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Kinder Morgan to consolidate assets in $70 billion deal

Kinder Morgan is bringing all of its publicly traded units under one roof in a $70 billion deal that reshapes the financial structure of the oil and gas pipeline company.

The deal will create a company worth $140 billion including debt that combines Kinder Morgan Energy Partners, Kinder Morgan Inc with Kinder Morgan Management and El Paso Pipeline Partners.

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Kinder Morgan is purchasing the outstanding shares of the other three companies. Holders of KMP, KMR and EPB shares will receive shares of Kinder Morgan Inc as well as possibly cash in the deal, which will consolidate the companies under KMI.

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"This combined entity will be the largest energy infrastructure company in North America and the third largest energy company overall," said Chief Executive Richard Kinder in a statement.

The company expects the deal to close by the end of the year.

KMI will consolidate the companies under a single C-corporation, instead of the master limited partnership structure that Kinder Morgan had previously used extensively.

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MLPs, a legal structure favored by energy companies, grow through acquisition and pay no taxes because nearly all profits are paid out to investors in the form of distributions.

KMI has drawn criticism in recent years. An email sent to clients of independent research firm Hedgeye Risk Management last year called Kinder Morgan "a house of cards, completely misunderstood and mispriced."

Barclays and Citi were KMI's financial advisers while Barclays will provide financing. KMI's legal advisers were Weil Gotshal & Manges and Bracewell & Giuliani.

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Jefferies advised KMP and KMR while Baker Botts acted as legal counsel. Tudor, Pickering, Holt & Co. was EPB's financial adviser and Vinson & Elkins was its legal counsel.

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