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DealBook: Regulators Extend Deadline for Xstrata’s Answer to Glencore

September 22, 2012 by NewsMaker Leave a Comment

Michael Buholzer/ReutersSimon Murray, Glencore’s chairman.

British regulators have granted Xstrata extra time to respond to Glencore’s merger offer, as the mining giant weighs the sweetened bid.

Xstrata’s board will now have until Oct. 1 to make a decision, according to a regulatory disclosure on Friday. The previous deadline was Monday.

The two companies have faced a difficult path to a deal.

DealBook: Glencore Says Higher Bid for Xstrata Is Its Final Offer

September 10, 2012 by NewsMaker Leave a Comment

Jack Atley/Bloomberg NewsXstrata’s Mount Isa mine in Queensland, Australia. Glencore adjourned a shareholder meeting on Friday after raising its bid for Xstrata.

LONDON — Glencore International, the world’s largest commodities trader, confirmed its increased all-share offer for the mining giant Xstrata on Monday, which would value the combined company at about $90 billion, but said it would not raise its bid again.

Under the terms of the revised offer, Glencore is now offering 3.05 of its shares for every Xstrata share after shareholders in the mining company balked at Glencore’s initial 2.8 share bid.

The company raised its offer on Friday after several Xstrata shareholders, including the sovereign wealth fund Qatar Holding, said they would vote against the deal if the offer was not increased.

In response to the unrest, Glencore raised its offer, but added in a company statement on Monday that it “will not increase the merger ratio further.”

As part of the new offer, Mick Davis, the chief executive of Xstrata, will become head of the combined company after the deal is completed, but will step down after six months. Mr. Davis will be succeeded by Glencore’s chief executive, Ivan Glasenberg.

Michael Buholzer/ReutersSimon Murray, Glencore’s chairman, left, and Ivan Glasenberg, its chief executive, adjourned a shareholder meeting Friday after Glencore raised its bid for the mining company Xstrata to 3.05 of its shares for every share of Xstrata. The bid had been for 2.8 shares.

Despite the increased offer, some of Xstrata’s shareholders may still hold out for improved terms. Qatar has yet to respond publicly to the newly improved deal, while the the board of Xstrata has said the new price may be too low.

In a move that could placate wary investors, Glencore also confirmed on Monday that the deal would remain a merger.

The company said last week that it wanted the option to restructure the deal as a takeover. The change would have required only 50 percent of Xstrata investors to agree to the deal.

“The new proposal is structured far less aggressively than the straight takeover hinted at on Friday,” Ash Lazenby, an analyst at Liberum Capital in London, said in a research note on Monday. “We expect the revised structuring should get Xstrata board’s recommendation.”

Several hurdles may still block the plan. On Friday, Xstrata warned shareholders about potential problems, highlighting the “significant risk” created if Mr. Davis and his lieutenants did not lead the merged Glencore-Xstrata.

The mining company also said the new ratio offered a premium “significantly lower than would be expected in a takeover.”

On Monday, Xstrata said its board would consider Glencore’s revised bid and decide by Sept. 24 whether to put the offer to its shareholders.

Shares in Xstrata rose 3 percent in morning trading in London on Monday, while stock in Glencore fell about 1 percent.

Article source: http://dealbook.nytimes.com/2012/09/10/glencores-bid-for-xstrata-represents-final-offer/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: chief-executive, shareholders, wary investors

DealBook: Glencore Increases Offer in Bid to Secure Deal

September 7, 2012 by NewsMaker Leave a Comment

9:28 a.m. | Updated

LONDON — Glencore International, the world’s biggest commodities-trading company, has potentially saved its mega-merger with the mining company Xstrata by sweetening the terms of the all-share deal at the last minute as it seeks to gain shareholder support.

The commodities trader is trying to win over investors, including Qatar Holding, Xstrata’s second-largest shareholder, which had threatened to block the deal.

Under the terms of the revised deal, Glencore has proposed to increase its offer to 3.05 shares for every Xstrata share. The commodities trader had initially offered 2.8 of its own shares for every Xstrata share.

