Kinder Morgan to acquire Terasen - Media medley

Kinder Morgan - Terasen joint press release
U.S. firm offers $3-billion for Canada's Terasen
Catherine McLean, Globe and Mail, 01 Aug 2005
Houston-based Kinder Morgan to buy Terasen Inc., formerly B.C. Gas, for $6.9B
John Valorzi, Canadian Press, 01 Aug 2005
Energy Pipeline Operator to Buy Canadian Rival
Reuters, New York Times, 02 Aug 2005
U.S. company to buy B.C.'s Terasen Gas for $6.9 billion
Scott Simpson, Vancouver Sun, 02 Aug 2005
$6.9B on table for Terasen
Peter Brieger and Paul Vieira, National Post, 02 Aug 2005
U.S. giant bids for Terasen
Scott Simpson, Vancouver Sun, 02 Aug 2005
Texas energy firm gobbles up Terasen Gas in $7-billion deal
Kent Spencer, The Province, 02 Aug 2005

Catherine McLean
Globe and Mail
August 1, 2005

Kinder Morgan Inc. unveiled an agreement Monday to buy Terasen Inc. for $3.1-billion (U.S.), giving the U.S.-based energy giant critical strategic involvement in the Alberta's oil sands.

Kinder Morgan is the latest company from outside the country's borders to secure a spot in this key market. Until Monday, Chinese firms had been the most aggressive suitors, making three separate investments this year. However, lately the oil sands have attracted more attention from the United States, as evidenced by Treasury Secretary John Snow's tour of the region last month.

Terasen's main pipeline from the oil sands runs from Edmonton to B.C.'s Lower Mainland. It operates another that runs south to the U.S. Midwest. With Kinder Morgan's backing, Terasen will have greater access to capital to expand pipelines and move more crude from the oil sands.

Larger rival Enbridge Inc. is also pushing ahead with expansion plans to send more oil sands crude to the U.S.

“It has great upside potential in the sense the oil sands play is going to get larger and larger,” Kinder Morgan chief executive officer Richard Kinder said Monday in an interview. “We think with Terasen's current footprint, the pipelines it has in place, and our financial wherewithal, we'll be able to dramatically increase our capacity to take more product coming out of Alberta.”

Houston-based Kinder Morgan started looking at the oil sands a year ago, according to Mr. Kinder. Over the past six to eight weeks, the two parties held discussions. The combined company will have 40,000 miles of pipelines and more than 1.1 million natural gas distribution customers.

Kinder Morgan is also assuming $2.5-billion in debt. Kinder Morgan said the value of the transaction is $35.91 (Canadian) a share, a 14-per-cent premium to Friday's closing price of $31.40. For each share, Terasen shareholders can choose $35.75 in cash, 0.3331 shares of Kinder Morgan, or $23.25 in cash and 0.1165 Kinder Morgan shares.

The deal will immediately be accretive in terms of earnings and cash flow per share, Mr. Kinder said. Kinder Morgan expects the combined company's earnings per share and dividend will grow at approximately 10 per cent annually.

“This transaction is a real validation in many ways of what it is that we're trying to do with the oil sands,” Terasen chief executive officer John Reid said Monday in an interview. “I believe the folks at Kinder Morgan see that, and think that in partnership we can move that so much further ahead. This transaction is about growth. It's about accelerating, further developing growth opportunities.”

Analysts are bullish on the outlook for production at the oil sands, which currently stands at one million barrels a day, about 1 per cent of global output. It could reach as high as 11 million barrels a day in the 2040s, analyst Steven Paget of FirstEnergy Capital Corp. wrote in a report a few weeks ago.

According to Terasen, Canadian oil sands production is projected to rise to about 2 million barrels of crude a day between 2010 and 2012.

Those forecasts are bringing in foreign investors. In April, China National Offshore Oil Corp. bought a one-sixth share in Calgary-based MEG Energy Corp. for $150-million. In May, China Petroleum & Chemical Corp. (Sinopec) took a 40-per-cent stake in an upstart project controlled by Synenco Energy Inc.

Kinder Morgan's deal must be approved by 75 per cent of Terasen shareholders who attend a special meeting held before Oct. 31. Regulatory approval is also required. The board of Vancouver-based Terasen is recommending shareholders vote in favour of the transaction.

Terasen said it has agreed to pay a termination fee of $75-million under certain circumstances, without elaborating. There has been speculation that the company could spin off a utility, Terasen Gas. However, Mr. Kinder said Kinder Morgan has no such plan.

