Richard Kinder, chairman and chief executive officer of Kinder Morgan in Houston, said the purchase of El Paso, which he called a cash generator that is well-positioned in key U.S. natural gas markets, would create the largest gas pipeline network in North America.
"The natural gas pipeline systems of the two companies are very complementary, as they primarily serve different supply sources and markets in the United States," Kinder said in a written statement. "The transaction is expected to produce immediate shareholder value upon closing through strong cash-flow accretion and offers significant future growth opportunities."
The growth opportunities come from an expected surge in the use of natural gas in North America due to the desire to reduce greenhouse gas emissions and the development of bountiful shale gas reserves.
"If America is serious about reducing carbon emissions to benefit the environment, and reducing its dependence on foreign oil, natural gas is absolutely the best readily available option," Kinder said.
The deal, which must be approved by government regulators, is expected to close early next year. Kinder Morgan said El Paso stockholders would receive $26.87 per share, a 47-percent premium to the 20-day average of El Paso share prices as of Oct. 14.
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