For months, Qatar Holding had held out for a ratio closer to 3.25. Qatar, which owns 12 percent of Xstrata shares, was poised to vote against the deal at a shareholder vote on Friday.

Within minutes of the vote, Glencore increased its offer with the condition that Ivan Glasenberg, the chief executive of Glencore, be made the chief executive of the merged company.

Under terms the companies agreed in February, Mick Davis, Xstrata’s chief executive, was to lead the new company, even though Xstrata’s shareholders would own less than 50 percent of the combined Glencore-Xstrata.

Xstrata confirmed that it had received the new proposal. The new offer also allows the companies to change the structure of the deal from a merger that required 75 percent shareholder approval to a takeover. That would then mean Glencore, with its 34 percent stake in Xstrata, would only need 16 percent or more of Xstrata shareholders to approve the new offer.

“This is now a lot cleaner deal,” said Michael Rawlinson, head of natural resources at Liberum Capital in London. “It’s more of a takeover with Ivan as C.E.O.”

Glencore shares fell 4 percent in midday trading in London, while stock in Xstrata rose 7.7 percent on Friday, as analysts now expected the merger to take place.

The increased offer is a major change for Mr. Glasenberg, who said last month that it was “no big deal” if Qatar’s opposition quashed the Glencore-Xstrata merger. He had held firm in public that no change of terms would be forthcoming and suggested to Glencore shareholders and financial advisers that Glencore could make a new offer for Xstrata next year.

Glencore’s initial public offering last year, which was the biggest stock market listing by value in the history of the London Stock Exchange, paved the way for an Xstrata merger.

Qatar’s opposition to Glencore’s initial deal had galvanized other Xstrata shareholders, who also were disgruntled about the deal terms.

Together, they had been on the verge of blocking a merger that would combine Glencore, the world’s biggest trader of commodities like wheat and aluminum, with Xstrata, one of the world’s biggest miners of copper and coal.

“We are supportive of the improved terms and the changes to the executive governance arrangements,” said David Cummings, head of equities at Standard Life Investments, a fund manager that owns 1.4 percent of Xstrata and 0.8 percent of Glencore. “The deal will, we believe, enhance the growth prospects of the combined group.”

Previously, Mr. Cummings had publicly criticized the deal, calling the earlier offer “inadequate.”

Simon Murray, Glencore’s chairman, adjourned the Glencore shareholder meeting shortly before it was due to begin on Friday morning in Zug, Switzerland.

Developments have “happened very recently overnight,” Mr. Murray told shareholders and journalists who had gathered for the vote.

An Xstrata representative did not specify the date of a new shareholder vote on the deal. The new terms were a proposal in outline form, not a firm offer, Xstrata added. The company first planned to vote on the transaction in May but was forced to push the vote to September because of Qatar’s opposition.

The new delay means that the deal will now take at least eight months to complete from the date it was unveiled in February. During this time, metal prices have fallen sharply, hurting Xstrata’s earnings, which fell 33 percent in the first six months of the year. Xstrata’s declining fortunes this year had led most London analysts and investors to not expect an improved offer.

The companies have considered a merger several times over the last five years, most recently in the months leading up to the flotation, according to a person with direct knowledge of the matter, who spoke on the condition of anonymity because he was not authorized to speak publicly.

In a presentation to shareholders, Xstrata had discussed the benefits of a deal. The last attempt was several months before Glencore’s May 2011 flotation, according to a banker who was present during the negotiations.

A banker to one of the two companies, who spoke on the condition of anonymity because he was not authorized to speak publicly, confirmed that Mr Glasenberg made the new offer to Qatar at around 9 p.m. London time on Thursday.

“This is all about face-saving,” the banker said. The higher offer “was always there as a possibility,” he added. But Qatar and Glencore’s hardening public opposition had blocked all lines of communication and potential compromise.

While Qatar has won improved terms, it may have to compromise on the issue of executive management. Qatar spent $5 billion buying Xstrata shares in part because of its confidence in Mr. Davis and his team, and the sovereign wealth fund supported Mr. Davis as the head of Glencore-Xstrata.

