Kinder Morgan Reaches Deal for Terasen

U.S. pipeline operator Kinder Morgan Inc. said Monday that it had reached a deal to buy Canada’s Terasen Inc. for $3.1 billion in a move that would enable it to take advantage of growing Canadian energy production.

The purchase, one of the largest-ever U.S. acquisitions in Canada, also would call on Kinder Morgan to take on $2.5 billion in Terasen’s debt.

In addition to gaining Terasen’s 2,800 miles of pipelines that carry 680,000 barrels a day of petroleum products, the deal would position Kinder Morgan to expand into Alberta’s growing oil sands crude oil production.

That area was projected to double its production from current levels to about 2 million barrels a day from 2010 to 2012.

Alberta’s oil sands reserves are believed to be the largest in the world and currently account for more than one-third of Canada’s oil production.

Vancouver-based Terasen also owns a natural gas utility in western Canada.

Under the deal’s terms, Terasen shareholders can elect to receive $29.52 in cash per share, 0.3331 share of Kinder Morgan common stock per share or $19.20 in cash plus 0.1165 share of Kinder Morgan common stock per share, the companies said.

The deal, which was unanimously approved by each company’s board of directors, would require Terasen shareholders’ approval, which is expected by the end of the year.

The combined company would have a value of about $19 billion and own 40,000 miles of natural gas and petroleum pipelines and reach more than 1.1 million natural gas distribution customers.

Kinder Morgan Chairman and Chief Executive Richard Kinder would remain head of the company. Terasen’s natural gas distribution and utility service operations would stay based in Vancouver, and pipeline operations would stay in Calgary.

Kinder Morgan’s shares, which fell 26 cents to $88.60 on Monday, have gained nearly 21% this year.