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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of natural gas pipeline operator El Paso (NYSE: EP ) soared 23% today after industry peer Kinder Morgan (NYSE: KMI ) agreed to buy it for about $21 billion.
So what: The all-cash deal values El Paso at $26.87 per share and represents a juicy 37% premium to its closing price on Friday. Kinder is making the move to expand in the midst of the continent's shale field boom, and judging by the stock's 8% pop today, Mr. Market seems very pleased with the strategy and purchase price.
Now what: While El Paso shares are probably all popped out, Kinder Morgan could just be getting started. The combined company would boast about 80,000 miles of pipe across the U.S., creating by far the largest midstream energy and pipeline company in the nation. Given all the pricing power that this newly created monster stands to possess, Kinder Morgan shares are certainly worth considering.
Interested in more info on El Paso? Add it to your watchlist.
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Report this Comment On October 18, 2011, at 8:42 AM, mm5525 wrote:
EP longs have the following options:
The offer is comprised of $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 Oct. 14, 2011. The warrants will have an exercise price of $40 and a five-year term. EP shareholders will be able to elect, for each EP share held, either (i) $25.91 in cash, (ii) 0.9635 shares of KMI common stock, or (iii) $14.65 in cash plus 0.4187 shares of KMI common stock. All elections will be subject to proration and in all cases EP shareholders will receive 0.640 KMI warrants per share of EP common stock.
http://phx.corporate-ir.net/phoenix.zhtml?c=119776&p=iro...
I am long EP and unsure what I will do. Part of me wants to take the money and run now, but the 4.5% KMI yield is juicy. I am worried of anti-trust issues killing this deal, though. Even though EP has agreed not to solicit other offers, I think it's possible they do get other offers. KMI rallying as the acquirer tells me KMI underpaid for EP.
Report this Comment On October 18, 2011, at 4:11 PM, Retired1OG wrote:
I held Coastal Stock and when it merged with EP the stock dropped dramatically. I'm not worried about a merger with Kinder, because I'm in in for the long haul.
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