Kinder Morgan Inc plans to buy El Paso Corp in a US$20.7 billion deal that’s expected to create the US’ largest natural gas pipeline operator.
Kinder Morgan is expanding its reach as the US becomes increasingly reliant on natural gas.
Drillers are pumping ever--increasing amounts from underground shale deposits across the US.
Natural gas prices have dropped to less than a third of their level of three years ago and power companies are using more of the fuel because it emits fewer greenhouse gases than coal.
Kinder Morgan will more than double the size of its pipeline network by purchasing El Paso. The new pipeline system would stretch 128,800km — long enough to wind around the globe three times.
“We believe that natural gas is going to play an increasingly integral role in North America,” company chairperosn Richard Kinder said on Sunday when the deal was announced.
Once approved, Kinder Morgan said it will also become the largest independent transporter of gasoline, diesel and other petroleum products.
It will also be the largest independent owner and operator of petroleum storage terminals.
It will be the largest transporter of carbon dioxide in the US, moving about 37 million cubic meters a day.
Kinder Morgan and El Paso are both based in Houston, Texas. Kinder will remain chairperson and CEO of the combined company.
The companies valued the deal at US$26.87 per El Paso share, which includes US$14.65 in cash, 0.4187 in Kinder Morgan shares and 0.640 in Kinder Morgan warrants.
Based on El Paso’s about 770.25 million outstanding shares, the deal is worth about US$20.7 billion.
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