Millennium Management increases position in Kinder Morgan

Millennium Management and Kinder Morgan 

Millennium Management’s new positions in 3Q14 include St. Jude Medical (STJ) and Kimberly-Clark (KMB). The fund sold positions in Forest Laboratories (FRX) and Procter & Gamble (PG). Millennium increased its position in Kinder Morgan (KMI), Actavis plc (ACT), and American Express (AXP). Finally, it decreased its stake in Northeast Utilities (NU) and CVS Caremark (CVS).

The hedge fund increased its position in Kinder Morgan (KMI) from 0.01% of its portfolio in the previous quarter to 0.4% of it in 3Q14, according to the 13F filings.

Millennium Management increases position in Kinder Morgan

Company overview

Kinder Morgan is the largest energy infrastructure company in North America. It was founded in 1997 and is headquartered in Texas. The firm operates approximately 80,000 miles of pipelines and 180 terminals. The pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide, and more.

As of mid-January 2015, Kinder Morgan had $17.6 billion in expansion and joint venture investments in its backlog with a high certainty of completion. These will drive future growth at the company across all of its business segments.

KMI to consolidate all affiliates under one company

On Sunday, August 10, 2014, Kinder Morgan Inc. (KMI) announced that it would be consolidating all of its affiliates under one public company.

KMI will acquire all outstanding public units of Kinder Morgan Energy Partners (KMP) and all outstanding shares of Kinder Morgan Management (KMR). El Paso Pipeline Partners (EPB) will be acquired by KMP, which in turn will be 100% owned by KMI.

The combined company is estimated to have an EV (enterprise value), which is roughly the sum of a company’s equity and net debt, of $140 billion.

This will make it the largest energy infrastructure company in North America and the third-largest energy company in North America, behind only Exxon Mobil and Chevron.

KMI believes there’s a high likelihood that the deal will be completed in 4Q14. Shareholder and unitholder meetings for the companies involved in the authorization of the deal are expected in the fourth quarter this year.

Shareholder impact

KMI intends to pay a premium for each company and will mostly be using stock as payment. This will also allow shareholders of the three target companies to continue participating in any future upside of the combined company.

KMI expands fleet of tankers

In order to transport crude oil, condensate, and refined products over water, KMI has closed an agreement with Crowley Maritime Corporation to purchase two Jones Act tankers for $270 million. The vessels each have 330,000 barrels of cargo capacity and will join Kinder Morgan’s existing fleet of five operating tankers.

The next article in this series will explore Millennium Management’s new position in Actavis plc (ACT).