whether directors of the Companies breached their fiduciary duties by failing to maximize shareholder value in the potential acquisition and the process by which the directors considered and approved the transaction. Block & Leviton is also investigating potential aiding and abetting of fiduciary breaches by KMI.

    Disclosure: The author is long KMR.

    Stocks: KMR, KMP, KMI, EPB
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Comments (15)
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  • Qniform
    , contributor
    Comments (3602) | Send Message
     
    Quite a tax hit coming for KMP and EPB holders. I assume that KMR will be like kind and not a taxable event.
    10 Aug 2014, 09:12 PM Reply Like
  • NV_GARY
    , contributor
    Comments (4109) | Send Message
     
    Informed? Huh- not likely until Monday when Kinder speaks. This is it for now. Will be interesting to see where KMI goes.
    10 Aug 2014, 09:14 PM Reply Like
  • Qniform
    , contributor
    Comments (3602) | Send Message
     
    On the contrary. Forwarned is forearmed.

     

    http://bit.ly/1nGOAcY

     

    A look at footnote #3 on page 13 is a good place to start for any holder of KMP and EPB.
    10 Aug 2014, 09:21 PM Reply Like
  • Dividends#1
    , contributor
    Comments (3369) | Send Message
     
    Author’s reply » Hi Qniform,

     

    Thank you. This is why I posted this instablog. I am going to read it now.
    10 Aug 2014, 09:25 PM Reply Like
  • Dividends#1
    , contributor
    Comments (3369) | Send Message
     
    Author’s reply » Hi Qniform,

     

    Does this mean KMR will trade up to $89.75 tomorrow?
    10 Aug 2014, 10:22 PM Reply Like
  • Dividends#1
    , contributor
    Comments (3369) | Send Message
     
    Author’s reply » KMR should open at $89.75 tomorrow.

     

    Did we hit a mini jack pot?
    10 Aug 2014, 10:38 PM Reply Like
  • cking6178
    , contributor
    Comments (44) | Send Message
     
    not sure about a mini-jackpot, but definitely loving the 2.5x exchange coupled with the increased dividend payout....definitely a great way to start my Monday!
    11 Aug 2014, 10:07 AM Reply Like
  • Retired CFA
    , contributor
    Comments (197) | Send Message
     
    Rich Kinder has hinted in the last several conference calls that 1) he is fed up with people not giving proper valuation to the KMI companies, and (2) that they are seriously looking at ways to do something about it.

     

    I'm not surprised at this announcement, but thought it wouldn't happen for several more years until after some of their major projects are completed - especially the TransMountain Pipeline expansion in British Columbia.

     

    Can't wait to see what the market makes of it Monday morning.
    10 Aug 2014, 09:17 PM Reply Like
  • cking6178
    , contributor
    Comments (44) | Send Message
     
    apparently they LOVE it...
    11 Aug 2014, 10:05 AM Reply Like
  • Dividends#1
    , contributor
    Comments (3369) | Send Message
     
    Author’s reply » NV GARY,

     

    I was very excited, since my taxable account has a large amount of KMR.

     

    You make a good point, we have to wait. However, some here at SA know more about these entities than others.
    10 Aug 2014, 09:19 PM Reply Like
  • NV_GARY
    , contributor
    Comments (4109) | Send Message
     
    Dividends#1
    I agree- but the only real info available is what was released- but no info on tax considerations ( but no tax concerns here). Everyone is speculating and either euphoric or worried.
    KMI,KMR
    11 Aug 2014, 01:38 AM Reply Like
  • Qniform
    , contributor
    Comments (3602) | Send Message
     
    <but no info on tax considerations>

     

    "You can lead a horse to water..."
    11 Aug 2014, 01:53 AM Reply Like
  • NV_GARY
    , contributor
    Comments (4109) | Send Message
     
    Found the slides -- with tax info
    11 Aug 2014, 06:20 AM Reply Like
  • Be Here Now
    , contributor
    Comments (5394) | Send Message
     
    Slides 11, 12, and 13 make it clear that the KMR exchange will be non-taxable, and the KMP and EPB exchanges will be taxable.
    11 Aug 2014, 02:03 AM Reply Like
  • Founder
    , contributor
    Comments (267) | Send Message
     
    I also see it as taxable to KMP and EPB unitholders. It will initially lower the distribution payout, but you are receiving cash upfront for that.

     

    Long term it should be beneficial, as it will lower cost of capital and increase payout growth.

     

    11 Aug 2014, 03:59 AM Reply Like
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