Tuesday May 30th, 2006

Richard Kinder plans to take Kinder Morgan private in $13.4 billion transaction…Federal judge refuses to interrupt broadband trial deliberations to address publicity spillover from Lay/Skilling conviction… The chairman and CEO of pipeline operator Kinder Morgan has teamed up with senior managers and outside investors to purchase the company for about $13.4 billion. They say they’ll […]

Richard Kinder plans to take Kinder Morgan private in $13.4 billion transaction…Federal judge refuses to interrupt broadband trial deliberations to address publicity spillover from Lay/Skilling conviction…

The chairman and CEO of pipeline operator Kinder Morgan has teamed up with senior managers and outside investors to purchase the company for about $13.4 billion. They say they’ll take the company private. Richard D. Kinder sent a letter to the company’s board of directors Sunday offering to pay $100 a share–an 18.5 percent premium above Friday’s closing price. The deal also includes the assumption of more than $8 billion in debt, bringing its total value to almost $22 billion. Finance professor Steve Arbogast with the Bauer College of Business at the University of Houston says there’s tremendous value in hard assets…

“…that not only Enron neglected, but interestingly enough, that major oil and gas companies have turned their back on. There’s a large sector of not just Kinder Morgan but master limited partnerships that have specialized in acquiring what it known as the midstream–you know, the pipelines, the terminals, the transportation–that used to be owned by major companies, but which they’ve divested. A group of financial investors have done extremely well in terms of taking these over and selling transportation services to the major companies.”

Sander Morris Harris analyst Rob Lane says Richard Kinder has been quietly building a network of 150 storage and processing terminals and 43,000 miles of owned or operated pipelines that transport primarily natural gas, crude oil and petroleum products.

“It’s sort of the anti-Enron, where Enron kept trying to move away from the hard assets that it had and trying to re-cast itself as almost a virtual company. Rich Kinder, who should be noted was at one time, I believe, president of Enron, has made his reputation on a sort of toll road, as he puts it, for energy products. He has the hard assets, charges a fee for people to use those hard assets, whether it be to move products or gas or to store products or gas.”

Lane says the majors concentrate on refining and exploration, leaving the middle part of the business–the transportation–to companies like Kinder Morgan.

“Where a lot of these companies–including Kinder Morgan and other large ones like Enterprise Products–have really been making their claim is to be the guys in the middle. They’re the ones who transport and store the oil and gas until the majors and other refiners need it. These are sort of the quiet companies, the companies that you tend not to hear of as much because we don’t see them at the end, on the retail end.”

Kinder wrote that he intends to remain as chairman and CEO and believes the deal is in the best interest of the company. He added that the merger agreement could be finalized very quickly because the management team is so familiar with the company. The company’s board of directors has formed a special committee to consider the proposal.

A federal judge in Houston refused today to interrupt jury deliberations in the trial of two former Enron Broadband executives. Former broadband unit finance chief Kevin Howard and former in-house accountant Michael Krautz are on trial on fraud and conspiracy charges. Their attorneys wanted jurors questioned on whether they were exposed to publicity surrounding the convictions of Enron founder Ken Lay and former CEO Jeff Skilling. But U.S. District Judge Vanessa Gilmore refused the defense request, saying she’d already admonished the broadband jury to avoid Enron publicity. The broadband jury today resumed deliberations that began last week. Last week was also when another jury convicted Lay and Skilling of conspiracy and fraud before Enron’s crash into bankruptcy in 2001.

A refinery financier says oil companies and other investors are spending a total of $100 billion on new oil refineries. That could bring down the price at the pump–eventually. Banker Will Rathvon tells the Associated Press that with 30 new or expanded refineries expected over the next decade, at least 6.5 million barrels a day of capacity would be added. That, he says, could shave up to $3 from the price of a barrel of crude oil, resulting in a break of up to ten cents a gallon for Americans. But Rathvon says “refining is maxed out” right now and that even the shutdown of a single refinery can trigger a price hike. Around 60 percent of new refinery construction is in Asia and the Middle East, mainly China, India, Saudi Arabia, Vietnam, Indonesia, Kuwait and Japan.

Ground is being broken for the Galveston Bay Biodiesel plant tomorrow afternoon on Old Port Industrial Road. Senator Kay Bailey Hutchison will join Galveston Mayor Lyda Ann Thomas and other officials for the groundbreaking. The facility will have the potential to produce more than double the amount of biodiesel produced in 2005. The plant will manufacture biodiesel from soybeans and other renewable resources.

Leonard-Hawes Real Estate Schools is changing its name to Kaplan Professional Schools, according to the Houston Business Journal. Chicago-based Kaplan acquired the schools, on Southwest Freeway, Sam Houston Parkway and Cypress Station Drive, in 2000. The schools have served more than 23,000 real estate professionals in Texas.

The conference board says consumer confidence has declined over the past month. The reported decline comes after a rebound seen since late last year, in the aftermath of last year’s hurricanes. The business research group puts its index at 103.2, down about six and a-half points from the previous month. It’s better than what analysts had expected. Conference Board Consumer Research Center director Lynn Franco notes that the measure retreated from a four-year high in April.

North Carolina will withhold its shareholder votes for five directors at the Exxon Mobil annual meeting this week. North Carolina state treasurer Richard Moore says the votes will be withheld to protest high executive pay at the Irving-based company as gasoline prices soar. Moore said the North Carolina Retirement System will decline to support the re-election of the directors who have served on the board’s compensation committee. The system owns 11 million shares of Exxon Mobil stock. The company’s annual meeting is tomorrow in Dallas. Congress and the public have complained about a nearly $400 million retirement package given recently to Exxon Mobil’s former chairman, Lee Raymond. No comment from Exxon.

AT&T has announced the availability of a satellite-based broadband Internet access service for rural markets. New deployments of WiMAX will begin later this year in Texas and Nevada, joining existing fixed wireless service in Alaska, Georgia and New Jersey. AT&T Yahoo! high speed Internet service is available to nearly four out of five customer locations in its 13-state local phone service territory.

A new state campaign hopes that small towns and lush landscapes will lure more retirees to settle in Texas. Starting this week, the state Agriculture Department will take applications from cities seeking the brand of “certified retirement community.” Cities will pay 25 cents per resident to apply, or $5,000 if the city is under 20,000 people. In return, the state will promote the city nationwide in hopes of bringing more retirees to towns like Nacogdoches in east Texas. Now that the baby boomer generation is reaching retirement age, communities are competing to attract their tax dollars and consumer spending. Gene Warren, a Phoenix-based consultant who helps cities market to retirees, says each new household spends an average of $36,000 a year in the local economy and pays about $3,000 in taxes. He says they bring jobs and are lured by the charms of the Pineywoods, the Gulf Coast and the Hill Country. Texas ranked sixth on a list of most popular retirement states. That’s according to a new book by gerontologist Charles F. Longino.

Continental Airlines has won two awards in the OAG Airline of the Year Awards. The Houston-based air carrier won “Best Executive/Business Class” for the fourth year in a row and “Best Airline Based in North America” for the third consecutive year. The awards are based on votes by frequent flyers around the world who subscribe to OAG print and electronic travel information products.

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