HOUSTON, May 29 /PRNewswire-FirstCall/ -- Richard D. Kinder, the Chairman and CEO of Kinder Morgan, Inc. , today announced that he, together with other members of management, co-founder Bill Morgan, current board members Fayez Sarofim and Mike Morgan, and investment partners Goldman Sachs Capital Partners, American International Group, Inc., The Carlyle Group and Riverstone Holdings LLC, has submitted a proposal to acquire all of the outstanding common stock of Kinder Morgan, Inc. at a price of $100 per share in cash. Kinder, who would continue as Chairman and CEO following the transaction, would reinvest all of his 24 million KMI shares. Combined, KMI management and the participating board members would be investing almost $2.8 billion in the transaction, and the financial sponsors would provide the remainder of the required equity. The value of the purchased equity, together with the debt that would be either refinanced or remain outstanding is approximately $22 billion. Goldman Sachs Credit Partners has provided a "highly confident" letter regarding the group's ability to raise the required debt. (A copy of the text of the proposal letter to the KMI board of directors and Goldman Sachs Credit Partners' letter is attached to this news release).
The proposal represents a premium of approximately 18.5 percent over the closing price of KMI stock on Friday, May 26, of $84.41. At the offer price, KMI shareholders will have realized an average annual return of approximately 39 percent since the announcement of the creation of KMI in July 1999.
"I am very pleased to be working with Goldman Sachs, AIG, Carlyle and Riverstone Holdings to provide extraordinary value to all of KMI's shareholders," Kinder said. "Under our proposal, the senior management team would remain intact to help lead our enterprise into the future, and it would be business as usual for our valued employees, who are responsible for our success. We look forward to working with the KMI board of directors and hope that a merger agreement can be reached in the near future."
"This buyout proposal reflects the confidence that senior management and the sponsors have in the future growth potential of Kinder Morgan Energy Partners, L.P. , as KMI's ownership of the general partner of, and other partnership interests in, KMP represents KMI's largest and fastest growing asset," said Kinder. "KMP would directly benefit in two ways. First, this transaction would enable a new crude oil hedging facility to be implemented for the CO2 business segment that would lock in $1.5 billion in proceeds from future crude sales without requiring the posting of margin. Second, upon completion of the transaction, KMI would offer KMP the option to acquire the Trans Mountain Pipeline and its future expansion opportunities at an attractive price, subject to KMP board approval."
Founded in 1869, Goldman Sachs is one of the oldest and largest investment banking firms. Goldman Sachs is also a global leader in private corporate equity and mezzanine investing. Established in 1992, the GS Capital Partners Funds are part of the firm's Principal Investment Area in the Merchant Banking Division. Goldman Sachs' Principal Investment Area has formed 12 investment vehicles aggregating $35 billion of capital to date. With $8.5 billion in committed capital, GS Capital Partners V is the current primary investment vehicle for Goldman Sachs to make privately negotiated equity investments.
American International Group, Inc. (AIG), world leaders in insurance and financial services, is the leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world. AIG's common stock is listed in the U.S. on the New York Stock Exchange as well as the stock exchanges in London, Paris, Switzerland and Tokyo.
The Carlyle Group is a global private equity firm with $39 billion under management. Carlyle invests in buyouts, venture & growth capital, real estate and leveraged finance in Asia, Europe and North America, focusing on aerospace & defense, automotive & transportation, consumer & retail, energy & power, healthcare, industrial, technology & business services and telecommunications & media. Since 1987, the firm has invested $18.1 billion of equity in 463 transactions for a total purchase price of $73.2 billion. The Carlyle Group employs more than 650 people in 14 countries. In the aggregate, Carlyle portfolio companies have more than $46 billion in revenue and employ more than 184,000 people around the world. http://www.carlyle.com/.
Riverstone Holdings LLC is a New York-based energy and power focused private equity firm founded in 2000 with $6.5 billion currently under management. Riverstone conducts buyout and growth capital investments in the midstream, upstream, power and oilfield service sectors of the energy industry. To date, the firm has committed more than $2 billion to over 20 investments across each of these four sectors, involving more than $15 billion of assets. For more information on Riverstone Holdings, see http://www.riverstonellc.com/.
