Kinder Morgan commences $2.3bn IPO

The offering is poised to become the largest-ever private equity-backed initial offering in the US market for a group of funds managed by Goldman Sachs, Highstar, The Carlyle Group and Riverstone Holdings.

The parent company of pipeline and storage terminal operator Kinder Morgan has begun a $2.3 billion share sale that could become the largest-ever private equity-backed initial public offering in the United States.

The IPO aims to provide an exit to a group of infrastructure and private equity funds that backed the company in a $22 billion leveraged buyout in 2007. These include funds managed by Goldman Sachs, Highstar Capital, The Carlyle Group and Riverstone Holdings, according to a regulatory filing. The funds will be the only ones selling the 80 million shares to be offered to investors. Kinder Morgan management is not selling any shares in the IPO.

There's been a slight improvement in PE-backed IPOs

Scott Sweet

The IPO could become the largest-ever initial offering backed by private equity firms in the US market, according to data provider Dealogic. Kinder Morgan said in a prospectus it would seek to sell 80 million shares at a maximum price of $29 per share, which implies a deal value of $2.3 billion.

If the offering prices at that level, it will exceed last week’s $1.9 billion offering of TV ratings and research company Nielsen Holdings. That IPO priced at $23 and quickly jumped to more than $25 per share, providing a boost to a consortium of big name private equity shops that included Kohlberg Kravis Roberts, Thomas H. Lee Partners, The Carlyle Group and The Blackstone Group.

“There’s been a slight improvement in PE-backed IPOs,” said Scott Sweet, senior managing partner at Florida-based IPO advisory firm IPO Boutique.  “Nielsen was priced well, performed well and also was high-profile. And there are others in the pipeline, like Toys R Us and HCA,” Sweet added, pointing to two Kohlberg Kravis Roberts and Bain Capital-backed companies that already have filed for IPOs.

Dealogic, the data provider, sees a pipeline of 21 private equity-backed IPOs worth a combined $9.7 billion, based on IPOs filed in the last six months and still pending. That $9.7 billion represents 54 percent of all expected US listed IPO volume, according to Dealogic.

Goldman Sachs and Barclays Capital are joint book-runners for the Kinder Morgan offering, which is expected to price later this week.

A spokesperson for Kinder Morgan declined to comment on the offering.