1000 units of CPNO will convert to 456 units of KMP (plus a few dollars for the fractional unit).
1000 CPNO units used to yield $575 per quarter.
456 units of KMP will yield ~$588 at today's $1.29/qtr rate, or if we assume 3c/qtr increase for KMP then ~$615/qtr following Q3 closing.
So not that much of a premium in terms of portfolio cash flow (I don't really care about unit price premium since I do not plan to sell).
I'd have hoped for a little higher premium in terms of cash flow, especially as distribution growth at CPNO was expected to resume soon.
Oh well, looks like I will become a KMP unitholder and probably also soon an ETP unitholder once they merge with RGP.
I built my position from December 2008 through March 2009. I'm tickled pink with the offer and look forward to owning KMP. The whole space is overvalued and after selling CPNO, paying taxes and finding a quality replacement, it would take years to get even.
Liza, I always appreciate your perspective and analysis. Are we sure that this will be a non-taxable exchange? I really don't want to have to calculate my CPNO gains and start over with KMP.
No doubt we'll be getting more detailed information in due course, but almost certainly it will be a tax free exchange because both acquirer and acquiree are MLPs. There have been a number of examples in the past including VNR buying ENP and several MLPs buying out their MLP GPs.
If it were a C-corp (such as KMI) doing the acquiring, then it would be a taxable disposition because you couldn't keep your tax deferral in a C-corp.
78.94 million shares equals $40.91 per share.
So why are folks selling out at $38.16? Why are they leaving more than $2.50 on the table????
Is it because the current value of KMP shares comes into play?
I plan to sell for one simple reason---this law suite scares me. KMP could walk away from the deal and CPNO would return to low $30's. Many years ago I read a book by Howard Ruff and something he wrote has stayed with me....."I will never buy a stock at the bottom or sell at the top. The best I can hope for is to take my 80% out of the middle." I will take my profit at around $38.75 and move to another LP. That way I won't worry about the legal issues.
One reason is that there is always a possibility the deal doesn't go through, although that's pretty unlikely.
A better reason is that the deal won't close till Q3. That's 6 months away and so these units are pretty much dead money (excepting distributions) till then. So many people who are short term focussed will not want to tie up their money for 6 months and will sell now in order to invest in something which has short term gain potential. They have captured the bulk of the money already, so they don't want to wait 6 months to get the last couple of dollars when they figure they can get a better return elsewhere over that timeframe. If you are a trader that makes perfect sense - in fact it makes no sense for them to hang around in CPNO and get no return on their funds (except distributions) for 6 months.
Think you are right, Kinder usually gets the better part of a deal. I own KMI, KMP and EPB. Had a large pos in EP/EPB and was a little irritated with that deal, but it seems to working now. KMI and EPB are moving.
I own a bit of CPNO. Have owned KMR but never KMP. Am laughing at all the attorney posts. Maybe we should post one that KM paid too much on behalf of KMP holders, and one for KMR holders that we should be able to get KMR units, but at a higher ratio.
I bought EPB (large position) after the deal and am very pleased. My only surprise there was that EPB is still in existance as a seperate company.