Kinder Morgan Energy Partners L.P’s (KMP) board of directors are under scrutiny for possible breaches of fiduciary duty and other violations of state law related to sale of the partnership to Kinder Morgan Inc. (KMI).
Levi & Korsinsky, a national firm, is investigating the matter. It is looking into whether Kinder Morgan’s board violated fiduciary duties to stockholders by failing to effectively shop the partnership before agreeing to enter into this transaction. It is also examining whether KMI is underpaying for Kinder Morgan shares.
Per the agreement, KMP unitholders are entitled to 2.1931 KMI shares and $10.77 in cash for each KMP unit they own. This is equivalent to a price of $89.98 per unit, a 12% premium based on the Aug 8, 2014 closing price. Moreover, this is a premium of 11.4% based on the closing price of Jul 16, used as the reference date by the parties during negotiation of the transaction.
The acquisition will likely simplify the structure of Kinder Morgan group of companies, benefiting all shareholders and unitholders. KMI is projected to return a dividend of $2.00 in 2015, up 16% from the estimated figure of $1.72 in 2014. Management expects the dividend to increase by about 10% each year from 2015 through 2020. Over the same period, excess coverage is anticipated to exceed $2 billion.
The combined entity, once operational, will represent the largest energy infrastructure company in North America and the third largest energy company overall. The new company is estimated to have an enterprise value of about $140 billion.
Kinder Morgan currently carries a Zacks Rank #3 (Hold). Investors interested in the oil and gas sector could consider stocks like Weatherford International plc (WFT) and Sunoco Logistics Partners L.P (SXL). Both of these sport a Zacks Rank #1 (Strong Buy) and are expected to perform better.
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