Kinder Morgan Inc. announced on Sunday it is set to buy El Paso Corp. for $38 billion, along with cash, stock and debt to create a powerful North American energy company.
This once in a lifetime transaction is a win-win opportunity for both companies, Kinder Morgan chairman and CEO Richard Kinder said in a statement. The transaction is expected to produce immediate shareholder value (upon closing) through strong cash flow accretion and offers significant future growth opportunities.
Kinder will hold titles of chair in the combined company, which will result in a cost savings of nearly $350 million each year. The sale will make Kinder Morgan, a pipeline transportation and energy storage company, the fourth-largest energy company in North America, according to a statement from the company.
The offer is valued at $26.87 a share, which is 37 percent more than El Paso's closing price on Oct. 14, and is comprised of $14.65 in cash, 0.4187 Kinder Morgan Inc. shares and 0.64 Kinder Morgan warrants.
Kinder Morgan will sell product assets of El Paso and has a commitment letter from Barclays Capital to underwrite cash needed for the transaction, expected to close in the second quarter of 2012.