Question

Who gains from the action for Kinder Morgan in El Paso, in what ways, and for what reasons?

Answer 1

The Kinder Morgan acquisition of El Paso was one of the largest energy industry deal back in 2011. The deal was worth about $21 billion in cash and stock.

There are two things that happened during the deal. Acquiring El Paso made Kinder Morgan a dominant company in the market and they were the only company that could handle the oil sands pipeline that ran to the West Coast of USA. This made them be able to deliver oil and gas all over the country.

However, during acquisition, Kinder Morgan had to pay a premium for El Paso. While the deal was for $21 billion, there were other debts and affiliated business that they had to take over as well. This brought the overall deal to around $38 billion. According to NY times report, the premium over the current price (back in 2011 October) was about 30-40% above the traded price of El Paso stocks.

So looking at both the scenarios, we can see that El Paso gained handsomely from the sale of the company and Kinder gained a large market share in an extremely fierce marketplace. Thus we can conclude that it was a win-win situation for both the companies.