Sunday, October 16, 2011

Kinder Morgan to Acquire El Paso

El Paso Corp. announced today (Sunday) that it has agreed to be acquired by Kinder Morgan, Inc. for $21 billion ($38 billion including assumed debt).  The acquisition price represents a 37% premium over Friday's close.  Being a transport company, Kinder Morgan is only interested in El Paso's large pipeline infrastructure and it plans to sell off EP's exploration and production business, which EP was already in the process of spinning off into EP Energy Corp. It is unclear at this point if the E&P business will be a standalone entity or be sold to an acquirer.

After closing of the deal, Kinder Morgan will be the largest midstream company in North America and a major player in Haynesville Shale takeaway.  It is also a significant bullish bet on natural gas for the company.

This is the second deal (or at least hint thereof) involving a Haynesville company in a week.  Last week, it was reported that Samson Investment Co. was shopping for an investment bank adviser to "explore its strategic alternatives," meaning that it is seeking a deal anywhere from a joint venture to an outright sale.  Analysts speculate that an outright sale might fetch between $7 and $10 billion.

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