Kinder Morgan Energy Partners, L.P. (KMP) agreed Monday to sell certain of its midstream assets to Tallgrass Energy Partners, LP for about $3.3 billion, including assumed debt of $1.5 billion. The deal, subject to Federal Trade Commission approval, is expected to close in the fourth quarter.
The midstream assets include Kinder Morgan Interstate Gas Transmission, Trailblazer Pipeline Co., the Casper-Douglas natural gas processing and West Frenchie Draw treating facilities in Wyoming, and KMP's 50 percent interest in the Rockies Express Pipeline.
"As I previously stated, we would prefer to keep all of these assets, but we anticipated divestiture of certain assets in the Rockies would be necessary to obtain FTC approval," Chairman and CEO Richard Kinder said in a statement.
The deal is part the divestiture process of certain assets that is required under the conditional approval given by the Federal Trade Commission to complete the El Paso Corp. (EP) acquisition by Kinder Morgan, Inc. (KMI). KMP expects to complete the divestiture process during the third quarter of 2012.
KMI agreed in mid-October 2011 to acquire El Paso for about $21 billion, in a deal that will combine the two largest natural gas pipeline operators in North America. KMI also said in November that it intends to sell the exploration and production assets of El Paso, and other oil and gas companies. Kinder Morgan completed its acquisition of El Paso in late May.
The combination of the two companies makes Kinder Morgan the midstream company with the largest natural gas pipeline network in the U.S., and the fourth largest energy company in North America with an enterprise value of about $94 billion.
Barclays and Citi acted as financial advisers to KMP on the current divestiture deal.
Tallgrass is owned by The Energy & Minerals Group including Magnetar Capital, Kelso & Co. and the management team of Tallgrass, including CEO David Dehaemers, Jr., who served as CFO and EVP of corporate development at Kinder Morgan from 1997 to 2003. Tallgrass confirmed that it is interested in retaining the employees of the entities that is being acquired.
"Tallgrass Energy Partners is excited about the opportunity to acquire these premier midstream assets. We look forward to working with a talented group of Kinder Morgan employees and will leverage their integral experience as we continue the high level of operational performance of these assets, work to expand the asset base and grow the company," Dehaemers noted.
Kinder Morgan Energy Partners, L.P., whose general partner is owned by Kinder Morgan, is a leading pipeline transportation and energy storage company and one of the largest publicly traded pipeline limited partnerships in the U.S.
In Monday's regular trading session, KMP is currently trading at $82.13, down $0.41 or 0.50% on a volume of 65,747 shares.
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