KMP acquiring Copano in $5 billion transaction

Houston-based Kinder Morgan Energy Partners LP (NYSE: KMP) and Copano Energy LLC (NASDAQ: CPNO), also headquartered in Houston, said Jan. 29 they have signed an agreement whereby KMP will acquire all of Copano's outstanding units for a total purchase price of approximately $5 billion, including the assumption of debt.

The transaction, which has been approved by the boards of directors of both companies, will be a 100% unit-for-unit transaction with an exchange ratio of 0.4563 KMP units per Copano unit. The consideration to be received by Copano unitholders is valued at $40.91 per Copano common unit based on KMP's closing price as of Jan. 29, 2013, representing a 23.5% premium to Copano's close on Jan. 29, 2013.

The transaction, which is expected to close in the third quarter of 2013, is subject to customary closing conditions, including regulatory approval and a vote of the Copano unitholders. TPG, Copano's largest unitholder (owning over 14% of its outstanding equity), has agreed to support the transaction.

Copano, a midstream natural gas company with operations primarily in Texas, Oklahoma, and Wyoming, provides comprehensive services to natural gas producers, including natural gas gathering, processing, treating, and natural gas liquids fractionation. Copano owns an interest in or operates about 6,900 miles of pipelines with 2.7 billion cubic feet per day (bcf/d) of natural gas throughput capacity and 9 processing plants with more than 1 bcf/d of processing capacity and 315 million cubic feet per day of treating capacity.

"As a result of this acquisition, we will be able to pursue incremental development in the Eagle Ford Shale play in South Texas, gain entry into the Barnett Shale Combo in North Texas and the Mississippi Lime and Woodford Shales in Oklahoma. We continue to be bullish on the domestic shale plays and believe they will drive substantial future growth at KMP" — Richard Kinder, KMP chairman and CEO   "As a result of this acquisition, we will be able to pursue incremental development in the Eagle Ford Shale play in South Texas, gain entry into the Barnett Shale Combo in North Texas and the Mississippi Lime and Woodford Shales in Oklahoma. We continue to be bullish on the domestic shale plays and believe they will drive substantial future growth at KMP" — Richard Kinder, KMP chairman and CEO

"We are delighted to have reached this agreement with Copano, a company that we know very well and have partnered with through the years, as this transaction will enable us to significantly expand our midstream services footprint," said KMP chairman and CEO Richard D. Kinder. "As a result of this acquisition, we will be able to pursue incremental development in the Eagle Ford Shale play in South Texas, gain entry into the Barnett Shale Combo in North Texas and the Mississippi Lime and Woodford Shales in Oklahoma. We continue to be bullish on the domestic shale plays and believe they will drive substantial future growth at KMP. Copano's assets are very complementary to ours, as KMP is principally a pipeline transportation and storage company, while Copano is primarily a fee-based gathering, processing and fractionation player. Broadening our midstream assets will allow us to offer a wider array of services to our customers."

Copano president and CEO R. Bruce Northcutt commented: "We are excited to have reached this agreement with KMP, which delivers a significant premium to our unitholders that is reflective of the strength and potential of our business and provides an ownership interest in a highly diversified industry leader with an impressive history of sustained distribution growth. Through this transaction, Copano will become part of a larger, investment grade organization with stable cash flows and the financial resources to fund our increasing number of high-return growth projects. We are committed to continuing to support our customers with the highest quality service, and expect that KMP's size and scale will allow us to provide even more value for customers. In addition, we expect this combination will provide opportunities for our many talented employees. We look forward to completing this transaction and to building significant long-term value for all of our stakeholders as part of KMP."

"We anticipate retaining the vast majority of Copano's approximately 415 employees," Kinder said. "This transaction is about producing future cash flow and expanding our midstream services footprint."

Upon closing, KMP will own 100% of Eagle Ford Gathering (currently a joint venture with Copano), which provides gathering, transportation and processing services to natural gas producers in the Eagle Ford Shale. Eagle Ford Gathering comprises approximately 400 miles of pipelines (including its capacity rights in certain KMP pipelines) with capacity to gather and process over 700,000 MMBtu/day.

Citi acted as financial advisor for KMP, and Weil Gotshal & Manges LLP and Bracewell & Giuliani acted as legal counsel to KMP. Barclays Capital Inc. and Jefferies & Company Inc. provided financial advisory services to Copano, and Wachtell, Lipton, Rosen & Katz acted as legal counsel to Copano.

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