Kinder Morgan (KMI) Gets Early Hart-Scott-Rodino Approval - Analyst Blog

Kinder Morgan, Inc. (KMI) has received an early clearance under the Hart-Scott-Rodino Antitrust Improvements Act (HSR) from the Federal Trade Commission for its planned purchase of Kinder Morgan Energy Partners L.P. (KMP).

The intended acquisition announced by Kinder Morgan on Aug 10, 2014, also entails the purchase of all the outstanding equity securities of Kinder Morgan Management, LLC (KMR) and El Paso Pipeline Partners, L.P. (EPB), for which no HSR filings were required.

The transaction, valued at around $70 billion, will expectedly close by the end of 2014 and is subject to standard regulatory notifications and approvals following unitholder and shareholder votes.

Further, the acquisition will simplify the structure of Kinder Morgan group of companies, benefiting all shareholders and unitholders. Kinder Morgan is projected to return a dividend of $2.00 per share in 2015, up 16% from the estimated figure of $1.72 in 2014. Management expects the dividend to increase by about 10% each year from 2015 through 2020. Over the same period, excess coverage is anticipated to exceed $2 billion.

The combined entity, once operational, will become the largest energy infrastructure company in North America and the third largest energy company overall. The new company is estimated to have an enterprise value of about $140 billion.

The transaction will provide KMI shareholders with significant tax benefits from the depreciation deductions related to the upfront purchase and future capital expenditures.

Additionally, the company will have a leading position in each of its business segments, and operate in the swiftly growing North American energy infrastructure sector. The company operates approximately 80,000 miles of pipelines transmitting natural gas, refined petroleum products, crude oil, carbon dioxide and additional products. It has more than 180 terminals that store petroleum products and chemicals, as well as ethanol, coal, petroleum coke and steel.  

Currently, Kinder Morgan carries a Zacks Rank #3 (Hold).