Kinder Morgan Buys El Paso

Kinder Morgan & El Paso

* $21.1 billion in cash and stock

* Bought to tap into a boom in natural gas drilling and production

* Will make Kinder Morgan biggest of North America's midstream energy companies, which process oil and gas products before transporting them to production facilities

* KM will own or operate about 67,000 miles of pipelines stretching across the continent

* CEO: "If you believe in the future of natural gas, you believe in putting together the biggest possible network."

* Made Kinder Morgan the dominant pipeline company in the country - "They can deliver gas all over the country."

* Valued at $38 billion, including the assumption of debt owed by El Paso and an affiliated business, El Paso Pipeline Partners

o 2nd biggest deal announced this year and largest energy deal since Exxon Mobil bought XTO Energy for $40.8 billion in late 2009

* Paying a big premium

o Per share, $14.65 cash, .4187 of Kinder share, and .640 of a warrant

 Values the offer at $26.87

o 37% premium to Friday closing price and 47% premium to 20-day average closing price

* Expects to raise dividends starting next year at average annual rate of 12.5% through 2015

* KM received financing from Barclays to pay for cash portion

o $11.5 billion cash portion

* Plan to sell El Paso's exploration and production business to help pay down debt

o El Paso had already announced in May it would spin off those business, which account for 34% of annual revenue

* Expected to close by 2Q next year

* KM will own 68% of combined company, El Paso shareholders will own the rest

* Had talked with El Paso about a deal for years, but needed to wait until IPO in February (one of largest IPO by company owned by PE firms... raised $2.9 billion)

o Needed currency of public stock to do the deal

* Advisors

o KM: Evercore, Barclays

o El Paso: Morgan Stanley (and had already been receiving advice from Goldman on previous spinoff plan)

* The business reported 2010 earnings of $1.1 billion before interest, taxes, depreciation and amortization, said Bruce Connery, a spokesman for El Paso. That would give it a value of about $7.3 billion