(By Balaseshan) Kinder Morgan Energy Partners LP (NYSE:KMP) said it has agreed to buy 100% of Tennessee Gas Pipeline and 50% interest of El Paso Natural Gas pipeline for about $6.22 billion from Kinder Morgan Inc. (NYSE:KMI).
The purchase price includes about $1.8 billion in assumed debt at Tennessee Gas Pipeline (TGP) and about $560 million of proportional debt at El Paso Natural Gas (EPNG).
The company previously announced that KMI would offer to sell (drop down) these assets to KMP to more than replace cash flow from certain assets KMP is divesting pursuant to an agreement KMI reached with the Federal Trade Commission in order to complete the El Paso Corporation acquisition.
Kinder Morgan Energy expects to complete the divestiture process during the third quarter of 2012. It is anticipated that the combination of the divestitures and the dropdowns will be slightly accretive to KMP's distributable cash flow in 2012 and nicely accretive thereafter.
KMP intends to fund 10% of the transaction value, net of debt assumed, with KMP units that will be issued to KMI at closing valued at about $387 million. The remaining value is expected to be funded with borrowings under a new $2.0 billion credit facility, and equity and debt issuances. KMI plans to use the proceeds from the drop-down sales to reduce debt.
The transaction, which is expected to close this month and be effective August 1, was approved by the independent members of the boards of directors of both KMI and Kinder Morgan Management LLC (NYSE:KMR) after the receipt by each board of separate fairness opinions from different investment banks.
KMP closed Monday's regular session up 0.75% at $80.43, while KMI ended up 0.78% at $36.17.