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John Valorzi
Canadian Press
Monday, August 01, 2005

TORONTO (CP) - Houston-based Kinder Morgan Inc. is buying Canada's Terasen Inc. in a cash, share and debt deal that values the Vancouver company at nearly $7 billion and provides the financial muscle needed to rapidly grow the pipeline network sprouting from the Alberta oilsands.

In a blockbuster deal announced Monday afternoon, Kinder Morgan and Terasen detailed an agreement that will see the Houston company pay $35.91 Cdn in cash or stock for each Terasen share, creating a major North American energy transportation and distribution company.

The total purchase price, including assumption of debt, is about $5.6 billion US, or $6.9 billion Cdn, the companies said.

The acquisition of Terasen, a natural gas utility and oil pipeline company formerly known as B.C. Gas, is the second major acquisition of a Vancouver-based pipeline company by a U.S. energy giant in recent years.

Westcoast Energy, which operated natural gas pipelines on the West Coast and had other significant energy businesses across Canada, was acquired by Duke Energy several years ago.

Monday's announced acquisition of Terasen has been unanimously approved by each company's board of directors and by a special committee of independent directors created by the Terasen board to oversee the sale. The deal is expected to close by the end of the year, subject to Terasen shareholder approval and other regulatory approvals.

"For shareholders, it means a 20-per-cent premium over the price they've been getting the last 20 days which has been trading at its high so it's a great financial gain for shareholders," said Terasen spokesman Cam Avery.

The combined company will have about 64,000 kilometres of natural gas and petroleum transportation pipelines, more than 1.1 million natural gas distribution customers, about 150 terminals, 9,000 employees and a value of more than $19 billion US.

Including Kinder Morgan affiliate Kinder Morgan Energy Partners L.P. (NYSE:KMP), of which KMI is the general partner, the value of the total combined companies will be about $35 billion US.

Terasen operates British Columbia's major gas distributor, with about 875,000 customers.

"For gas customers, it won't make any difference at all because those are regulated companies and the gas business will continue to operate as Terasen gas in B.C.," said Avery.

But a key lure for Kinder Morgan was Terasen's growing presence in the oil pipeline business, where the Vancouver company's pipelines in B.C., Northern Alberta and the United States are well-positioned to ship growing production from the Alberta oilsands to markets in Canada, the United States and Asia.

"This transaction will combine two strong entities to create a premier energy company in North America with a bright future," said Kinder Morgan chairman and CEO Richard Kinder.

"It is a win-win transaction for both entities that is expected to produce immediate shareholder value through strong earnings and cash flow accretion, as well as provide exciting future growth opportunities. For Kinder Morgan, the merger will dramatically broaden our footprint into Canada."

He noted that the financial strength of the combined company will help finance new pipeline construction to service the oilsands sector.

"There is a definite need for additional pipeline infrastructure from the Alberta oilsands, and we have a great opportunity to use the capital strength of the combined company - along with our expertise in building and operating pipelines - to increase capacity on Terasen's existing pipeline system and help meet the growing demand of an oil-starved world," he said.

Canadian oilsands production is projected to double from current levels to about two million barrels of crude oil a day between 2010 and 2012. According to the National Energy Board, Canada's recoverable oilsands reserves are the largest in the world. They currently account for about 37 per cent of all Canadian oil production, and are expected to make up two thirds of domestic production by 2015.

Terasen president and CEO John Reid said the planned combination is a great opportunity for Terasen (TSX:TER) and its shareholders.

"This transaction creates significant immediate and long-term value for our shareholders and gives us the scale, resources and access to capital we need to accelerate our business strategy and lead the development of world-class infrastructure across Western Canada."

"The offer represents a significant premium to our recent share price at a time when Terasen is trading at all-time highs, and gives Terasen shareholders the opportunity to participate in the ongoing success of the combined company.

"Kinder Morgan is one of the largest and most respected energy transportation and storage companies in the United States, is the market leader in most of its businesses and has produced outstanding returns for its shareholders. We are very pleased to become a significant part of a much larger and stronger enterprise."

Avery said other petrolem companies would likely welcome the move.

"For the petroleum pipeline customers - these are the big oil companies - and they're all familiar with Kinder Morgan because Kinder Morgan are bigger pipeline players than we are," Avery said. "They'll probably welcome it because it means a bigger, more sound financially sound company taking pipeline proposals to them".

