Rick Rainey/Kinder MorganKinder Morgan pipeline in Las Vegas.
Kinder Morgan agreed on Sunday to buy the El Paso Corporation, a natural gas exploration and pipeline company, for about $20.7 billion in cash and stock, in one of the biggest energy deals in recent years.
Including the assumption of debt owed by El Paso and an affiliated business, El Paso Pipeline Partners, the takeover is valued at about $38 billion.
Through the deal, Kinder Morgan will become the nation’s biggest player in the business of transporting natural gas, with more than 80,000 miles of pipelines.
“This once in a lifetime transaction is a win-win opportunity for both companies,” Richard D. Kinder, the chief executive of Kinder Morgan, said in a statement.
Under the terms of the deal, Kinder Morgan will pay $14.65 in cash, .4187 of its own shares and .640 of its warrants for each El Paso share. At Friday’s closing price, that values the offer at about $26.87. That is a 37 percent premium to El Paso’s Friday closing price.
El Paso announced in May that it planned to spin off its exploration and production businesses to shareholders, leaving it with its midstream operations, which account for 66 percent of its annual revenue.
Kinder Morgan said on Sunday that it plans to sell off El Paso’s exploration and production businesses.
After the deal’s closing, which is expected by the second quarter next year, Kinder Morgan shareholders will own about 68 percent of the combined company, while El Paso shareholders will own 32 percent.
Somewhat unusually, El Paso has agreed not to seek out potentially higher rival offers, and would be obligated to pay Kinder Morgan a $650 million break-up fee under certain circumstances.
Kinder Morgan has received a financing commitment from Barclays Capital for the entire cash portion of the deal.
Kinder Morgan was advised by Evercore Partners, Barclays and the law firms Weil Gotshal Manges and Bracewell Giuliani. El Paso was advised by Morgan Stanley for this deal, and had already been receiving advice from Goldman Sachs and the law firm Wachtell, Lipton, Rosen Katz on its previous spinoff plan.
Article source: http://feeds.nytimes.com/click.phdo?i=283e29f5a78702581730dfd11214d2e0