This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although it is believed that the expectations are based on reasonable assumptions, there can be no assurance that such assumptions will materialize. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein are enumerated in Kinder Morgan Inc.'s and Kinder Morgan Energy Partners, L.P.'s Forms 10-K and 10-Q as filed with the Securities and Exchange Commission.
May 28, 2006
Board of Directors
Kinder Morgan, Inc.
500 Dallas Street, Suite 1000
Houston, Texas 77002
Gentlemen:
Together with senior management, co-founder Bill Morgan, Board members Fayez Sarofim and Mike Morgan, and investment partners GS Capital Partners, AIG, The Carlyle Group, and Riverstone Holdings LLC, I am pleased to offer to acquire all of the outstanding shares of common stock of Kinder Morgan, Inc. (the "Company") at a cash purchase price of $100 per share.
We believe that our offer is fair and in the best interest of the Company and its public shareholders and that the shareholders will find our proposal attractive. This offer represents a premium of 18.5% over the closing price of the Company's common shares on May 26, 2006. The acquisition would be in the form of a merger of the Company with a new acquisition vehicle that we would form.
I would continue as Chairman and CEO following the transaction, and we also expect that the Company's senior management team would remain in place. We clearly anticipate continuing to run the business in accordance with our current practice and maintaining the Company's valuable employee base, which we view as one of its most important assets.
I would expect to reinvest 100% of my equity ownership through this transaction. My reinvestment, when combined with the investment expected to be made by other members of senior management and by each of Fayez Sarofim and Bill and Mike Morgan, would have a value of approximately $2.8 billion based on the proposed transaction price. In addition to this substantial reinvestment, the transaction would be financed through a combination of (1) approximately $4.5 billion of equity that would be provided by affiliates of and investment funds managed by GS Capital Partners, affiliates of AIG and funds managed by AIG Global Investment Group, funds managed by The Carlyle Group and funds managed by Riverstone Holdings LLC and (2) approximately $14.5 billion of funded indebtedness. We have received a "highly confident" letter from Goldman Sachs Credit Partners, L.P. stating that it is highly confident of its ability to raise the debt necessary to complete the transaction. A copy of the letter is enclosed herewith.
We believe that we offer a high degree of closing certainty and that we are well positioned to negotiate and complete the transaction in an expedited manner. We are preparing a draft merger agreement that we will provide to you shortly. The familiarity of our management team with the Company means that we will be in a position to finalize the merger agreement very quickly. We do not anticipate that any regulatory approvals will be impediments to closing.
We expect that you will establish a special committee of independent directors to consider our proposal on behalf of the Company's public shareholders and to recommend to the Board whether to approve the proposal with its own legal and financial advisors to assist in its review. We would welcome the opportunity to present our proposal to the special committee as soon as possible.
Of course, no binding obligation on the part of the Company or any of the undersigned shall arise with respect to the proposal or any transaction unless and until such time as definitive documentation satisfactory to us and recommended by the special committee and approved by the Board of Directors is executed and delivered.
Our entire team looks forward to working with the special committee and its legal and financial advisors to complete a transaction that is attractive to the Company's public shareholders. Should you have any questions, please contact us.
Sincerely,
By: /s/ Richard D. Kinder
Richard D. Kinder
GS CAPITAL PARTNERS V FUND, L.P.
By: GSCP V Advisors, L.L.C., its general partner
By: /s/ Henry Cornell
Name: Henry Cornell
Title: Managing Director
AIG GLOBAL ASSET MANAGEMENT HOLDINGS CORP.
By: /s/ Brian Schreiber
Name: Brian Schreiber
Title: Managing Director
CARLYLE PARTNERS IV, L.P.
By: TC Group IV, L.P., its general partner
By: TC Group IV, L.L.C., its general partner
By: TC Group, L.L.C., its managing member
By: TCG Holdings, L.L.C.
By: /s/ Allan M. Holt
Name: Allan M. Holt
Title: Managing Director
CARLYLE/RIVERSTONE ENERGY PARTNERS III, L.P.