Article source: http://dealbook.nytimes.com/2012/09/07/glencore-postpones-meeting-in-bid-to-secure-deal/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: ivan, mining company, shareholders

DealBook: Shell Abandons Offer for Cove Energy

July 17, 2012 by NewsMaker Leave a Comment

The energy giant Royal Dutch Shell said on Monday it would abandon a bid for Cove Energy, leaving PTT Exploration and Production of Thailand as the sole remaining suitor for the oil and gas exploration company.

Shell said it had decided against raising its offer of £1.12 billion ($1.75 billion) for Cove, after it was outbid by PTT in May. The offer by PTT, which values Cove Energy at £1.22 billion ($1.91 billion), has the support of Cove’s board.

The board “continues to believe that it is in the best interests of Cove’s shareholders to accept” PTT’s offer, Cove said in a statement on Tuesday. Shareholders have until July 25 accept the bid.

Shares of Cove, which are listed in London, fell 14 percent on Monday to roughly 240 pence, in line with PTT’s offer.

Shell’s announcement comes after a ruling last week by Britain’s takeover panel, which said the rival bidders would have to enter a formal auction process on Monday if no decision had been made. There hasn’t been a formal auction for a public British company since 2008.

Shell, drawn to Cove’s energy assets in Africa, had urged Cove’s shareholders to accept its offer, extending the deadline several times. Some analysts said shareholders might have been holding out for a higher bid from the Anglo-Dutch company.

The bidding war, which dates to February, had centered on Cove’s 8.5 percent stake in a natural gas field in Mozambique, which is estimated to hold up to 30 trillion cubic feet of recoverable natural gas. In taking over Cove, PTT would gain resources to help meet Thailand’s rising demand for natural gas.

PTT is being advised by UBS, while Standard Chartered is advising Cove Energy.

Article source: http://dealbook.nytimes.com/2012/07/17/shell-abandons-offer-for-cove-energy/?partner=rss&emc=rss

Filed Under: Global Business Tagged With: dealbook, gas exploration company, shareholders

Business Briefing | Legal News: U.S. Shareholders Sue Lloyds

January 3, 2012 by NewsMaker Leave a Comment

Opinion »

Op-Ed: Boko Haram Is Not the Problem

In Nigeria, designating Boko Haram as a foreign terrorist group will only inflame anti-Americanism among Muslims.

Article source: http://feeds.nytimes.com/click.phdo?i=485b1a5e74f1cb184f12e8ec735325f3

Filed Under: Business News Tagged With: lloyds, muslims, shareholders

DealBook: The Benefits of Incorporating Abroad in an Age of Globalization

December 21, 2011 by NewsMaker Leave a Comment

Harry Campbell

Michael Kors Holdings not only sells fashion that people crave, it has also offered shares that were a hit with investors. The company’s shareholders, including the designer himself, sold about $944 million worth of stock last week in an initial public offering that valued the company at about $4 billion.

Michael Kors is not just a successful I.P.O., however. The company is also a case study on how globalization increasingly allows companies to avoid United States taxes and regulation.

Michael Kors gets about 95 percent of its revenue from sales in Canada and the United States. Like most clothing manufacturers, the company makes its clothes largely in Asia. And Michael Kors has gone one step further. It has outsourced its corporate governance and taxes to the British Virgin Islands.

Because the company is organized there, it sidesteps higher taxes and substantial regulation in the United States.

The tax savings are likely in the millions and could end up being much more.

Deal Professor

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If Michael Kors were organized under the laws of the United States, it would be subject to taxation on its worldwide income instead of just the revenue it earned in the United States. The company could defer these taxes on foreign income by keeping the money abroad in foreign subsidiaries. If it repatriated the money to the United States, it would then be taxed at rates of up to 35 percent, offset by any foreign tax paid.

Because of this tax regime, JPMorgan Chase estimates that American multinationals have $1.375 trillion in cash sitting overseas. By keeping this cash abroad, these companies are not subject to United States tax until the money is returned to America. These companies may be waiting for Congress to enact a tax holiday to allow the cash’s repatriation.

Since Michael Kors is organized abroad, it never has to face this issue and will pay tax only on money earned in the United States. Right now, Michael Kors does not have significant foreign revenue, but this is bound to increase, as the company appears focused on building international sales.

