Baker Botts, Weil Gotshal & Manges and Vinson & Elkins have advised on Kinder Morgan’s blockbuster $70bn consolidation of its related pipeline companies, marking the biggest energy merger since ExxonMobil 12 years ago.
Kinder Morgan announced its intention to take on all of the outstanding equity securities of Kinder Morgan Energy Partners, Kinder Morgan Management and El Paso Pipeline Partners last week. The merger would be the largest energy M&A transaction since the $75.3bn ExxonMobil merger in 1998.
Kinder Morgan turned to Weil Gotshal & Manges corporate partner Michael Aiello and tax partners Marc Silberberg, Amy Rubin and Jared Rusman. The firm also fielded head of antitrust Steven Newborn, securities litigation co-head Joseph Allerhand and partner Greg Danilow. Washington partner and environmental head Annemargarate Connolly joined them
The company was also advised by Bracewell & Giuliani, which put up business and regulatory co-chair Gregory Bopp, and corporate and securities partners Gary Orloff, Daniel Witschey, Cleland Dade and Troy Harder. The firm also fielded tax partner Lance Behnke, energy partner and Washington DC head Mark Lewis and energy and finance partner Heather Brown. Restructuring and corporate securities partner William Wood also advised as well energy partner Kirk Morgan. They were joined by finance partner Manuel Vera.
Baker Botts won spots for two targets. Houston corporate partners Joshua Davidson and Tull Florey led the deal for the Audit and Conflicts Committee of Kinder Morgan Energy Partners and the Special Committee of Kinder Morgan Management. Tax partners Michael Bresson and Don Lonczak were also on the team as well as litigation partners David Sterling and Danny David.
El Paso Pipeline Partners’ Conflicts Committee was led by Vinson & Elkins corporate partners Mike Rosenwasser, Keith Fullenweider and Stephen Gill. Litigation partner Michael Holmes also played a lead role in the transaction along with partner John Lynch. Energy partner Jay Seegers was also fielded for the deal along with environmental partner Larry Nettles.
The combined entity will be the largest energy infrastructure company in North America and the third largest energy company overall with an estimated enterprise value of approximately $140 billion.
But the dramatic restructure has attracted controversy due to Kinder Morgan’s about-turn on the master limited partnership structure it helped make popular. The partnership model has become increasingly common for energy companies because it enables investors to take all profits as dividends while taxes on the substantial quarterly payouts are deferred.
When units are sold or exchanged, as in this restructure, deferred taxes are due.
Chairman and CEO Richard Kinder said: “All shareholders and unitholders of the Kinder Morgan family of companies will benefit as a result of this combination.
“Everyone will hold a single, publicly traded security – KMI – which will have a projected dividend of $2.00 in 2015, a 16 percent increase over the anticipated 2014 dividend of $1.72.”