Hedgeye’s Kevin Kaiser is an independent analyst on a lone crusade against the shoddy valuation of capital intensive corporations with limited earnings but with strong dividend payout track records. His question: where exactly is the money coming from?
His biggest beef is with Kinder Morgan, the pipeline operator which recently transformed itself from a Master Limited Partnership into a corporation. But, as Kaiser observes in a new research note, “Yieldco” syndrome could be much more common than that. Read more
Matt Levine at Bloomberg has already explained how the $12bn surge in the value of Kinder Morgan Inc. following its self-acquisition is mostly due to the tax savings brought about by the deal:
The $44bn self-acquisition of Kinder Morgan has been heralded by some as a great deal for shareholders.
But is it? Is it really? At least for the ordinary investors?
We’ve already wondered about the motivation for the deal.
Among our initial thoughts: Kinder Morgan MLP units trading under the KMP ticker had got expensive due to the heavy promotion of MLP structures as a safe-ish and yieldy investment at a time of low interest rates.
But we now think there may be more to it than that. Read more
Bitcoin does it. Dogecoin does it. Gold miners do it. And now Kinder Morgan does it too.
What we’re talking about is the amazing ability to create value out of nothing.
The Kinder Morgan self-acquisition deal, which effectively found $12bn of shareholder value from a paperwork reshuffle, is probably the most high-profile example of mining shareholder value from good old fashioned financial ingenuity, even when it involves some finance reverse-engineering. Read more
Kinder Morgan has made a bold bet on the future of US natural gas by making a $38bn deal for El Paso, the pipeline operator, Reuters reports. The takeover includes El Paso’s debt alongside a $21bn cash and stock deal, and values El Paso at a 37 per cent premium to Friday’s closing price. Kinder Morgan said it plans to sell El Paso’s exploration assets, instead prizing the company’s 43,000 miles of interstate gas pipelines, the FT reports. Added to Kinder Morgan’s assets, the network will be able to reach every major natural gas production area in the US and create the country’s fourth-largest energy company, the WSJ says.
One of the United States’ largest natural-gas pipeline operators is buying a rival for $21.1bn in cash and stock, the WSJ says, making a big bet on the future of shale gas. Pipeline giant Kinder Morgan says that by buying rival El Paso it will become the largest operator of natural-gas pipelines in the country, and the fourth-largest energy company in the US. The combined company would own about 80,000 miles of pipe stretching from coast to coast. It was not immediately clear how regulators would view the deal, which Reuters says could demand higher transport fees from oil and gas producers, which could then raise the prices that power companies and other end users pay for gas.
Amid a resurgence in dealmaking, buy-out groups are doing their utmost to make 2011 the year of the initial public offering, reports the FT. Companies have raised more than $26bn globally this year through IPOs, the best start on record, according to Dealogic. This flurry has been particularly pronounced in the US. Already this year, the US market has chalked up two of the biggest floats ever of sponsor-backed companies with the IPOs of Kinder Morgan, the energy company, and Nielsen, the media tracking group. HCA, the hospital operator, is likely to top that with an IPO that could exceed $4bn, making it the largest private equity-backed flotation.
Kinder Morgan, the pipeline company that was taken private by its chief executive and a group of private equity funds in 2006, has filed registration for an initial public offering of shares to raise up to $1.5bn, the FT reports. It joins a list of successful private equity portfolio companies that have lined up to take advantage of thawing public markets after the financial crisis mostly shut the window for IPOs. The shares being sold are owned by private equity funds controlled by Goldman Sachs, The Carlyle Group, Riverstone Holdings and Highstar Capital. They became partners in the leveraged buy-out, which acquired the company for $15bn, and took on $7bn in debt. Together, the firms own roughly 60 per cent of the shares. Meanwhile Bloomberg reports that Cerberus Capital Management is seeking buyers for Chrysler Financial, which it acquired in 2007, according to sources.