Kinder Morgan to Go Private

The chairman and CEO of pipeline operator Kinder Morgan Inc. (KMI) has teamed up with senior managers and outside investors to purchase the company for about $13.4 billion and take it private, officials announced Monday.

Richard D. Kinder sent a letter to the Houston-based company's board of directors on Sunday offering to pay $100 a share, an 18.5 percent premium above Friday's $84.41 closing price. The deal also includes the assumption of more than $8 billion in debt, bringing its total value to almost $22 billion.

"We believe that our offer is fair and in the best interest of the company and its public shareholders and that the shareholders will find our proposal attractive," wrote Kinder, adding that he intends to remain as chairman and CEO following the transaction.

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"The familiarity of our management team with the company means that we will be in a position to finalize the merger agreement very quickly," he added.

The company's board of directors has formed a special committee of independent directors to consider the proposal.

"The board of directors cautions KMI's shareholders and others considering trading in its securities that it has only received the proposal and that no decisions have been made by the board of directors with respect to the company's response to the proposal," the company said in a news release.

Kinder said in his letter that the acquisition would be structured as a merger between Kinder Morgan and the group of investors that includes co-founder Bill Morgan, board members Fayez Sarofim and Mike Morgan, Goldman Sachs Capital Partners, AIG Global Asset Management Holdings Corp., The Carlyle Group and Riverstone Holdings LLC.

Kinder said he would reinvest 100 percent of his equity stake in the company and that combined with the investments from other senior managers and board members this would amount to roughly $2.8 billion, based on the proposed transaction price. The outside investors would provide $4.5 billion in equity, and the remainder of the transaction would be financed with debt.

Kinder Morgan owns an interest in or operates about 43,000 miles of pipelines that transport primarily natural gas, crude oil and petroleum products. It also has more than 150 terminals that store, transfer and handle products such as gasoline and coal, and provides natural gas distribution service to more than 1.1 million customers.

The company had net income of $554 million in 2005, an increase of about $30 million from the year before. Its first quarter profit jumped 35 percent to $193.7 million.

On May 22, Kinder Morgan closed on the sale of its water and utility services unit to a private group of investors for $111 million in cash.

As of Friday, the company had 133.6 million outstanding shares valued at $11.28 billion.

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