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American Capital Agency Corp. Message Board

  • return5x return5x Jan 30, 2013 1:30 AM Flag

    KMP buying CPNO; Effect on Options in KMP?

    A lot of us here are playing the KMP puts long. Just saw this news, but I don't know enough about the industry to say whether this is going to be seen as great or awful for KMP (looks bad for anyone holding CPNO puts but great for CPMO long calls/shares, that much I know!). Anyone that can draw an informed conclusion before tomorrow's open, would love to hear it... (can't post link, but this is under KMP news on Yahoo).

    UPDATE 1-Kinder Morgan to buy Copano Energy for $3.22 bln

    * Assumption of debt pushes total deal value to $5 bln

    * Kinder gets access to shale plays in Texas, Oklahoma

    Jan 29 (Reuters) - Kinder Morgan Energy Partners LP said it plans to buy Copano Energy LLC for an equity value of about $3.22 billion, a deal that will broaden the company's oil and gas pipeline assets in Texas and Oklahoma.

    Based on an exchange ratio of .4563 Kinder Morgan units, Copano shareholders will receive $40.91 per share, which is a 23.5 percent premium to Copano's close on Tuesday.

    Shares of Houston-based Kinder Morgan Energy closed at $89.66 on Tuesday on the New York Stock Exchange.

    Including assumption of debt, the total deal value is about $5 billion.

    "As a result of this acquisition, we will be able to pursue incremental development in the Eagle Ford Shale play in south Texas, gain entry into the Barnett Shale Combo in north Texas and the Mississippi Lime and Woodford Shales in Oklahoma," Kinder Morgan CEO Richard Kinder said in a statement.

    The deal will add at least 10 cents per unit to Kinder Morgan's earnings for at least the next five years beginning in 2014.

    TPG Capital Management LP, Copano's largest shareholder with more than a 14 percent stake, has agreed to support the deal, Kinder Morgan said in a statement.

    The transaction is expected to close in the third quarter of 2013, Kinder Morgan said.

    Citi acted as financial advisor for Kinder Morgan while Copano was advised by Barclays Capital Inc and Jefferies & Company Inc.

    Kinder Morgan, the largest midstream company in North America, was created when it finalized its purchase of El Paso Corp last year in a deal valued around $38 billion

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    • It is a stock deal for KMP. As for what it will do, it should drop the shares of KMP tomorrow but the MLPs have been so hot as of late nothing seems to be able to hold them down so we'll see how the deal is viewed.

      • 2 Replies to jtrader64
      • Hey JT,

        ""it should drop the shares of KMP tomorrow but the MLPs have been so hot as of late nothing seems to be able to hold them down""

        Go figure. KMP is too schizophrenic. Between yesterday and this AM I am out at BE. Ping Pong up 2.00, down 2.00. its a #$%$ shoot I don't want to be in at the present. Still holding a few EPD Puts. This, once again, is a reinforcing message regarding the huge hurdle the option buyer faces around EX dates.

        I will stay on the other side and continue to write options. Odds are way in the writer's favor.

        On a separate note, I am out @ 10.87 on FSC this AM for a .20 profit this run. I am probably premature and we can see .40 before EX. I will be short on the EX for the next leg and will hold for .20 again. I might short on the DBEX and pay the dividend, holding for .20 and getting paid. Hard to find one Q, since monthlies, where this has not paid. What do you think?

        I am developing the same scenario with PSEC. The dates line up, IMO, for a 2 to 4 day entry post EX, long, with an entry of .20 below the close on the DBEX as your indicator, holding for .40(on PPS above 10.50), and .20 hold (below PPS 10.00). Enter on the next up day's close. IOW, if the PPS continues to close lower than the previous close do not enter until the next up day's close.

        This, of course does not work 100% of the time, but it is the "best fit" method to reap pretty incredible returns that I have found, rivaling and exceeding FSC's historicals. Check it out and good luck!!

        DocReits

      • Thanks, jtrader. Logical to think PPS drops, at least for some period at the open tomorrow. As long as it is far enough, and long enough, to trip my sell limits it'll be good enough for me.

 
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