Kinder Morgan facing investor lawsuit over consolidation plan

Oct. 3 — Kinder Morgan Energy Partners LP shareholders will face a significant tax burden from Richard Kinder’s $44 billion consolidation plan, an investor said in a lawsuit.

Shareholders will lose 4 percent of their investment value under the proposed deal, announced in August, investor Irwin Berlin said in a complaint filed today in Delaware Chancery Court.

“The tax consequences of the proposed transaction significantly (and disproportionately) impact” Energy Partners holders, Berlin said in the complaint. “Investors who purchased units of the company as a retirement strategy will immediately owe taxes which they, if they had held the investment until death, would not have had to pay.”

Kinder, a Houston billionaire, is consolidating his pipeline empire as the U.S. shale drilling boom opens up $1.5 trillion in potential purchases and expansion projects. Investors have been putting pressure on Kinder to consolidate, cut costs and increase profits. Kinder, 69, controls the empire through his 24 percent stake in parent Kinder Morgan Inc.

Under the proposed deal, Kinder Morgan will acquire all of Kinder Morgan Energy Partners, Kinder Morgan Management LLC and El Paso Pipeline Partners LP in a series of transactions. The merger plan is comprised of $40 billion in parent-company equity, $4 billion in cash and $27 billion in assumed debt, according to a presentation posted on Kinder’s website in August.

Berlin is seeking to represent all Energy Partners shareholders in a bid to rescind the consolidation agreement.

Larry Pierce, a spokesman for Houston-based Kinder Morgan, didn’t immediately return a phone call for comment on the complaint.

The case is Berlin v. Kinder Morgan Energy Partners LP, CA10191, Delaware Chancery Court (Wilmington).