Kinder Morgan Energy Partners (NYSE:KMP) is selling a package of gas processing, treating and pipeline assets in the Rocky Mountains to Tallgrass Energy Partners in a cash and debt deal valued at $3.3 billion.
Kinder Morgan will receive about $1.8 billion in cash from the deal, which is part of an agreement the company made with the Federal Trade Commission to sell the units as part of its purchase of El Paso, which closed in May.
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“As I previously stated, we would prefer to keep all of these assets, but we anticipated divestiture of certain assets in the Rockies would be necessary to obtain FTC approval,” Kinder Morgan CEO Richard Kinder said in a statement.
The infrastructure being sold includes the Kinder Morgan Interstate Gas Transmission, Trailblazer Pipeline Company, the Casper-Douglas natural gas processing and West Frenchie Draw treating facilities in Wyoming and the company’s 50% interest in the Rockies Express Pipeline.
Tallgrass is owned by private equity firm Kelso & Co., which said the purchase will help expand the asset base of the company. Tallgrass CEO David Dehaemers, who served as chief financial officer and executive vice president of corporate development at Kinder Morgan from 1997 to 2003, said Kelso will also explore some “promising growth projects” on the east end of Rockies Express to “maximize the potential” of the pipeline.
The transaction, subject to FTC approval, is expected to close in the fourth quarter. Barclays (NYSE:BCS) and Citi (NYSE:C) acted as financial advisors to Kinder Morgan on the transaction.