Kinder Morgan To Buy El Paso Corp. For $20.7 Billion To Become America's Largest NatGas Pipeline Operator (KMI, EP)

NEW YORK (AP) — Kinder Morgan plans to buy El Paso Corp. in a $20.7 billion deal that's expected to create America's largest natural gas pipeline operator.

Kinder Morgan Inc. is expanding its reach as the U.S. becomes increasingly reliant on natural gas. Drillers are pumping ever-increasing amounts from underground shale deposits across the U.S. Natural gas prices have dropped to less than half their level of three years ago, and power companies are using more of the fuel because it emits fewer greenhouse gases than coal.

The deal also adds to founder and CEO Richard Kinder's energy empire. Kinder, 66, started the company with friend William Morgan after leaving his post as president of the now-defunct Enron Corp. Forbes lists his net worth at $6.4 billion.

Kinder Morgan will more than double the size of its pipeline network by purchasing El Paso. The new pipeline system would stretch 80,000 miles — long enough to wind around the globe three times. Kinder Morgan's pipelines in the Rocky Mountains, the Midwest and Texas will be woven together with El Paso's expansive network that spreads east from the Gulf Coast to New England, and to the west through New Mexico, Arizona, Nevada and California.

"We believe that natural gas is going to play an increasingly integral role in North America," Kinder, who is also the company's chairman, said on Sunday when the deal was announced.

Robert McFadden, a Houston-based natural gas pipeline consultant, said the expanded network will make it easier to move natural gas from new shale fields that have mushroomed across the U.S. in the past few years.

"Think of it like federal highways and toll roads," McFadden said. "The more options you have to get from point A to B, the shorter your trip."

Pipeline companies, which get paid for moving natural gas from the field to the market, have been in big demand recently as drillers tap rich new deposits in Pennsylvania, Montana, Utah and other states. The pipeline companies been able to keep transport fees roughly constant during the past several years, even though natural gas prices have dropped from more than $13 per 1,000 cubic feet in 2008 to less than $4, pipeline this year.

The acquisition comes on the heels of other consolidation in the industry. Energy Transfer Equity is planning to buy Southern Union Co. for $5.7 billion after a tug of war with Williams Cos.

With more pipelines under its control, Kinder Morgan could charge suppliers higher transport fees, and that may affect the price that utilities and other major natural gas buyers pay for natural gas. But home owners and other retail natural gas customers won't notice much of a change on their monthly bills, if any. Retail gas bills are largely influenced by local distribution costs and other items that won't change with this deal, McFadden said.

Once approved, Kinder Morgan said it will also become the largest independent transporter of gasoline, diesel and other petroleum products. It will also be the largest independent owner and operator of petroleum storage terminals. It will be the largest transporter of carbon dioxide in the U.S., moving about 1.3 billion cubic feet per day.

Kinder Morgan and El Paso are both based in Houston. Kinder will remain chairman and CEO of the combined company.

The combined company will surpass other pipeline companies like Enterprise Products Partners LP, also based in Houston. Enterprise operates about 50,200 miles of pipelines.

The companies valued the deal at $26.87 per El Paso share, which includes $14.65 in cash, 0.4187 in Kinder Morgan shares and 0.640 in Kinder Morgan warrants.

Based on El Paso's about 770.25 million outstanding shares, the deal is worth about $20.7 billion.

Kinder Morgan is also assuming $13 billion, net of cash, of El Paso debt as part of the deal. It intends to fund the purchase with a combination of equity and more debt. But once the deal closes, the company said it plans to sell off El Paso's exploration and production assets and the cash raised will help reduce that debt.

Kinder Morgan said the deal is expected to boost Kinder Morgan's shareholder value through increased cash flow and future growth opportunities. It's also expected to boost Kinder Morgan's dividends and result in about $350 million a year in cost savings.

El Paso had announced plans to spin off its exploration and production unit in May.

The acquisition, which has been approved by the board of both companies, is expected to close in the second quarter of next year and needs regulatory approval.

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Uniqlo Started Out As A Tiny Menswear Shop In Japan, Now It Owns The Largest Retail Space On Fifth Avenue

Image: Business Insider

Yesterday Uniqlo opened its 89,000-square-foot flagship store at 53rd Street in Manhattan -- making it the largest single retail space on Fifth Avenue. 

Next Friday it'll open another global flagship store -- only a few blocks down, on 34th Street.

Both stores are major steps in the Japanese clothing giant's ambitious plan to become the world's largest apparel maker. Its goal is to open 300 stores in the next three years.

Chief Executive Tadashi Yanai summarized the company's current strategy: "We have to become the No. 1 in Asia to eventually become the global No. 1."

