Carlyle-backed Kinder Morgan Files $1.5 Billion IPO

Pipeline company Kinder Morgan filed Tuesday for an initial public offering of up to $1.5 billion, Reuters reported. The company was taken private in 2007 through a $14.6 billion management buyout, and is backed by investors including The Carlyle Group, Goldman Sach’s buyout fund, Highstar Capital and Riverstone Holdings. All the common stock in the offering will be sold by existing investors, Reuters said.

(Reuters) – Carlyle-backed pipeline company Kinder Morgan Inc, which was taken private in a $14.6 billion management buyout in 2007, filed with U.S. regulators on Tuesday for an initial public offering of up to $1.5 billion.

Kinder Morgan, backed by Carlyle Group [CYL.UL] and Goldman Sachs Group Inc’s buyout fund, said all of the common stock in the offering will be sold by existing investors, including Carlyle, Goldman, Highstar Capital and Riverstone Holdings.

It is the latest in a string of private equity-backed portfolio companies to move to go public, such as Carlyle-backed government consulting firm Booz Allen Hamilton .

Kinder Morgan Inc owns about 11 percent of master limited partnership (MLP) Kinder Morgan Energy Partners . The partnership holds most of the company’s assets, so investors buying shares in the offering will essentially be investing in Kinder Morgan Inc’s financial interest in its MLP.

“I think the bottom line is that it’s time for the private investors to monetize their investments and this is the path they have chosen,” Mark Reichman, analyst at Madison Williams, said. “I wouldn’t say it’s good or bad, but the interest in Kinder Morgan Partners is the crown jewel here.”

The window for private equity IPO exits was shut during the financial crisis but cracked open late last year. Private equity firms have a large number of companies to sell in coming years as they look to profit from buyouts done during the boom years of the last decade.

However, some have run into problems; such as Harrah’s Entertainment Inc, which pulled a planned $500 million offering on Friday, citing difficult market conditions.

Some potential private equity-backed IPOs that have already filed, such as retailer Toys R Us Inc, may sit it out until next year.

Investors historically have been more critical of private equity-backed companies, which typically have higher debt. [ID:nN18285952]

Kinder Morgan said it would not receive any proceeds from the offering.

MLPs are favored by owners of cash-generating pipeline and other energy infrastructure assets because of the low tax liability. Those tax advantages provide MLPs with a lower cost of capital.

Kinder Morgan Inc also owns 20 percent of and operates Natural Gas Pipeline Company of America, which serves the Chicago market.

Goldman Sachs and Barclays Capital are joint book-running managers for the offering.

Reuters reported in July that the pipeline company was preparing for the offering, citing a source familiar with the matter.

(Reporting by Megan Davies and Michael Erman in New York and Anna Driver in Houston; Editing by Lisa Von Ahn, Bernard Orr, Gary Hill)