Kinder Morgan to Buy El Paso for $38 Billion Including Debt

Kinder Morgan Inc. (KMI) agreed to buy El Paso Corp. for about $38 billion in cash, stock and assumed debt, creating the largest U.S. natural gas pipeline network.

The offer is valued at $26.87 per El Paso share, or 37 percent more than their Oct. 14 closing price, Houston-based Kinder Morgan said in a statement today. The offer is comprised of $14.65 in cash, 0.4187 shares of Kinder Morgan, and 0.64 Kinder Morgan warrants, the statement said.

“This once in a lifetime transaction is a win-win opportunity for both companies,” Richard Kinder, who is chairman and chief executive officer of Kinder Morgan and will hold those posts in the combined company, said in the statement. “The transaction is expected to produce immediate shareholder value (upon closing) through strong cash flow accretion and offers significant future growth opportunities.”

Kinder Morgan intends to sell the exploration and production assets of El Paso, the statement said. The transaction is expected to close in the second quarter of 2012, creating the fourth-largest energy company in North America, according to the statement.

The combination will result in a cost savings of about $350 million a year, the statement said.

To contact the editor responsible for this story: Dan Hart at dahart@bloomberg.net; Alexis Leondis in New York at aleondis@bloomberg.net

To contact the editor responsible for this story: Kevin Miller at kmiller@bloomberg. net

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Photographer: Stephen Morton/Bloomberg

Storage tanks at the El Paso Corp. liquified natural gas Elba Island terminal near Savannah, Georgia.

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Photographer: Stephen Morton/Bloomberg

Storage tanks at the El Paso Corp. liquified natural gas Elba Island terminal near Savannah, Georgia. Close

Storage tanks at the El Paso Corp. liquified natural gas Elba Island terminal near Savannah, Georgia.

Photographer: Brett Coomer/Bloomberg

El Paso Corp. headquarters in Houston, Texas. Close

El Paso Corp. headquarters in Houston, Texas.

Source: Kinder Morgan Inc. via Bloomberg

Kinder Morgan Chief Executive Officer Richard Kinder. Close

Kinder Morgan Chief Executive Officer Richard Kinder.

Photographer: Matthew Staver/Bloomberg

Pipe is stacked for the construction of the Kinder Morgan section of the Rockies Express natural gas pipeline outside Laramie, Wyoming in 2006. Close

Pipe is stacked for the construction of the Kinder Morgan section of the Rockies Express natural gas pipeline outside... Read More

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