Renouncing Partnership Structure, Pipeline Group Kinder Morgan to - TopicsExpress



          

Renouncing Partnership Structure, Pipeline Group Kinder Morgan to Reorganize as Single Corporation -- New York Times - By DAVID GELLES - August 10, 2014 8:45 pm In recent years, master limited partnerships have become an increasingly popular — and lucrative — structure for oil and gas companies. They pay no corporate taxes and distribute all profits to shareholders, making them a hit with investors. But on Sunday, the biggest M.L.P. of them all announced it was disbanding the unique structure and reorganizing into a traditional corporation. Kinder Morgan, which encompasses a huge network of oil and gas pipelines across North America, will acquire its three associated companies and reorganize as one corporation based in Houston. The new Kinder Morgan will have an estimated enterprise value of about $140 billion — $100 billion of market value and $40 billion of debt — making it the third-largest energy company in the United States, after Exxon and Chevron. “This simplifies the structure and will allow us to get to this turbocharged growth,” Richard D. Kinder, chief executive and co-founder of Kinder Morgan, said in an interview. Mr. Kinder pioneered the M.L.P. structure in the 1990s and became a billionaire by overseeing Kinder Morgan’s growth for nearly two decades. He will own 11 percent of the new company, a stake that will account for about $11 billion of his fortune. Under the deal’s terms, Kinder Morgan will acquire its two related M.L.P.s — Kinder Morgan Energy Partners and El Paso Pipeline Partners — and a third related company, Kinder Morgan Management, for $71 billion. Kinder Morgan will pay a premium for each company, and use mostly stock to fund the purchases, allowing shareholders of the three targets to essentially continue their ownership. The deal exposes one of the significant challenges M.L.P.s face: the need to constantly acquire new assets to continue increasing the dividends they pay investors. Smaller M.L.P.s continually buy new assets to satiate this need. But Kinder Morgan’s related companies had grown so large that it was difficult to find suitable targets. Furthermore, because the companies were paying out such large dividends, they were hard pressed to comfortably finance big transactions. The simplified structure will allow Kinder Morgan to become more acquisitive in a new American oil and gas boom. The move will also free up cash for the company to invest in new capital expenditures needed to accommodate new reserves of natural gas being tapped across North America. ... dealbook.nytimes/2014/08/10/renouncing-complexity-kinder-morgan-pipeline-group-makes-plans-to-reorganize/?_php=true&_type=blogs&_r=0
Posted on: Fri, 15 Aug 2014 07:50:45 +0000

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