Kinder deal gives Copano investors long-awaited payout

Investors in Copano Energy may finally get something for which they’ve waited years: a good return. Kinder Morgan said it plans to buy the Houston-based pipeline company for about $4 billion, a 23.5 percent premium to Copano’s closing price Tuesday.

Copano shares jumped $4.96, or almost 15 percent, to $38.09 in late morning.

“The deal makes a lot of sense and will clearly benefit Copano investors, who are getting a price they haven’t seen [the company] trade at since mid-2008,” said Hinds Howard, chief investment officer for Guzman Investment Strategies in Austin, who tracks energy partnerships.

Copano was once among the fastest-growing pipeline partnerships in the U.S., with quarterly distributions rising at an annual rate of about 30 percent. In the past four years, though, that distribution growth slowed to a trickle.

It has been rumored as a takeover candidate since the death of its founder and former chief executive John Eckel in 2009.

Kinder Morgan was often mentioned as a possible suitor because the two companies shared a joint venture that operated a gas gathering system in the Eagle Ford Shale of South Texas.

Copano’s corporate structure also made it more attractive as an acquisition. Although the company functions much like a partnership, it’s a limited liability corporation, which means it doesn’t have a general partner. That makes it easier to acquire than a traditional master limited partnership.

The deal will benefit Kinder Morgan over the long-term as well, Howard said. The move is part of a buying spree for Kinder Morgan that included the $21 billion purchase of El Paso Corp. last year.

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About The Author

Loren Steffy is the business columnist for the Houston Chronicle. His column appears in on Wednesdays, Fridays and Sundays. He is also the author of "Drowning in Oil: BP and the Reckless Pursuit of Profit," and "The Man Who Thought Like a Ship."