Kinder Morgan IPO Premium Price, Still Leaving Some on the Table (KMI, GS, KMR, KMP, AMJ, FMO, KYN, AMLP)

We have been calling for a premium IPO and a higher share count deal for Kinder Morgan, Inc. (NYSE: KMI) and its highly anticipated IPO.  Technically this is a re-IPO and is the largest private equity backed IPO out there and one of our own Top 17 IPOs to Watch For 2011.  The deal did price at a premium and then some.  Kinder Morgan’s IPO was for 95,466,600 shares of common stock and the price came at $30.00 per share.

As had been noted before the offering, all shares in the IPO are being sold by the existing investors.  The selling shareholders include affiliates of Goldman Sachs Group, Inc. (NYSE: GS), Highstar Capital LP, The Carlyle Group, and Riverstone Holdings LLC.  The good news is that none of the shares being sold are coming from Kinder Management, and that includes CEO Richard Kinder.

We are still considering the halo-effect for shares of Kinder Morgan Energy Partners LP (NYSE: KMP) and Kinder Morgan Management LLC (NYSE: KMR).  Kinder Morgan Energy Partners LP (NYSE: KMP) has not seen any gains this week as the oil market has not been a bullish one. Its units closed at $71.67 on Thursday and the 52-week trading range is $57.40 to $73.08.  Kinder Morgan Management LLC (NYSE: KMR) is closer to its week highs and at $64.83 its 52-week trading range is $50.67 to $67.56.  These two existing Kinder Morgan entities account for more than 14% of the weighting in the JPMorgan Alerian MLP Index Exchange Traded Notes (NYSE: AMJ).  Fiduciary/Claymore MLP Opportunity Fund (NYSE: FMO) has a 7.9% weighting and Kayne Anderson MLP Investment Company (NYSE: KYN) has a 6.6% weighting in the Kinder Morgan Management LLC (NYSE: KMR).  Kinder Morgan Energy Partners LP (NYSE: KMP) has roughly a 9.35% weighting in the ALPS Alerian MLP ETF (NYSE: AMLP).

Goldman Sachs and Barclays Capital are the joint book-running managers.  The deal’s co-managers are BofA Merrill Lynch, Citi, Credit Suisse, Deutsche Bank, J.P. Morgan, Wells Fargo, Madison Williams, Morgan Keegan, Raymond James, RBC Capital Markets, and Simmons & Company International.  The selling stockholders will grant the underwriters a 30-day option to purchase up to 14,319,990 additional shares of common stock to cover overallotments.

The most recent terms before the pricing had been for an IPO of 80 million shares with a price range of $26.00 to $29.00.  Just yesterday, our information from the night before had led us to believe that the IPO was likely to be closer to 90 million shares from the selling holders at the top of the trading range.  This premium pricing was that and then some at more than 95 million shares at a price of $30.00 per share.  Here is the funny thing about this IPO.  Despite our own digging for a higher price, there is still a feeling that some money was left on the table.  Management could have sold shares if it chose, particularly with such strong investor demand.

UPDATE at 3:40 PM EST: Shares were up at $31.17 on more than 47.5 million shares; the day’s trading range was $30.83 to $32.84.

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JON C. OGG

End note…. If you want to know why the Kinder Morgan interest is so strong and why the demand for anything tied to Richard Kinder is so strong, here is a chart as of last week that shows the long-term performance of Kinder Morgan Energy Partners LP (NYSE: KMP) and Kinder Morgan Management LLC (NYSE: KMR).  The chart should speak for itself: