Kinder Morgan Said to Prepare to Sell El Paso Unit in Parts

Kinder Morgan Inc. (KMI) is preparing to start talks on selling off parts of El Paso Corp. (EP)’s oil and gas exploration and production unit in case the pipeline operator can’t find a buyer for the whole division, said people with knowledge of the matter.

Kinder Morgan, which agreed in October to take over El Paso, plans to initiate formal negotiations with suitors for parts of the unit as soon as next week, said the people, who spoke on condition of anonymity as discussions are private. Kinder Morgan is in separate talks with Apollo Global Management LLC and Reliance Industries Ltd. over a sale of the whole unit, and is asking for bids by Jan. 16, they said.

Selling off the business piecemeal may complicate Kinder Morgan’s effort to raise cash quickly to help finance its $21 billion takeover of Houston-based El Paso. Some assets, such as acreage in Texas’s Eagle Ford shale prospect, are likely to attract many buyers, while others may be difficult to sell quickly, the people said. The whole unit may be worth $8.1 billion, analysts at BNP Paribas SA estimated in November.

Larry Pierce, a spokesman for Kinder Morgan, declined to comment. Gretchen Krueger, a representative for El Paso, referred questions to Kinder Morgan. Tushar Pania, a spokesman for Mumbai-based Reliance, declined to comment. Carolyn Sargent, a spokeswoman for New York-based Apollo, also declined to comment.

Combining Kinder Morgan with El Paso would create the largest U.S. operator of oil and gas pipelines. El Paso dropped a previously disclosed plan to spin off the upstream business to shareholders. The unit had $1.1 billion of earnings before interest, taxes, depreciation and amortization in 2010, El Paso said in October.

Apollo has been working with potential co-investors including New York-based Riverstone Holdings LLC, one of the people said. Riverstone spokesman Jeffrey Taufield declined to comment.

To contact the reporters on this story: Zachary R. Mider in New York at zmider1@bloomberg.net; Cristina Alesci in New York at calesci2@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net.

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