UPDATE 4-Top U.S. pipeline CEO Kinder sees new acquisitions; units soar

Mon Aug 11, 2014 5:46pm EDT
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(Adds comments from IRS, fund manager seeing few similar deals)

By Anna Driver and Mike Stone

HOUSTON/NEW YORK Aug 11 (Reuters) - The biggest U.S. pipeline company, Kinder Morgan Inc, will be better able to acquire rivals after it consolidates as a single company and buys out investors in its publicly traded units for $44 billion, its CEO said on Monday.

The North America midstream company already operates or has stakes in 80,000 miles of pipelines and there is growing demand for new infrastructure to handle surging output of oil and gas from the U.S. shale boom.

Kinder Morgan's shares closed 9 percent higher as investors embraced the deal, although it is expected to create significant tax bills for investors in two of its units: Kinder Morgan Energy Partners LP and El Paso Pipeline Partners LP , which both rose around 20 percent.

"We have such a broad platform, virtually anything in the midstream area would fit us," Chairman and Chief Executive Officer Rich Kinder told investors on a conference call.

He did not name potential takeover targets, but said the company would not stray from its core business. For instance, he said it would not start buying "truck lines and railroads," which increasingly have been used to move crude oil, but have drawn criticism after fiery accidents.

Kinder Morgan said on Sunday it would put all its units under one roof. Investors had grown concerned the tax-advantaged Master Limited Partnership (MLP) structure that the Houston-based company popularized was hurting its growth and was too complicated. The companies had a market value of $92 billion before the deal was announced.

Under the terms of the deal, it will consolidate its MLPs, Kinder Morgan Energy Partners and El Paso Pipeline Partners, with Kinder Morgan Management LLC and organize into a single C-corporation.   Continued...