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KINDER MORGAN, INC.

(KMI)
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Kinder Morgan hires TD to sell Canadian business: sources

09/14/2018 | 05:02pm EST

TORONTO/NEW YORK (Reuters) - Kinder Morgan Inc has hired investment bank TD Securities to facilitate a potential sale of its Canadian business, which could fetch as much as C$2.4 billion ($1.8 billion), people familiar with the situation told Reuters this week.

Should the move succeed, it would mark the exit of the U.S. pipeline giant from Canada, having closed its sale of the Trans Mountain pipeline to the Canadian government for about C$4.5 billion at the end of last month.

After the Reuters report on the hiring of the bank, shares in Kinder Morgan Canada Ltd, which completed its initial public offering just last year, turned positive and jumped 3.7 percent to a three-month high. They ended up 2.1 percent in a flat market. Shares in Houston-based Kinder Morgan closed down 1.3 percent.

Spokeswomen for TD and Kinder Morgan declined to comment on the hiring of the investment bank and the valuation. Sources declined to be identified as the process is private.

Pipeline companies in Canada have faced opposition from environmental groups and First Nations groups in recent times

in getting approval for new projects. Last month, a Canadian court overturned approval of the Trans Mountain expansion, saying that Ottawa failed to adequately consider aboriginal concerns.

On the flip side though, this makes established pipelines highly prized assets by those operating in the country.

At a conference earlier this month in New York, Kinder Morgan Chief Executive Steven Kean indicated his willingness to sell the rest of the Canadian business, noting that the original purpose of these assets was to support the Trans Mountain project.

Kinder Morgan bought Terasen Inc in 2005, a deal in which it acquired the Trans Mountain pipeline and dramatically broadened its footprint in Canada.

Kinder Morgan's remaining Canadian business includes the Edmonton, Alberta and Vancouver Wharves terminal businesses, as well as the Canadian portion of the Cochin pipeline. The unit has earnings before interest, tax, depreciation and amortization (EBITDA) of about C$200 million, Kean said at the time.

The assets, which could be sold separately or in one swoop, are expected to go for a multiple of 10 to 12 times EBITDA, the sources said, taking the total deal value to C$2.4 billion.

The bidding for the business is expected to come from midstream companies, private equity firms and infrastructure funds, the sources added.

Kinder Morgan would likely keep the assets if it does not get a good price as they generate solid cash flows, the sources added.

In a note following the Reuters report, RBC analyst Robert Kwan said "we would view a sale process as positive for Kinder Morgan Canada's share price."

In 2016, Williams Cos Inc, another U.S. pipeline company, sold its Canadian business.

Enbridge Inc said in July it would sell its Canadian natural gas gathering and processing business to Brookfield Infrastructure Partners LP and its institutional partners for about C$4.31 billion. In February, Canadian oil sands producer MEG Energy agreed to sell some pipeline and storage assets in Alberta to Wolf Midstream Inc for C$1.61 billion.

(Reporting by John Tilak in Toronto and David French in New York; Additional reporting by Jessica Resnick-Ault in New York, Rod Nickel in Winnipeg and Fergal Smith in Toronto; Editing by Marguerita Choy)

By John Tilak and David French


© Reuters 2018
Stocks mentioned in the article
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BROOKFIELD INFRASTRUCTURE PARTNERS L.P. 0.52% 56.45 Delayed Quote.13.68%
DEERE & COMPANY -0.78% 347.895 Delayed Quote.30.32%
ENBRIDGE INC. 0.21% 47.96 Delayed Quote.17.59%
KINDER MORGAN, INC. -0.76% 15.619 Delayed Quote.15.07%
MEG ENERGY CORP. 1.42% 10.74 Delayed Quote.137.98%
THE TORONTO-DOMINION BANK -1.01% 95.525 Delayed Quote.34.18%
THE WILLIAMS COMPANIES, INC. -0.48% 27.1266 Delayed Quote.32.87%
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Analyst Recommendations on KINDER MORGAN, INC.
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Financials (USD)
Sales 2021 15 809 M - -
Net income 2021 1 732 M - -
Net Debt 2021 31 954 M - -
P/E ratio 2021 20,4x
Yield 2021 6,86%
Capitalization 35 667 M 35 667 M -
EV / Sales 2021 4,28x
EV / Sales 2022 4,94x
Nbr of Employees 10 524
Free-Float 95,4%
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Technical analysis trends KINDER MORGAN, INC.
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Mean consensus HOLD
Number of Analysts 25
Last Close Price 15,73 $
Average target price 18,78 $
Spread / Average Target 19,4%
EPS Revisions
Managers and Directors
Steven J. Kean Chief Executive Officer & Director
Kimberly Allen Dang President & Director
David Patrick Michels Chief Financial Officer & Vice President
Richard D. Kinder Executive Chairman
Mark E. Huse Chief Information Officer & Vice President
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