Why Copano Energy Shares Surged

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 company Copano Energy LLC (UNKNOWN: CPNO.DL  ) climbed 15% today, after Kinder Morgan Energy Partners (NYSE: KMP  ) agreed to acquire it for about $3.2 billion.

So what: The all-stock deal values Copano at $40.91 per unit, and represents a 24% premium to its closing price on Tuesday. KMP is making the move to boost its access to increasingly-attractive shale basins in Texas, Wyoming, and Oklahoma, but, judging by its own stock's pullback today, Mr. Market isn't too excited over the price being paid to do it.

Now what: The deal is expected to close in the third quarter, and should be immediately accretive to cash available for distribution to KMP unit holders. According to KMP Chairman and CEO Richard Kinder:

Copano's assets are very complementary to ours, as [Kinder Morgan] is principally a pipeline transportation and storage company, while Copano is primarily a fee-based gathering, processing and fractionation player. . Broadening our midstream assets will allow us to offer a wider array of services to our customers.

While Copano's upside is likely limited at this point, KMP's newly-bolstered growth prospects might help spur some long-term gains.

Interested in more info on Copano? Add it to your watchlist.

How about Kinder Morgan? Add it to your watchlist.


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