Kinder Morgan’s $21.1 billion offer for El Paso Corp. appears to be a good deal for both companies’ shareholders, and of course, for Rich Kinder himself. Kinder controls about 219 million Kinder Morgan shares, which as of late morning had risen about $1.70 from Friday thanks to the El Paso deal. That means Kinder’s stake rose by about $370 million over the weekend and is now worth about $6.26 billion.
Kinder isn’t alone. Once again, billionaire Carl Icahn shows up as a big winner, just as he did in the earlier buyout battle over Houston-based Southern Union Co. According to an August filing with the Securities and Exchange Commission, Icahn is the biggest individual holder of El Paso’s stock. Icahn didn’t report owning any El Paso shares at the end of June, meaning he scooped up the shares sometime in mid-summer and, given the surge in El Paso shares today, the value of his investment has risen between 20 percent and 45 percent in the past few months.
Another big winner: Houston investor Fayez Sarofim. He owned more than 5 million units of Kinder Morgan Energy Partners. The value of the units has jumped by about $2.69 today, meaning he made about $14 million over the weekend.
And the losers? Investors who own El Paso Pipeline Partners. Its units fell $3.93 to $33.96 in midday trading. For them, the Kinder Morgan deal is likely to mean slower distribution growth. During the past three years, the partnership has grown distributions by 17.6 percent annually. Once the deal is complete, Kinder Morgan said it expects that to drop to about 9 percent, and that’s a best-case scenario. It’s possible Kinder Morgan could buyout the partnership at some point, but in the short-term, investors who thought they were looking at steady returns have found they are suddenly going to be getting a lot less.
Update (10/18): Another big winner in the deal, as the Wall Street Journal points out, is El Paso chief executive Doug Foshee. He becomes the latest CEO to clean up by selling off his company and going home. In Foshee’s case, he’ll have about $95 million in severance payments and equity, one of the biggest goodbye kisses ever for a departing CEO after a merger.
An El Paso spokesman noted that Foshee has never exercised any options or sold any stock in El Paso since he joined the company in September 2003. Given that the shares have tripled since then, shareholders probably aren’t too upset with Foshee’s severance, much of which comes from options and restricted shares he accumulated during his tenure.