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Business

Kinder-ly raise my stake

By
Josh Kosman
Published June 9, 2010, 4:00 a.m. ET

While private equity firms are rushing to take public every company they can — like Nielsen and Toys “R” Us — a $20 billion pipeline company, perhaps this era’s most successful buyout, is being restrained from an IPO by owners squabbling over a $176 million piece of the company, sources said.

The spat centers on Rich Kinder, the billionaire former Enron president, who feels his 31 percent stake in pipeline operator Kinder Morgan should be a certain percentage after an IPO, a source said. He is refusing to approve a move toward an IPO unless he gets his stake, the source said.

While the exact size of the discrepancy could not be learned, even a 1 percent spread in valuation means Kinder and one of his private equity backers are bickering over $176 million.

“There is a big pissing match about how much Kinder owns,” a source said.

While some of the private equity owners are willing to give Kinder the stake he wants after an IPO, Kinder Morgan owner Riverstone Holdings is fighting to keep what it believes is its rightful stake, the source said.

PE firms including Goldman Sachs’ private equity arm, Carlyle Group, Riverstone and Kinder put $7.8 billion down to buy the business, and their stake in April was valued at $17.6 billion, a 126 percent profit, according to analyst CreditSights.

Another source familiar with the negotiations said Kinder wants to keep his business out of the public eye, especially at a time when there is a critical spotlight on energy producers. Although it may not happen in the next few months, the source said Kinder Morgan could still file to go public this year.

Kinder Morgan President Park Shaper said, “it is false there is a boardroom battle,” declining to comment on whether the company plans to list its shares. When asked if Kinder has veto power to stop an IPO, Shaper said, “it gets complicated.”

The tussle over taking Kinder public is rather unusual, as private equity firms typically have all the real power when dealing with CEOs who run their businesses. Kinder Morgan owns an interest in or operates approximately 41,000 miles of pipelines that primarily transport natural gas, crude oil, petroleum products and CO2, and more than 155 terminals that store, transfer and handle products like gasoline and coal. In most of its businesses, Kinder Morgan says it operates like a giant toll road, receiving a fee for its services.

Since being taken private in 2007, Kinder Morgan has sold assets to pay most of the money it borrowed to finance the $28 billion buyout. Kinder Morgan owners Goldman Sachs Capital Partners, Carlyle Group and Riverstone Holdings declined comment. [email protected]