Kinder Morgan Inc (KMI) Consolidation

Kinder Morgan announced that it is consolidating its vast oil and gas pipeline empire in a $70B single company. The company announced that it is shedding its tax-advantaged legal structure it had popularized during the US shale boom; the MLP into one company. This will transform Kinder Morgan Inc into a $92B market cap mega-corporation. This combined entity will be the largest energy infrastructure company in North America and the third largest energy company overall.
The affected units include Kinder Morgan Energy Partners LP (KMP), Kinder Morgan Management  LLC (KMR) and El Paso Pipeline Partners LP (EPB). KMP shareholders will receive 2.1931 shares of KMI and $10.77 in cash; KMR shareholders will receive 2.4849 shares of KMI; EPB shareholders will receive 0.9451 shares of KMI and $4.65 in cash. Both KMP and EPB shareholders will be able to elect cash or KMI stock consideration subject to proration.
There is also some great news for KMI shareholders (including your truly) – the expected dividends for 2015 are $2.00, a 16% increase over current $1.72 KMI pays at a yield of 4.76%. In addition, KMI is expected to grow dividends at a rate of 10% each year from 2015 to 2020.

The current and simplified company structure is show below (source: Kinder Morgan presentation):

Full Disclosure: Long KMI. My full list of holdings is available here.

10 thoughts on “Kinder Morgan Inc (KMI) Consolidation

    • Hi SFZ,
      It was announced last night and I was excited to hear it too…now I wish I had bought more shares in KMI…but oh well, atleast I have some in my portfolio – so its a start 🙂

      Thanks for stopping by
      R2R

  1. Anonymous says:

    Hello R2R,
    thanks for the information. On Friday KMI was 36.12$ and KMP was 80.34$.
    If you get 2.1931 KMI for one KMP that’s ca. 79.21$ + 10.77 in cash is 89.98$. So it looks that you make almost 10$ in cash with this deal. Or is my calculation wrong?

    • Thats right. According to the press release (linked in the article) – “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.”

    • After opening 15% up, its pulled back quite a bit. I will be looking to add more to my KMI position in the next few days/weeks. Having a clear idea on how much those dividends will be rising next few years makes the decision much easier.

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