Kinder Morgan Raises $2.9 Billion in LBO-Backed IPO

Kinder Morgan Inc., the energy- pipeline company whose owners include the Carlyle Group and Goldman Sachs Group Inc., raised $2.9 billion in the biggest private equity-backed U.S. initial public offering.

The company, which was taken private in 2007, sold 95.5 million shares at $30 each, according to data compiled by Bloomberg. That’s 23 percent more than the company had originally sought to raise in the offering.

The company had offered 80 million at $26 to $29 apiece, according to a Feb. 3 filing with the U.S. Securities and Exchange Commission.

The price indicates “a ton of demand for this deal,” said Kevin Gallagher, a vice president at Dallas-based Swank Capital LLC, which owns a group of funds that invest in master limited partnerships, or MLPs. Selling shares as a corporation rather than an MLP “opens up the potential universe of investors,” Gallagher said.

Most of Kinder Morgan’s assets are owned by an MLP, whose units are publicly traded. The partnership structure has tax benefits for individual unitholders, though some institutional investors avoid the structure because of tax issues and liquidity, Gallagher said.

The share sale was the biggest by a U.S. oil and natural- gas company since Conoco Inc. raised $4.4 billion in 1998, according to Bloomberg data.

Growing Confidence

Kinder Morgan completed its offering after Nielsen Holdings NV’s initial sale last month set the previous U.S. record for a private equity-backed IPO. The deals are a boost to leveraged buyout firms betting the Standard & Poor’s 500 Index’s rally to the highest level since June 2008 will increase demand for sales of debt-fueled acquisitions completed as credit markets started to freeze four years ago.

“Now that people are seeing deals that are really coming out and doing well, they’re willing to come back to the table,” said Daniel Genter, president of RNC Genter Capital Management in Los Angeles, which oversees about $3.7 billion. “People are willing to come back into the market with liquidity and extend their risk profile. It’s the perfect time for private equity to unwind deals.”

All of the shares offered were owned by Goldman Sachs, New York-based Highstar Capital LP, the Carlyle Group and Riverstone Holdings LLC, according to the filing. The four investors put 13.5 percent of the company’s common stock up for sale, assuming full conversion of existing investors’ stakes from other classes, the company said in a statement.

Valuing the Company

Kinder Morgan’s underwriters, led by Goldman Sachs and London-based Barclays Plc, have the option to buy an additional 14.3 million shares after the offering, according to the company statement. The shares will start trading tomorrow on the New York Stock Exchange under the ticker KMI.

The midpoint of Kinder Morgan’s price range valued the pipeline owner at $19.4 billion. Carlyle’s pre-offering stake was worth about $2.2 billion based on that figure, more than double the initial investment of $882 million that the Washington-based firm disclosed in a letter to investors.

Nielsen, the New York-based television-ratings company, raised $1.64 billion from its Jan. 25 IPO, which two days later expanded to $1.89 billion after underwriters led by JPMorgan Chase & Co. and Morgan Stanley opted to buy more shares, according to Bloomberg data.

To contact the reporter on this story: Lee Spears in New York at lspears3@bloomberg.net.

To contact the editor responsible for this story: Daniel Hauck at dhauck1@bloomberg.net.

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