Kinder Mor­gan mulling Cana­dian exit, sources say


A full sale could fetch the U.S. pipe­line op­er­a­tor as much as $2.4-bil­lion

Kinder Mor­gan Inc. has hired in­vest­ment bank TD Se­cu­ri­ties to fa­cil­i­tate a po­ten­tial sale of its Cana­dian busi­ness, which could fetch the U.S. pipe­line op­er­a­tor as much as $2.4-bil­lion, peo­ple fa­mil­iar with the sit­u­a­tion said this week. The move comes about two weeks af­ter Kinder Mor­gan closed its sale of the Trans Moun­tain pipe­line to the Cana­dian gov­ern­ment for about $4.5-bil­lion.

At a con­fer­ence ear­lier this month, Kinder Mor­gan chief ex­ec­u­tive Steven Kean in­di­cated his will­ing­ness to sell the rest of the Cana­dian busi­ness. Kinder Mor­gan’s Cana­dian busi­ness in­cludes the Ed­mon­ton and Van­cou­ver wharves ter­mi­nal busi­nesses, as well as the Cana­dian por­tion of the Cochin pipe­line.

The as­sets, which could be sold sep­a­rately or in one swoop, are ex­pected to go for a mul­ti­ple of 10 to 12 times earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­za­tion (EBITDA), the sources said, de­clin­ing to be iden­ti­fied as the process is pri­vate. Kinder Mor­gan’s Cana­dian unit has EBITDA of about $200-mil­lion, Mr. Kean said at the con­fer­ence ear­lier this month. Spokeswomen for TD and Kinder Mor­gan de­clined to com­ment on the hir­ing of the in­vest­ment bank and the val­u­a­tion.

The sources said in­ter­est in the as­sets would be ro­bust, and bids are likely to come from both mid­stream com­pa­nies, pri­vate-eq­uity firms and in­fra­struc­ture funds. Cana­dian mid­stream as­sets have been ac­tively traded dur­ing the en­er­gy­sec­tor down­turn, high­light­ing their abil­ity to gen­er­ate sta­ble cash flows over a long time frames.

The Cana­dian busi­ness no longer has the scale to make long-term strate­gic sense for a com­pany of Kinder Mor­gan’s size, the peo­ple added. How­ever, they said that the pipe­line gi­ant would be will­ing to keep the as­set if it does not get a good price. Kinder Mor­gan has a mar­ket cap­i­tal­iza­tion of US$40.4-bil­lion.

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