Workers move pipe for part of the Kinder Morgan, Inc. Rockies Express Natural Gas Pipeline just outside Laramie, Wyoming, in August, 2006.
Workers move pipe for part of the Kinder Morgan, Inc. Rockies Express Natural Gas Pipeline just outside Laramie, Wyoming, in August, 2006. (Matthew Staver/Getty)

U.S. energy company Kinder Morgan Inc. is buying all the outstanding stock of Kinder Morgan Energy Partners LP, Kinder Morgan Management LLC and El Paso Pipeline Partners LP for $44 billion in stock and cash, consolidating the four entities into one publicly traded company.

In doing so, the combined company folds the tax-favored master limited partnerships Kinder Morgan helped pioneer in the 1990s into a conventional corporate structure.

The deal also calls for KMI to assume $27 billion in debt, putting the total transaction value at about $71 billion.

Chairman and CEO Richard Kinder said the move would allow the combined entity to grow faster by “dramatically” simplifying the companies’ structure with respect to incentive distributions and debt subordination, according to a company press release.

Consolidating the companies would also let Kinder Morgan expand and make more acquisitions in an expected shale drilling boom, Bloomberg reports.

Under the complex deal, Kinder Morgan Energy Partners (KMP) unit holders receive 2.1931 Kinder Morgan Inc. (KMI) shares and $10.77 in cash for each KMP unit, a premium of 11.4 percent over KMP’s closing price on July 16, the reference point used by all the parties in the transaction. Kinder Morgan Management (KMR) shareholders, meanwhile, would get 2.4849 KMI shares for each KMR share, a 16 percent premium over KMR’s closing price. El Paso Pipeline partners (EPB) unit holders would receive 0.9451 KMI shares and $4.65 in cash for each EPB unit, an 11.2 percent premium over EPB’s closing price. Both KMP and EPB unit holders would be able to elect cash or KMI stock consideration subject to proration.

The proposal has been approved by the boards of all the Kinder Morgan companies, who have voted to recommend it to their shareholders and unit holders, according to KMI. The transaction is expected to close by the end of 2014.

Weil, Gotshal & Manges and Bracewell & Giuliani advised KMI, while Baker Botts counseled KMP and KMR, and Vinson & Elkins represented EPB.

The combined company would be the largest energy infrastructure company in North America and the third-largest energy company overall, with a combined enterprise value estimated at $140 billion, according to KMI. Together, the entities operate or own an interest in 80,000 miles of pipeline and 180 terminals. The pipelines transport natural gas, gasoline, crude oil and carbon dioxide and its terminals store petroleum, ethanol and other energy products, as well as steel.

The Weil team for KMI was led by corporate partner Michael Aiello. Tax partners Jared Rusman and Marc Silberburg, employee benefits partner Amy Rubin, environmental partner Annemargaret Connolly, antitrust counsel Vadim Brusser, antitrust partner Steve Newborn, securities litigation partners Joseph Allerhand and Greg Danilow and counsel Seth Goodchild also advised in the matter.

The associates on the Weil team included Adam Bookman, Banks Bruce, Mariel Cruz, Christina De Vuono, Sachin Kohli, Lane Morgan, Amanda Pooler, Amanda Rosenblum, Gladriel Shobe and Adam Templeton, who is not yet admitted to practice.

The Bracewell & Giuliani team was led by Gregory Bopp, cochair of the firm’s business and regulatory section and a member of its management committee. Tax partner Lance Behnke; finance and energy partner Heather Brown; corporate and securities partner W. Cleland Dade; corporate, securities and M&A partner Troy Harder; Washington, D.C., managing partner Mark Lewis; energy partner D. Kirk Morgan II; corporate and securities partners Gary Orloff, Manuel Vera and R. Daniel Witschey Jr.; and restructuring partner William Wood III also worked on the deal.

The Bracewell associates on the matter included Elizabeth Behncke, George Fatula, Rebecca Keep, Kathy Medford, Serena Rwejuna, Caitlin Tweed and Caroline Wells.

Bracewell and Weil also advised KMI’s $2.9 billion initial public offering in February 2011, as reported in The Am Law Daily, as well as its acquisition in October 2011 of rival oil pipeline company El Paso Corp.

In January 2013, KMP was counseled by Weil and Bracewell on its $5 billion buy of natural gas company Copano Energy (Vinson & Elkins advised TPG Capital, then the largest shareholder in Copano, in that deal). Weil and Bracewell also advised on KMP’s December 2013 acquisition of two crude oil transporting tanker companies for $1 billion.

Bracewell advised KMI in its $7.15 billion sale of El Paso Corp.’s exploration and production business to affiliates of Apollo Global Management and Riverstone Holdings in February 2012.

Vinson & Elkins advised the conflicts committee of El Paso Pipeline Partners in this latest transaction. The team was led by corporate partners Keith Fullenweider, Stephen Gill and Mike Rosenwasser. Also advising in the matter were litigation partner Michael Holmes, tax partner John Lynch, environmental partner Larry Nettles, energy regulatory partner Jay Seegers and counsel Sabina Walia. Associates Benji Barron, Lina Dimachkieh, Justin Hunter, Jordan Rodriguez, Lande Spottswood and Brandon Tuck also worked on the deal.

Vinson & Elkins previously represented the private equity investors in KMI when the company went private in 2006.

Baker Botts represented the audit and conflicts committee team of KMP and the special committee of KMR in the current deal. The team was led by corporate partners Joshua Davidson and Tull Florey and included tax partner Michael Bresson, tax special counsel Chuck Campbell, litigation partner Danny David, tax partner Don Lonczak and litigation partner David Sterling. The Baker Botts associates who worked on the deal include senior associates James Marshall and Jeremy Moore, as well as associates Chelsie Gonzales, Laura Katherine Mann and Sarah McDermand.

Baker Botts had earlier represented the conflicts and audit committees of KMP and KMR in the March 2013 acquisition of 50 percent of the outstanding equity interests in El Paso Midstream Investment and 50 percent of outstanding interests in El Paso Natural Gas Co. from KMI for $1.7 billion.