Kinder Morgan Energy Partners (KMP) will acquire a 100% stake of the Tennessee Gas Pipeline (TGP), as well as a 50% stake in the El Paso Natural Gas pipeline (EPNG) from Kinder Morgan (KMI) for approximately $6.22bn.
The acquisition includes taking over an estimated $1.8bn in assumed debt at TGP and approximately $560m proportional debt at EPNG.
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The independent members of the boards of directors of both KMI and Kinder Morgan Management have approved the deal, which is expected to close in August 2012.
Divesture of the two premier natural gas pipelines is expected to generate substantial cash flow for KMP.
Kinder Morgan chairman and CEO Richard D Kinder sought to highlight the importance of the pipelines, saying, "TGP serves the Northeast and has access to the growing Marcellus and Utica shale plays, while EPNG serves much of the West, including southern California, Arizona and northern Mexico."
"KMP is purchasing world-class assets with tremendous growth opportunities at an attractive price, and KMI is reducing its debt outstanding and continuing to participate in the cash flows from the assets through its general and limited partner interests in KMP," added Kinder.
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By GlobalDataThe company is making this purchase at eight times the 2012 EBIDTA value and will fund 10% of the transaction with KMP units that will be issued to KMI at closing valued at about $387m.
The remaining 90% of the transaction will be funded by a $2bn credit facility, equity and debt issuing.
EPNG is a 10,200-mile pipeline system has a design capacity of about 5.6 billion cubic feet per day while the 13,900-mile TGP pipeline system has a design capacity of about 7.5 billion cubic feet per day.
