Term Sheet

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Merger Sunday: Kinder Morgan buying El Paso

October 16, 2011: 3:27 PM ET

Kinder Morgan announces the year's second-largest acquisition.

Remember when companies waited until Monday to announce major acquisitions?

Apparently that protocol is no longer fashionable in Houston, where Kinder Morgan (KMI) today announced that it will buy oil and gas pipeline company El Paso Corp. (EPB) for $38 billion (including assumed debt). It is the second-largest acquisition announced in 2011, behind only AT&T's (T) proposed $39 billion purchase of T-Mobile.

The cash and stock deal will value El Paso shares at around 26.87 a piece, which represents a 37% premium to Friday's closing price and a 47% premium to the 20-day average closing price.

"The El Paso assets are primarily regulated interstate natural gas pipelines that produce substantial, stable cash flow and have access to key supply regions and major consuming markets," said Kinder Morgan chairman and CEO Richard Kinder, in a prepared statement. "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. The transaction is expected to produce immediate shareholder value (upon closing) through strong cash flow accretion and offers significant future growth opportunities."

Kinder Morgan returned to the public markets earlier this year, after having previously been taken private by The Carlyle Group, GS Capital Partners, Highstar Capital and Riverstone Holdings. At least three of those firms remains significant shareholders.

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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