Kinder Morgan Inc said on Sunday it will pay around $21 billion to buy El Paso Corp, creating the largest pipeline company in North America.
The offer of $26.87 a share, represents a 37 percent premium to the closing price of El Paso shares, based on its Friday, October 14 closing price of $19.59.
When including El Paso's debt, the deal tops $38 billion.
The offer per share comprises $14.65 in cash, 0.4187 KMI shares -- valued at $11.26 per EP share -- and 0.640 KMI warrants -- valued at $0.96 per EP share -- based on KMI's closing price on Friday.
The warrants will have an exercise price of $40 and a five-year term.
The transaction has been approved by each company's board of directors the companies said. Pipeline transportation and energy storage company KMI said it has a commitment letter from Barclays Capital underwriting the full amount of cash required for the transaction.
El Paso Corp owns North America's largest natural gas pipeline system.
The new company hopes to generate $350 million a year in cost savings, or about 5 percent of the combined companies' earnings before interest taxes, depreciation and amortization. It is expected to be immediately accretive to dividend yield for KMI holders through these savings.
The new combined company will be 68 percent owned by KMI shareholders with EP holders owning the remaining 32 percent.
The companies also said the transaction is expected to close in the second quarter of 2012 subject to regulatory approvals.
Copyright 2011 Thomson Reuters. Click for restrictions.
Source: http://www.msnbc.msn.com/id/44922359/ns/business-us_business/
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