Michael Aiello, 45, corporate chair and member of Weil Gotshal & Manges’ management committee.
Kinder Morgan Inc., a Houston-based energy company that also owns general partner and limited partner interests in Kinder Morgan Energy Partners LLP (KMP), El Paso Pipeline Partners LP (EPB) and Kinder Morgan Management (KMR).
The agreement calls for Kinder Morgan Inc. to buy all of the outstanding stock of KMP, KMR and EPB for $44 billion in cash and stock and $27 billion in assumed debt for a total transaction value of $71 billion. All four entities would be combined into one publicly traded corporation that would make it the third-largest energy company in the United States after Exxon and Chevron, according to The New York Times.
The deal was announced Aug. 10 and approved by the boards of all four companies, with each transaction contingent upon closing of the others. As part of the agreement, KMP unit holders would receive 2.1931 KMI shares and $10.77 in cash for each KMP unit, a premium of 11.4 percent based on the July 16 closing price that was used as a reference date in negotiations. KMR shareholders would get 2.4849 KMI shares per share of KMR, a 16 percent premium, while EPB shareholders would get 0.945 KMI shares and $4.65 cash per EPB unit, representing a 11.2 percent premium. The transaction is expected to close by the end of 2014.
As The Am Law Daily reported on Monday, Bracewell & Giuliani advised Kinder Morgan alongside Weil on the deal. Baker Botts represented the audits and conflicts committee of KMP and the special committee of KMR, while Vinson & Elkins counseled EPB’s conflicts committee.
THE BIG PICTURE
The transaction is remarkable not only for its massive size but also because Kinder Morgan pioneered the tax-advantaged master limited partnership organization it is now leaving behind, analysts say. The move surprised many in the oil and gas industry, as reported in Forbes and other financial media.
The Kinder Morgan deal is the largest energy M&A transaction since Exxon merged with Mobil in 1999, according to Energy & Capital newsletter. It creates the largest energy infrastructure company in North America and the third-largest energy company overall with an enterprise value of about $140 billion, including $100 billion in market value and $40 billion of debt after the closing, the company says.
Chairman and CEO Richard Kinder said the move allows the combined company to grow faster and make more acquisitions. Observers say it also could save the company billions in tax dollars while increasing dividends for shareholders.
“This is a company that always has been out front and delivered a lot of value for shareholders,” Aiello said of Kinder Morgan.
The relationship between Kinder Morgan Inc. and Weil began in 2006, when the firm represented its CEO and senior company management as several senior managers and a group of investors, including The Carlyle Group and Goldman Sachs Capital Partners, took the company private. Some of Kinder Morgan’s in-house counsel had worked with Jim Westra when he was cohead of Weil’s private equity practice in Boston. (Westra is now chief legal officer at Advent International.)
Weil has been deeply involved in representing the Kinder Morgan companies. In February 2011, the firm advised Kinder Morgan on its $2.9 billion initial public offering, which was described as the largest IPO by a private equity organization in U.S. history, according to Bloomberg. In October 2011, Weil was once again on hand for the company’s $37.8 billion buy of El Paso Corp., a rival pipeline company.
In January 2013, Weil represented KMP on the $5 billion purchase of Copano Energy LLC, a natural gas transportation and processing company with 6,900 miles of pipeline and nine plants in United States, and KMP’s acquisition in December 2013 of two crude oil tanker companies for $1 billion. (Houston-based Bracewell also advised on those deals.)
Aiello joined Weil in January 2007 from the former Dewey Ballantine, where he was a partner. He has handled several complex energy deals for Weil, including representation of the special committee of McMoRan Exploration in the $3.4 billion sale of the company as part of a three-way merger with Freeport-McMoRan and Plains Exploration & Production Company in February 2013.
Last summer, Aiello and David DeVeau, vice president and general counsel of Kinder Morgan, began consulting with one another, and a couple of months ago Weil was approached about the current consolidation deal.
The complex transaction was initiated a couple of months ago, but Aiello was juggling other big deals at the same time: He also advised Comdata, Ceridian, Thomas H. Lee Partners and Fidelity National Financial Inc. on their $3.45 billion sale of Comdata to FleetCor earlier this week.
Of the Kinder Morgan deal, Aiello said: “The most challenging thing was how do you coordinate four companies and three transactions all that are conditioned on one another getting done? Just imagine how difficult it is to negotiate one M&A transaction, and this was three at the same time.”
He credited the deal team at Weil and counterparts at Bracewell & Giuliani as well as the in-house team at Kinder Morgan for helping to bring it all together.
Aiello described the intense pressure and amount of detail that went into getting the deal done. “When you deal with a transaction of this size, everything is under a microscope, and these were companies that are related, and that raises challenges,” he said. “And when you decide you are going to do a deal, you want to get it done in a reasonable amount of time. That adds a lot of pressure.”
Brooklyn-born Aiello says his experience working his way through New York University as an emergency medical technician in the hectic New York City of 1988 to 1991 helped teach him how to manage complexity in his role as chair of Weil’s 600-lawyer corporate department, which under his leadership has advised on more than $180 billion in U.S. M&A deals in the first half of 2014.
He recalls specific days as an EMT when “all hell broke loose” with patients injured in fires, accidents and more. “If you would talk to the people I work with, I tend to do two things well,” Aiello said. “The first thing is that I tend to be very calm under pressure. I can slow down and take a step back, and I do that in my practice every day. And the other thing is that I can take a very complicated situation and break it into pieces I can understand.”