Story by Bloomberg
Investors in a partnership controlled by billionaire Richard Kinder can’t block a $44 billion consolidation of Kinder’s oil-pipeline empire over a voting-rights dispute, a judge said.
Kinder Morgan Energy Partners LP (KMP) unitholders’ rights aren’t being unfairly trampled by Kinder’s push to have a simple majority of investors approve a consolidation of his pipeline holdings, Delaware Chancery Court Judge Travis Laster ruled today.
The investors “do not have a reasonable probability of success on the merits of their voting rights claim,” Laster said in a 21-page ruling denying their bid for a preliminary injunction.
The decision clears the way for a Nov. 20 shareholder vote on whether Kinder’s cash-and-stock offer to buy out unitholders in pipeline partnerships he controls through parent company Kinder Morgan Inc. (KMI) should be approved. Laster said only a simple majority of investors is required for approval rather than the supermajority sought by disgruntled unitholders.
“We are gratified by the Delaware court’s ruling and look forward to moving forward with this transaction,” Pierce said.
Kinder, 70, is consolidating his pipeline holdings to strengthen his company for growth as the U.S. shale drilling boom opens up $1.5 trillion in potential purchases and expansion. Shareholders in the parent company have been pressuring the billionaire to consolidate, cut costs and increase profits.
He already controls the partnerships through his 24 percent stake in the parent company and is seeking to buy out other unitholders. Kinder, a former top executive of the now-defunct Enron Corp., acquired some of his pipelines from the Houston-based company after leaving in 1996.
Analysts say merging the partnerships runs counter to the energy-industry trend of spinning off pipelines and oil terminals into tax-advantaged partnerships that funnel cash to investors.
By simplifying his empire’s corporate structure, Kinder seeks to reduce borrowing costs and unify the company under a single stock he can use as currency in acquisitions.
Under the proposed deal, Kinder Morgan will acquire all of Kinder Morgan Energy Partners, Kinder Morgan Management LLC (KMR) and El Paso Pipeline Partners LP (EPB) in a series of transactions. Kinder’s offer includes $40 billion in shares, $4 billion cash and $27 billion in assumed debt, according to the parent company’s website.
The case is In Re Kinder Morgan Inc. Unitholders Litigation, Consolidated CA No. 10093-VCL, Delaware Chancery Court (Wilmington).