Kinder Morgan Energy Partners to acquire Copano Energy in $5 billion unit-for-unit transaction

By Lisa Kerner

Charlotte, N.C., Jan. 30 - Kinder Morgan Energy Partners, LP announced a definitive agreement to acquire all of the outstanding units of Copano Energy, LLC for about $5 billion, including the assumption of debt, or about $40.91 per Copano common unit.

The transaction will be a unit-for-unit transaction with an exchange ratio of 0.4563 Kinder Morgan units per Copano unit.

The purchase price per unit is a 23.5% premium to Copano's closing price on Tuesday.

Kinder Morgan, a Houston-based petroleum pipeline company, expects to benefit from Copano's substantial long-term, fee-based cash flows, said chairman and chief executive officer Richard D. Kinder.

According to Kinder Morgan, the acquisition is expected to be accretive to cash available for distribution to its KMP unitholders upon closing.

Kinder Morgan, Inc. (KMI), the general partner of KMP, has agreed to forego a portion of its incremental incentive distributions in 2013 in an amount dependent on the time of closing, a company news release said.

KMI also intends to forgo $120 million in 2014, $120 million in 2015, and $110 million in 2016. Annual amounts KMI will forgo thereafter will decrease by $5 million per year.

The increase in KMI's cash available to pay dividends (net of the amounts voluntarily foregone) is expected to be about $25 million in 2014, increasing to about $70 million in 2016, the news release said.

Both companies' boards of directors approved the transaction, which is expected to close in the third quarter.

"Through this transaction, Copano will become part of a larger, investment-grade organization with stable cash flows and the financial resources to fund our increasing number of high-return growth projects," said Copano president and chief executive officer Bruce Northcutt.

Copano, also based in Houston, is a midstream natural gas company with operations primarily in Texas, Oklahoma and Wyoming.

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