Michael Kors will also be able to dodge much of the securities and corporate regulation applicable to American public companies, which are subject to scrutiny under the federal securities laws intended to protect investors. This requires an American company to file quarterly reports and publicly disclose material events promptly upon their occurrence. Executives also have to report all stock sales within two days, and companies are generally required to have a board comprising a majority of independent directors. As a foreign corporation, Michael Kors is under no such restrictions and instead is subject to bare-bones reporting requirements under United States securities law.

If a shareholder wants to sue a Michael Kors director for misconduct, good luck. The corporate laws of the British Virgin Islands are very different from those of United States. Michael Kors states in its I.P.O. prospectus that “minority shareholders will have limited or no recourse if they are dissatisfied with the conduct of our affairs.” A shareholder would most likely have to sue in the British Virgin Islands. While a few weeks’ visit there might be nice, I am not sure that shareholders are prepared to spend years on the island locked up in litigation.

It is not just Michael Kors that is taking advantage of foreign incorporation. Private equity firms have been buying American companies with significant foreign operations and reorganizing them as foreign corporations. The private equity firms will then arrange for the company to make an initial public offering on an American exchange. Freescale Semiconductor Holdings, a company purchased by a consortium of private equity firms in 2006, went public on the New York Stock Exchange in May, yet it was organized under the laws of Bermuda.

It is all seems so easy.

More American companies would probably love to lower their taxes and leave for the Caribbean, if not for Congress. In 2002, Stanley Works, based in Connecticut, tried to reincorporate in Bermuda to save $30 million a year in taxes. But after a public outcry, the company’s board abandoned the plan. Congress subsequently passed a law prohibiting companies from migrating out of the United States to lower their taxes unless the exit involved a sale of control. Private equity firms take advantage of this loophole to send portfolio companies with large overseas operations abroad.

Michael Kors was reincorporated in the British Virgin Islands and established its corporate headquarters in Hong Kong in connection with its acquisition by Sportswear Holdings in 2003. Sportswear Holdings is based in Hong Kong and controlled by Lawrence S. Stroll and Silas K. F. Chou, both of whom reside outside the United States. Michael Kors’s foreign incorporation and headquarters was most likely put in place to take advantage of this foreign ownership and further ensure that the United States did not tax its owners.

Michael Kors and Freescale show yet again that American corporate tax laws need to change as companies become increasingly international. The United States is one of the few countries in the world to tax worldwide income for companies based here.

In a world where companies have a choice about where to incorporate, enforcing these tax rules is going to get harder. Michael Kors stock may be listed on the Hong Kong Stock Exchange and the company may have headquarters in Hong Kong, but this appears to be a mailbox. The fashion designer’s largest office is in New York and its stock is also listed on the New York Stock Exchange. But when it came time to set up the company’s place of organization, Michael Kors chose a third country where it had no operations.

Congress can try to close this loophole, but companies that want to lower their taxes will still find a way to incorporate abroad, something made easier by the ability to raise capital through an I.P.O. anywhere in the world.

Perhaps it is time for the United States to adopt a tax system more in line with the rest of the world. This does not mean pandering to tax havens, but it should incentivize companies to bring their riches to the United States.

The regulatory concerns are also high. American investors may be investing in Kors and other companies incorporated outside the United States without appreciating that they are not subject to the same United States laws that other publicly traded companies are. The Securities and Exchange Commission set up these different regimes to attract foreign listings, but companies like Michael Kors are taking advantage of the loophole to lower their tax burden, possibly at the expense of shareholders.

Welcome to globalization.

Steven M. Davidoff, writing as The Deal Professor, is a commentator for DealBook on the world of mergers and acquisitions.

Article source: http://feeds.nytimes.com/click.phdo?i=c8046c3cdb79751e3a8c5c531aeecf69

Filed Under: Business News Tagged With: corporate governance, shareholders, tax regime

Japan’s Disgraced Olympus May Rehire Ex-C.E.O.

