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Kinder Morgan to offload stake in Cochin pipeline and the majority of KML to Pembina
Posted on Wednesday, 21 August 2019 12:45
Pembina Pipeline has reached an agreement to pick up the US-based portfolio of the Cochin Pipeline and a 70.0 per cent interest in Kinder Morgan Canada Limited (KML) from Kinder Morgan for a combined USD 3.85 billion in proceeds. Under the terms of the deal, the acquiror will pay USD 1.55 billion for the oil carrier, representing 13.0x 2019 expected earnings before interest, taxes, depreciation and amortisation (EBITDA). Furthermore, Pembina is offering 0.31 shares for every one held in KML, or a total 25.00 million stocks, which at yesterday’s close of CAD 49.27 implies a value of CAD 15.12 apiece and would be worth equivalent to USD 2.30 billion. Closing of both deals is conditioned that both go through and following the receipt of regulatory and security holder approvals will complete late in the fourth quarter of 2019 or early in Q1 2020. Kinder Morgan plans to use the proceeds from this deal to reduce debt, maintain its net debt to adjusted EBITDA ratio of around 4.5x and to invest in attractive products or repurchase shares. Chief executive Steve Kean said the transaction is attractive to both the company and KML, enabling the group to dilute obligations and gives more flexibility to create additional value. The US portion of the Cochin Pipeline is regulated by the Federal Energy Regulatory Commission and is run from Michigan to North Dakota. Kinder Morgan is billed as one of the largest energy infrastructure companies in North America, operating a total 84,000 miles of pipelines and 157 terminals, with 11,000 employees on hand and the largest natural gas network with about 70,000 miles of transportation. It holds interest in the Eagle Ford, Marcellus, Haynesville and Barnet shales and moves around 40.0 per cent of the total natural gas consumed in the US. © Zephus Ltd