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The Ten Largest Oil Deposits In The World

Image: Wikimedia Commons

24/7 Wall St. provides insightful analysis and commentary for U.S. and global equity investors.

Is September Really A Cursed Month For Stocks? (VZ, T, IBM, BAC, KFT, MCD, KO, HPQ, XOM, CVX, DIA)The Great Energy Spin-Off Pipeline (MRO, MPC, TSO, TLLP, COP, BP, CHK, EP, XOM, CVX)AIG to Spin-off Plane-Leasing Subsidiary (AIG, BA, GE, EADSY, UTX, BAC, C, JPM, MS)Figuring out how much oil is left in the world and where it is located seems more important than ever, especially considering the political instability in many of the oil-producing countries.

24/7 Wall St. used the most recent public information available to identify the largest oil fields in the world.

Those who call for America to end its dependence on foreign oil would be relived to hear the U.S. actually has the world’s largest oil reserve, albeit in oil shale — oil that is in rock form.

If prices go high enough, however, and the supply dries out, extracting that oil could become commercially viable.

There are more than 40,000 producing oil fields dotted around the globe, though most are relatively small. Just 100 to 125 giant or supergiant oil fields supply approximately 50% of the world’s oil. A giant oil field is one that contains more than 500 million barrels of recoverable oil. A supergiant fields holds more than 5 billion barrels of recoverable oil. 24/7 Wall St.’s ten largest oil fields in the world are all supergiants.

Interestingly, the largest deposits ever found are not liquid oil at all. They are either an asphalt-like substance called tar or oil sands, or rocks called oil shale. The vast size of these “unconventional” resources is matched only by the vast complexity and cost involved in turning them into liquid petroleum.

Finding new giant and supergiant oil fields brimming with cheap, easy-to-extract oil is surely a historical phenomenon, and the number of new discoveries — of any size — is dwindling. In addition, the largest recent finds are under miles of water and seabed, in some unconventional form or in some inhospitable, usually arctic, climate. The effort required to tap these fields will involve mountains of capital and years of work. No doubt, we need to be prepared to deal with a new reality where oil isn’t as cheap or abundant.

24/7 Wall St. looked at conventional oil fields, like those found in the Middle East, and unconventional oil fields, like oil shale found in the U.S., to come up with a comprehensive list of the largest oil deposits in the world.

This post originally appeared at 24/7 Wall St.

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Nine Companies That Destroyed Their Largest Competitors

Most companies want to be number one in their markets. Once there, however, they have trouble keeping the top spot for long.

They are flanked by smaller, nimbler companies that have better products or make innovations that change the industry and how its serves its customers.

24/7 Wall St. reviewed several industries in which the number one company was recently toppled from its position.

We looked at the weaknesses of the market leader and how and why it was replaced by a rival.

The reasons often have to do with sluggishness and lack of innovation on the part of the top company.

Complacency usually pushes these leaders from their top positions, allowing a once-smaller competitor to take over the first place spot.

America’s top companies — in any industry — are unusually successful.

There’s no better example than Apple (NASDAQ: AAPL), the largest corporation in the U.S. based on market capitalization.

The iPhone is the most popular smartphone and the iPad is the most popular tablet PC. Apple’s lead position in its markets helps it to be the most profitable company in its industry.

Its reputation as the  top consumer electronics company even helps it market products. Thinking it must be the best, many customers like to use the first place product.

However, there are disadvantages to being at the top. Market leaders are usually the target of competitors that want to gain market share. Take the premium streaming video business, where Netflix (NASDAQ: NFLX) holds the top spot with 25 million customers. Amazon (NASDAQ: AMZN), Walmart (NYSE: WMT), and Apple also want to be successful in the business. To do that, they naturally imitate Netflix’s service and prices in order to take its customers. They wouldn’t normally target the number three or four company in the sector.

Competition is but one of the challenges, and the first place position is hardly guaranteed. General Motors (NYSE: GM) was the world’s largest car company from the end of World War II until three years ago. Poor product decisions and high labor costs nearly took the company under, helping rival Toyota (NYSE: TM) move into the top spot. Blockbuster was the number one company in the video rental business until the model for the industry changed. Instead, DVD rentals by mail became popular because it is less expensive to mail DVDs than to run thousands of DVD stores. That’s when Netflix flanked Blockbuster by creating the DVD-by-mail business and becoming the top video rental company in the U.S.

Despite challenges, many companies have been able to keep the first place position in their industries for a long time. Walmart has been the largest retailer in the U.S. for almost 30 years. Exxon Mobil (NYSE: XOM) has been the largest American oil company since it was formed by a merger in 1999.

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