December 15, 2011 by NewsMaker Leave a Comment

Woodford, an Englishman who was a rare foreign CEO in Japan, went public with his concerns over crooked accounting at Olympus after his dismissal in October, leading to the uncovering of a $1.7 billion fraud that has left the company badly weakened.

He is now lobbying shareholders of the maker of cameras and medical equipment to support his reinstatement and replace the disgraced board with a new team that he is assembling.

“We saw a shameful state of the company’s finances yesterday, but not one Japanese shareholder stood up and said publicly ‘Mr Woodford is right, thank you Mr Woodford’, anything, a total, an utter silence,” Woodford said, a day after Olympus released its restated accounts on Wednesday.

His comeback campaign has highlighted the contrasting opinions of foreign and Japanese shareholders on the future leadership of Olympus, which has been found to have carried on a $1.7 billion fraud to hide investment losses for 13 years.

At least three big foreign shareholders have backed Woodford’s bid to return to the company where he spent three decades working his way up from salesman to CEO. But not one Japanese shareholder or lender has openly supported him since he blew the whistle, leaving him clearly frustrated.

Woodford also launched an emotional attack on the firm’s current Japanese boss.

“Should that man be the president and custodian of one of Japan’s iconic companies?” he said of Olympus President Shuichi Takayama, one of the directors who had voted unanimously to sack him after he had queried the firm’s dubious book-keeping.

“How dare he!” Woodford added, calling Takayama’s handling of the whole affair “Machiavellian.”

Woodford also said he had discussed refinancing options for Olympus with private equity firms and investment banks, and also voiced concerns that Takayama was planning to raise money by placing new shares with a third party.

That would dilute the stakes of existing owners and weaken their hand in a proxy battle between Woodford and whoever the existing board chooses as its next CEO candidate.

“It would dilute the existing shareholders, so then I could not win a proxy fight,” he said.

The existing board, led by Takayama, has said he and fellow directors will resign soon, to make way for a new board to be elected by shareholders at a meeting in March or April, and that the board wants to choose its successors before it quits.

It has set up an external panel to advise on board candidates and other management issues.

Takayama even suggested on Thursday the board would consider Woodford as a candidate for his old job, but few analysts gave the gesture any credence given the hostility between the pair.

Takayama, currently the most senior executive after several resignations since Woodford’s departure, said he had no plans to meet Woodford, who some major Japanese shareholders and lenders privately oppose, according to a banking source.

“As of now, I have no plans to meet,” he said.

Woodford says the board is discredited and has no right to choose its successors, and on Thursday expressed anger at signs that not all of the incumbent board would resign.

He is assembling his own team of candidates for a new board with himself at the helm.

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Woodford also went public with a plea to meet the head of Sumitomo Mitsui Banking Corp (SMBC), the main lender to Olympus, a possible sign that he was having trouble getting access.

“My representatives have asked for a formal meeting with SMBC. I hope they at least give me the courtesy of listening to me,” he said. The bank, which is the core banking unit of Sumitomo Mitsui Financial Group, said it had not received the request and declined comment.

Article source: http://www.nytimes.com/reuters/2011/12/15/business/business-us-olympus.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: shareholders, three decades, woodford

Wal-Mart Discloses Internal Investigation

December 9, 2011 by NewsMaker Leave a Comment

The company said that its investigation was a result of a voluntary internal review of its global anticorruption practices this year along with information “from other sources.”

“The company has begun an internal investigation into whether certain matters, including permitting, licensing and inspections, were in compliance with the U.S. Foreign Corrupt Practices Act,” the filing read.

The act forbids bribing foreign officials, among other items.

The company did not disclose which foreign country or countries its investigation pertained to. International business made up about 30 percent of Wal-Mart’s sales in the most recent quarter, and was the fastest-growing part of the company, with sales increasing 20 percent from the same quarter a year earlier. The biggest jumps in sales came in China, Mexico and Argentina.

As part of the review, “we are taking a deep look at our policies and procedures in every country in which we operate,” a Wal-Mart spokesman, David Tovar, said in an e-mail.

“Our investigation is currently focused on discrete incidents in specific areas. We intend to keep federal authorities apprised of what we learn,” Mr. Tovar said. “Although, based on the facts currently known, we do not believe these matters will have a material impact on our business, we decided it was appropriate to disclose the internal investigation to our shareholders.”

