Kinder Morgan Energy Partners, L.P. (KMP: Quote) and Copano Energy, L.L.C. (CPNO: Quote) have entered into a definitive agreement for KMP to acquire Copano’s outstanding units for about $5 billion, including the assumption of debt. The deal will help KMP expand its midstream services footprint.
While KMP is mainly a pipeline transportation and storage company, Copano is primarily a fee-based gathering, processing and fractionation player. Hence Copano’s assets are complementary to KMP. Both firms are based in Houston, Texas.
Copano, a midstream natural gas company, has its main operations in Texas, Oklahoma and Wyoming. It provides comprehensive services to natural gas producers, including gathering, processing, treating and natural gas liquids fractionation.
KMP currently has a joint venture with Copano in Eagle Ford Gathering and the deal will increase its ownership there to 100 percent.
Copano owns an interest in or operates about 6,900 miles of pipelines with 2.7 billion cubic feet per day or Bcf/d of natural gas throughput capacity. It has 9 processing plants with more than 1 Bcf/d of capacity and 315 million cubic feet per day of treating capacity.
KMP Chairman and CEO Richard Kinder said, “As a result of this acquisition, we will be able to pursue incremental development in the Eagle Ford Shale play in south Texas, gain entry into the Barnett Shale Combo in north Texas and the Mississippi Lime and Woodford Shales in Oklahoma.”
KMP continues to be bullish on the domestic shale plays and believe they will drive significant future growth at the company. Majority of Copano’s 415 employees will be retained after the deal.
The acquisition is expected to be accretive to cash available for distribution to KMP unitholders upon closing. Kinder Morgan, Inc. (KMI: Quote), the general partner of KMP, has agreed to forgo a portion of its incremental incentive distributions in 2013.
Additionally, KMI intends to forgo $120 million in 2014, $120 million in 2015, $110 million in 2016 and annual amounts decreasing by $5 million per year thereafter from this level.
The acquisition will be immediately accretive to KMI’s cash available to pay dividends, even after it forgoes a portion of the incremental incentive distributions.
The transaction is expected to be modestly accretive to KMP in 2013 and about $0.10 per unit accretive for at least the next five years from 2014.
The deal will be a 100 percent unit for unit transaction with an exchange ratio of 0.4563 KMP units per Copano unit. It has been approved by the boards of directors of both companies.
The consideration to be received by Copano unitholders is valued at $40.91 per Copano common unit, based on KMP’s closing price on January 29. This marks a 23.5 percent premium to Copano’s close on the same day.
The transaction is expected to close in the third quarter. TPG, Copano’s largest unitholder with over 14 percent of its outstanding equity, has agreed to support the transaction.
KMP closed up 1.5 percent on Tuesday at $89.66.
CPNO settled up 0.8 percent at $33.13.
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by RTT Staff Writer
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