Santa Fe Pacific to Be Sold to Texas Firm
Santa Fe Pacific Pipeline Partners, which operates a 3,300-mile network of underground pipelines for moving refined petroleum products around the West, said Monday it has agreed to be acquired for $1.15 billion by Texas pipeline operator Kinder Morgan Energy Partners.
The deal, in which Kinder Morgan would pay a 28% premium over Orange-based Santa Fe Pacific’s recent trading price, would create the largest publicly traded pipeline partnership in the nation with about $325 million in annual sales.
Both companies’ partnership units--a form of stock--trade on the New York Stock Exchange. Kinder Morgan said it will pay $85 million in cash and exchange 1.39 of its partnership units for each unit of Santa Fe Pacific.
The deal values Santa Fe Pacific’s 19 million units at about $55 each. The units have been trading in the $37 to $40 range recently, and Monday’s announcement sent them soaring 22% to a closing price of $50.25, up $9.13 for the day. Kinder Morgan units rose 81 cents to close at $39.81.
Subsidiaries of railroad giant Burlington Northern Santa Fe Corp. own about 44% of Santa Fe Pacific, with the remaining 11 million units held by about 18,000 individual and institutional investors.
The impact of the deal on Santa Fe Pacific’s 435 employees is unclear, but officials at Kinder Morgan said they expect the combined companies to eliminate duplicate operating overhead--usually a signal that layoffs are coming. More than 200 of the workers are in Southern California, including about 180 at company headquarters in Orange.
“Our markets are completely different, so the cost efficiencies are in management and operations,” said Bill Morgan, Kinder Morgan’s vice chairman.
He said no personnel decisions have been made although he expects Kinder Morgan’s top executives, including himself, Chairman Rich Kinder and President Tom King, to continue to hold the same posts.
Santa Fe shareholders, who would own about two-thirds of the combination, “are getting a big piece of a fast-growing company,” said analyst Zach Wagner, of the Edward D. Jones & Co. brokerage in St. Louis.