Article source: http://feeds.nytimes.com/click.phdo?i=a312e9768e1283b90fd28804074f7488

Filed Under: Business News Tagged With: argentina, china, shareholders

Banks Aided in Olympus Cover-Up, Report Finds

December 6, 2011 by NewsMaker Leave a Comment

TOKYO — Top executives at Olympus, the Japanese maker of cameras and medical equipment, devised an elaborate scheme to cover up investment losses involving at least $1.7 billion and should face legal action, a third-party panel said Tuesday in a highly anticipated report that called the company’s management “rotten to the core.”

The panel’s findings appeared to vindicate, to a great extent, the company’s ousted president, Michael C. Woodford, who had made public allegations and called for an inquiry into a series of exorbitant acquisition payments made by the company before his tenure. Mr. Woodford has called for the entire Olympus board to resign and has said he is in talks with shareholders to help install fresh management at the company.

The report also highlights the role played by three former Nomura bankers in arranging the cover-up, as well as alleged failings of Olympus’s auditors, especially KPMG’s Japan affiliate, in exposing fraud at the company. It alleges that several banks, including Société Générale, submitted incomplete financial statements to auditors, in effect aiding the cover-up.

“The management was rotten to the core, and infected those around it,” said the report, more than 200 pages long with appendices.

Still, concerns remain over the true independence of a panel appointed by the Olympus board, as well as just how fully a monthlong investigation could have investigated a complicated program involving numerous overseas funds and financial advisers. The panel cleared the cover-up of alleged links to Japan’s notorious criminal underworld, for example, despite acknowledging that it did not know for sure where some of the money ended up or whether individuals had pocketed money.

The possibility of organized crime involvement in the cover-up had become a critical issue in the investigation, as any proof of mob links could wipe out all shareholder value in the company by causing its shares to be delisted from the Tokyo Stock Exchange. The Japanese police are investigating possible links to organized crime, according to several people close to the inquiry.

Tatsuo Kainaka, the panel’s chairman and a former judge of Japan’s Supreme Court, acknowledged that a forensic accounting by Olympus’s auditors, as well as an investigation by the Japanese and overseas authorities, was needed to bring all facets of the scheme to light.

“We do not know for sure where funds ultimately flowed to and how,” Mr. Kainaka said at a news conference after the report’s release. But the panel “could not find any evidence of a flow of funds to organized crime,” he said.

In a separate statement, the Tokyo Stock Exchange warned that the company could still be delisted if it failed to meet a Dec. 14 deadline to submit its latest financial statement. Olympus shares have already lost half their value in the scandal.

According to the report, Olympus executives plotted with several former investment bankers to hide ¥117 billion in losses made from investments that went sour in Japan’s stock bubble crash in the early 1990s.

The company later used a series of acquisition-related payouts to settle those losses, including an outsize $687 million in fees paid to a now-defunct fund incorporated in the Cayman Islands for Olympus’s takeover of a British medical equipment maker in 2008. Olympus also paid $773 million for three companies in Japan that appeared unrelated to its main business, including a face cream maker, only to quickly write down the bulk of their value.

The report denied speculation that those acquisitions had been made solely to cover up losses. However, Olympus executives saw the purchases as an opportunity to hide irregular transactions, the report said.

The report also alleged that Olympus’s auditors KPMG AZSA and Ernst Young Nippon had not done enough to expose Olympus’s financial maneuvers. In 2009, KPMG AZSA raised serious concerns with the company’s recent acquisitions, the report said, but backed down and gave Olympus’s finances the all-clear when the company insisted that a third-party inquiry had found nothing wrong.

Article source: http://feeds.nytimes.com/click.phdo?i=268859554921b69788eabf2a8da9de12

Filed Under: Business News Tagged With: nomura, rotten to the core, shareholders

DealBook: $20.7 Billion Deal to Create Pipeline Giant

October 16, 2011 by NewsMaker Leave a Comment

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

Filed Under: Business News Tagged With: cash portion, pipeline company, shareholders