Kinder Morgan Energy Partners and Copano Energy announced a definitive agreement whereby KMP will acquire all of Copano’s outstanding units for a total purchase price of approximately $5 billion, including the assumption of debt.
The transaction, which has been approved by the boards of directors of both companies, will be a 100 percent unit for unit transaction with an exchange ratio of .4563 KMP units per Copano unit. The consideration to be received by Copano unitholders is valued at $40.91 per Copano common unit based on KMP’s closing price as of Jan. 29, 2013, representing a 23.5 percent premium to Copano’s close on Jan. 29, 2013.
The transaction, which is expected to close in the third quarter of 2013, is subject to customary closing conditions, including regulatory approval and a vote of the Copano unitholders. TPG, Copano’s largest unitholder (owning over 14 percent of its outstanding equity), has agreed to support the transaction.
Copano, a midstream natural gas company with operations primarily in Texas, Oklahoma and Wyoming, provides comprehensive services to natural gas producers, including natural gas gathering, processing, treating and natural gas liquids fractionation. Copano owns an interest in or operates about 6,900 miles of pipelines with 2.7 billion cubic feet per day (Bcf/d) of natural gas throughput capacity and 9 processing plants with more than 1 Bcf/d of processing capacity and 315 million cubic feet per day of treating capacity.
“We are delighted to have reached this agreement with Copano, a company that we know very well and have partnered with through the years, as this transaction will enable us to significantly expand our midstream services footprint,” said KMP Chairman and CEO Richard D. Kinder. “As a result of this acquisition, we will be able to pursue incremental development in the Eagle Ford Shale play in south Texas, gain entry into the Barnett Shale Combo in north Texas and the Mississippi Lime and Woodford Shales in Oklahoma. We continue to be bullish on the domestic shale plays and believe they will drive substantial future growth at KMP. Copano’s assets are very complementary to ours, as KMP is principally a pipeline transportation and storage company, while Copano is primarily a fee-based gathering, processing and fractionation player. Broadening our midstream assets will allow us to offer a wider array of services to our customers.”
“We are excited to have reached this agreement with KMP, which delivers a significant premium to our unitholders that is reflective of the strength and potential of our business and provides an ownership interest in a highly diversified industry leader with an impressive history of sustained distribution growth,” said Copano President and CEO R. Bruce Northcutt. “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. We are committed to continuing to support our customers with the highest quality service, and expect that KMP’s size and scale will allow us to provide even more value for customers. In addition, we expect this combination will provide opportunities for our many talented employees. We look forward to completing this transaction and to building significant long-term value for all of our stakeholders as part of KMP.”
“Copano is already executing on a substantial backlog of expansion projects for which it has secured customer commitments and is exploring a significant amount of projects incremental to these,” Kinder added. “Given the growth in cash flow that will come from the projects already in progress with existing customer commitments, we expect the multiple of EBITDA paid for Copano to decline to the very low double digits over the next few years and considering the growth opportunities beyond that, we expect continued attractive EBITDA growth from these assets thereafter.”
The acquisition of Copano is expected to be accretive to cash available for distribution to KMP unitholders upon closing. The general partner of KMP, Kinder Morgan, Inc. (NYSE: KMI), has agreed to forego a portion of its incremental incentive distributions in 2013 in an amount dependent on the time of closing. Additionally, KMI intends to forgo $120 million in 2014, $120 million in 2015, $110 million in 2016 and annual amounts thereafter decreasing by $5 million per year from this level. The transaction is expected to be modestly accretive to KMP in 2013, given the partial year, and about $0.10 per unit accretive for at least the next five years beginning in 2014.
“Copano’s cash flow is largely and increasingly fee based, and our accretion projections are based on commodity prices consistent with the current forward curve for the portion that is sensitive to commodity prices,” Kinder explained.
The acquisition will be immediately accretive to KMI’s cash available to pay dividends, even after KMI foregoes a portion of the incremental incentive distributions this transaction is expected to produce. The increase in KMI’s cash available to pay dividends (net of the amounts voluntarily foregone) is expected to be approximately $25 million in 2014 growing to approximately $70 million in 2016.
“We anticipate retaining the vast majority of Copano’s approximately 415 employees,” Kinder said. “This transaction is about producing future cash flow and expanding our midstream services footprint.”
Upon closing, KMP will own 100 percent of Eagle Ford Gathering (currently a joint venture with Copano), which provides gathering, transportation and processing services to natural gas producers in the Eagle Ford Shale. Eagle Ford Gathering comprises approximately 400 miles of pipelines (including its capacity rights in certain KMP pipelines) with capacity to gather and process over 700,000 MMBtu/day.
