Kinder Morgan, a leading U.S. energy company, has proposed consolidating its Master Limited Partnerships (MLPs) under its parent company. If it happens, it would be the second largest energy merger in history (the Exxon and Mobil merger in 1998, estimated to be $110.1 billion in 2014 dollars, is still the top dog).
Motley Fool details the deal this way:
Terms of the deal
The $71 billion deal is composed of $40 billion in Kinder Morgan Inc shares, $4 billion in cash, $27 billion in assumed debt.Existing shareholders of Kinder Morgan’s MLPs will receive the following premiums for their units (based on friday’s closing price):
- Kinder Morgan Energy Partners: 12%
- Kinder Morgan Management: 16.5%
- El Paso Pipeline Partners: 15.4%
Existing unit holders of Kinder Morgan Energy Partners and El Paso Pipeline Partners are allowed to choose to receive payment in both cash and Kinder Morgan Inc shares or all cash.
As I understand it, the exiting holders of the partnerships would have to pay taxes on the merger (this is partnership to a C-corp), but please, consult your tax professional.
The goal here is said to be to increase dividend potential and use the C-corp structure to