By: C/R Energy GP III, LLC
By: /s/ David M. Leuschen
Name: David M. Leuschen
Title: Authorized Person
By: /s/ Pierre F. Lapeyre, Jr.
Name: Pierre F. Lapeyre, Jr.
Title: Authorized Person
Goldman, Sachs & Co.
Goldman Sachs Credit Partners L.P.
85 Broad Street
New York, New York 10004
PERSONAL AND CONFIDENTIAL
May 28, 2006
Richard D. Kinderc/o Kinder Morgan, Inc.
500 Dallas Street,
Suite 1000
Houston, Texas 77002
GS Capital Partners V Fund, L.P.
85 Broad Street
New York, New York 10004
AIG Global Asset Management Holdings Corp.
70 Pine Street
New York, NY 10270
The Carlyle Group
1001 Pennsylvania Avenue, NW
Suite 200 South
Washington, DC 20004-2505
Riverstone Holdings LLC
712 Fifth Avenue
51st Floor
New York, NY 10019
Ladies and Gentlemen:
You have advised Goldman, Sachs & Co. ("Goldman Sachs") and Goldman Sachs Credit Partners L.P. ("GS Credit Partners" and together with Goldman Sachs, "we" or "us") that Richard D. Kinder, GS Capital Partners V Fund, L.P., AIG Global Asset Management Holdings Corp., The Carlyle Group and Riverstone Holdings LLC (the "Sponsors") are submitting a proposal to acquire (the "Acquisition") all of the outstanding capital stock of Kinder Morgan, Inc. (the "Acquired Business"). You have advised us that the Acquisition will be financed from a combination of equity contributed by the Sponsors in cash and the rollover and/or purchase of equity by Richard Kinder and certain other members of management of the Acquired Business (the "Equity Contribution") and funded indebtedness of approximately $14.5 billion to be incurred by the Acquired Business under (1) one or more senior and/or subordinated credit facilities (the "Credit Facilities"), (2) through the sale or placement of senior and/or subordinated debt securities (the "Securities") or, in the event market conditions do not permit the issuance of the Securities at the closing of the Acquisition, interim financing in lieu thereof consisting of additional Credit Facilities and/or (3) the assumption of certain existing indebtedness of the Acquired Business, including indebtedness consisting of trust preferred securities ("Existing Indebtedness"). You have consulted with Goldman Sachs and GS Credit Partners, respectively, concerning the sale of the Securities and the structuring and syndication of the Credit Facilities.
Based on the information that you have provided to us to date and publicly available information, our analysis of the current market for loans and securities issued by entities engaged in similar industries and for transactions of this type and subject to the foregoing and such other matters as we consider relevant, we are pleased to inform you that, as of the date hereof, we are highly confident that the sale and placement of the Securities and the structuring and syndication of the Credit Facilities can be accomplished by Goldman Sachs and GS Credit Partners, respectively, as part of the financing for the Acquisition as described above. We are pleased to confirm that we have received approval from our respective credit committees to deliver this letter to you.
Obtaining financing for the Acquisition is inherently subject to uncertainties and contingencies beyond our control; accordingly, this letter is not a commitment to place or purchase the Securities or to place, purchase or provide any loans under the Credit Facilities, and there can be no assurance that the sale and placement of the Securities and/or the structuring and syndication of the Credit Facilities will in fact be accomplished. The provision of any such commitment would be subject to satisfactory completion of due diligence, satisfactory structure and documentation for the Acquisition and the financing and any such commitment, if issued by us, would be subject to satisfaction of conditions that are customary for these types of financings of acquisitions of public companies with you or your affiliates. In connection with this letter, we have relied without independent verification upon the accuracy and completeness of all of the financial, accounting, tax and other information reviewed by us for purposes of this letter.
In addition, please note that Goldman Sachs and GS Credit Partners do not provide, and nothing herein shall be construed to be, accounting, tax or legal advice.
Very truly yours,
/s/ Goldman, Sachs & Co.
(Goldman, Sachs & Co.)
Goldman Sachs Credit Partners L.P.
By: /s/ William W. Archer
Authorized Signatory