Citi acted as financial advisor for KMP and Weil Gotshal & Manges LLP and Bracewell & Giuliani acted as legal counsel to KMP. Barclays Capital Inc. and Jefferies & Company, Inc. provided financial advisory services to Copano and Wachtell, Lipton, Rosen & Katz acted as legal counsel to Copano.
- Kinder Morgan Energy Partners to buy Copano Energy (fuelfix.com)
- Kinder Morgan Energy buying Copano for $3.2B (seattlepi.com)
(Reuters) – Government economist Axel Kicillof stormed the world stage this week when Argentina moved to nationalize energy company YPF, defending the plan he helped devise in a fiery speech worthy of Venezuelan President Hugo Chavez.
Charismatic and polarizing, the 40-year-old Kicillof lambasted “free-market fundamentalists” as he defended the push to seize control of YPF from Spain’s Repsol.
Just four months after taking the deputy economy minister post, Kicillof has penetrated the small circle of trusted advisers to President Cristina Fernandez, who singles him out for praise in her speeches.
Sporting sideburns and an open collar, Kicillof told Congress that only “morons” would think the state was stupid enough to play by Repsol’s rules and make an offer to buy 100 percent of its shares. He blasted economic theories that “justify the looting of our resources and our companies.”
People who know Kicillof say they are not surprised to see him become the public face of a move that has prompted howls of protest from abroad. They say he has always been brilliant, hard-working and even messianic.
One classmate remembered a high school camping trip where Kicillof and a group of friends played at him being God, surrounded by his chanting followers.
“It was child’s play, but it’s striking that Axel was God,” she said, speaking on condition of anonymity.
Kicillof, who declined to be interviewed for this story, spent most of his career in academia, giving classes and writing about the theories of economists such as John Maynard Keynes and Karl Marx.
His first foray into business administration came in 2009, when he took a key position at flagship carrier Aerolineas Argentinas, which the government had expropriated from Spanish travel group Marsans.
Last year, he rose to prominence when Fernandez’s administration fought to appoint him as state representative on the board of directors at steelmaker Siderar, despite company resistance.
With that, local media at odds with the government crowned him the new radical boogeyman.
As a college student, Kicillof co-founded TNT, a group that used irony and humor to tackle corruption and raise standards inside state-run Buenos Aires University’s economics department.
Later, during the 1999 presidential election, he helped organize a protest against Argentina’s obligatory vote because he said the field of candidates was too narrow.
“He’s a brilliant guy. He’s one of the most intelligent people I know, very honest and with strong ideals,” said Leo Piccioli, general manager of Staples Argentina and a fellow member of TNT in the 1990s.
Despite his youthful appearance, Kicillof is an old-school ideologue who shuns the tenets of 21st Century globalism and believes Argentina must find its own way to economic development and industrial prominence.
In his Tuesday speech, he mocked the concept of the “rule of law,” saying this was designed to protect big business. He also compared the Spanish operators of YPF and Aerolineas Argentinas, who received no compensation after the airline was expropriated.
“Spanish officials decide what is done at YPF … in the same way that (Marsans) was bent on lobotomizing Aerolineas Argentinas,” Kicillof said. “This is a transnational group that doesn’t think about the Argentine worker.”
Kicillof helped put together a strategic plan for Aerolineas, which critics say has failed because the company keeps losing money. Others say it is impossible to evaluate his administration of the airline’s finances when so much tax revenue has been used to revamp the company.
Admirers call him captivating while critics see him as inflexible and verbose. His influence is growing where it counts — with the president.
At both Siderar and YPF, Kicillof urged company officials to make fewer dividend payments abroad and invest more locally. Fernandez ended up enshrining that view in government policy.
“He was the main architect of this concept,” said a personal acquaintance who met Kicillof in the last few years. “He is absolutely convinced that (his vision) will be Argentina’s salvation and not its death knell.”
Some people view Kicillof as a threat to the country’s future, saying he will scare off private investors. Emerging markets analyst Walter Molano at U.S.-based BCP Securities called Kicillof “a flaming red Marxist” on Thursday.
One old friend said his lack of political experience, and his impulsive, irreverent style, could eventually cause a rift with the president and end with him being scapegoated.
But that view might underestimate the loyalty shown by Fernandez to another controversial government figure, price and import czar Guillermo Moreno, famed for his vulgar talk and his fanatical work ethic.
Like Moreno, Kicillof isn’t seen giving an inch.
“He is intelligent,” his old schoolmate said. “But he won’t listen to other opinions or other points of view. He won’t learn from past mistakes.”
- Leftist economist the fire under Argentina’s Repsol asset grab (business.financialpost.com)
- The Man Behind Argentina’s Next Crash (blogs.the-american-interest.com)
- Incensed Spain threatens Argentina after YPF seizure (mb50.wordpress.com)