Kinder Morgan to Consider Proposal to Go Private

The chief executive of oil and gas pipeline operator Kinder Morgan Inc. said Monday that senior management and investors, including a unit of Goldman Sachs Group Inc., have proposed buying the company for $100 a share and taking it private.

The proposal values Houston-based Kinder Morgan, which operates an estimated 43,000 miles of pipeline, at about $13.4 billion.

Richard D. Kinder, chairman and CEO of Kinder Morgan, said the total value of the deal, including debt, would be about $22 billion. That would make the proposal one of the biggest private equity deals ever.

The proposal represents a premium of 18.5% over the closing price of Kinder Morgan stock Friday at $84.41.

Kinder said the investor group included himself, co-founder Bill Morgan, board members Fayez Sarofim and Mike Morgan, Goldman Sachs Capital Partners, insurer American International Group Inc. and private equity firms Carlyle Group and Riverstone Holdings.

Kinder, who would remain as chairman and CEO after the deal, said he would reinvest all of his 24 million shares in the firm.

Management and board members taking part would invest almost $2.8 billion in the deal. The financial sponsors would provide $4.5 billion of equity, and there would be $14.5 billion of funded debt.

“Under our proposal,” Richard Kinder said, “the senior management team would remain intact to help lead our enterprise into the future.”

Kinder Morgan said its board had formed a committee of independent directors to consider the proposal and that the committee would hire independent financial advisors and legal counsel.

According to Reuters data, Kinder Morgan had a market value of about $11.3 billion as of Friday’s market close. On that basis, to buy all of its roughly 134 million shares outstanding for $100 a share would cost about $13.4 billion.

Kinder said the proposal would benefit the firm’s pipeline limited partnership Kinder Morgan Energy Partners.

Although the unit is not involved in the proposal, Kinder said the transaction would make possible a crude-oil hedging facility that would lock in $1.5 billion in proceeds from future crude sales.