© The Canadian Press 2005

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Reuters
New York Times
August 2, 2005

HOUSTON, Aug. 1 (Reuters) - An energy pipeline operator, Kinder Morgan, said on Monday that it had reached a deal to buy a Canadian pipeline company, Terasen, for $3.1 billion to expand its share of Canadian oil shipments.

The purchase also calls for Kinder Morgan to take on $2.5 billion in Terasen's debt.

Kinder Morgan's offer totals 35.91 Canadian dollars for each share of Terasen, a premium of about 20 percent over the average price of the last 20 trading days, the company said.

In addition to gaining Terasen's 2,800 miles of pipelines, which carry 680,000 barrels a day of petroleum and petroleum products, the deal will position Kinder Morgan to expand its network into Alberta's growing production of crude oil from oil sands.

That area was projected to double its production from current levels to about two million barrels a day between 2010 and 2012.

Alberta's oil sands reserves are believed to be the largest in the world and currently account for more than a third of Canada's oil production.

Terasen also owns a utility in western Canada that distributes natural gas to 875,000 customers in British Columbia.

Under the deal's terms, Terasen shareholders can elect to receive 35.75 Canadian dollars in cash per share, 0.3331 shares of Kinder Morgan common stock per share, or 23.25 Canadian dollars in cash plus 0.1165 Kinder Morgan common stock per share, the companies said.

The deal, which was unanimously approved by each company's board of directors, will require Terasen shareholders' approval in a vote to be held no later than Oct. 31.

The combined company will own 40,000 miles of natural gas and petroleum pipelines and reach more than 1.1 million natural gas distribution customers.

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Scott Simpson
Vancouver Sun
02-Aug-2005

More than 875,000 Terasen Gas customers in British Columbia will be paying their monthly heating bills to a company based in Houston, Tex., under a $6.9-billion deal announced Monday.

The deal would see Vancouver-based Terasen purchased by Kinder Morgan of Houston, a $35-billion company with a high-profile owner that was ranked this year by Fortune magazine as one of "America's most-admired companies."

Work on the deal began three months ago when Kinder Morgan approached Terasen.

It requires approval of 75 per cent of Terasen shareholders, who are being offered a premium of nearly 20 per cent over the current value of the company's shares. It would also require some approvals by the B.C. Utilities Commission.

Canadian investors own 99 per cent of Terasen Inc. shares, the firm says, with half of those stocks owned by individual shareholders and the other half owned by pension funds and mutual funds.

Terasen has two main components, a gas-delivery utility serving householders and commercial customers in B.C., and a pipeline company that provides service in both Canada and the United States.

The future of Terasen's pipeline operations represent the biggest prize in the deal because of the company's connections to the Alberta oil sands, its 2,700-kilometre Express pipeline into the U.S. Rocky Mountain states, and a growing U.S. desire for North American sources of petroleum.

Kinder Morgan chairman and CEO Richard Kinder said in an interview from Houston that the deal will have relatively little impact on Terasen's 2,553 employees.

"This is not a program where we are planning to cut a lot of jobs or anything else," Kinder said.

"These are assets and people we like very much. I think it's going to be, as [Terasen president and CEO] John Reid and I were talking earlier, a win-win for the shareholders and employees of both companies."

Kinder is one of the United States' wealthiest citizens and a solid backer of President George W. Bush.

His personal net worth exceeds $1.2 billion.

He was formerly a president of Enron Corp., the Houston-based energy trading company that was rocked by scandal in the early part of this decade due to allegations of manipulation of the California energy market.

However according to the website of Forbes business magazine, Kinder "wisely" left Enron in 1996, well before the scandal, because he was uncomfortable with the company's lack of emphasis on hard assets such as pipelines.

He created a new company that scooped up Enron's pipeline assets and never looked back, emerging as the United States first-ranked pipeline company.

"Vietnam vet careful to avoid Enron excesses: flies coach class, pays himself just $1 a year," says Forbes.

Kinder gets all of his compensation through the value of the company's shares -- average annual returns have been 40 per cent since 1999, 35 per cent since 1997.

Terasen's Reid said the deal won't bring any changes for the company's gas customers, who will still get their monthly bills on Terasen letterhead.

"At this point the immediate concern, I guess, is what this would mean to me as a customer of Terasen Gas -- are my gas bills going to go up, all those types of things," Reid said.

"The answer is absolutely no, there will be no change that is not positive. Service will continue at least at the present level.

"Going forward, the fact that we are part of a larger organization and everything that gives us access to means, ultimately, that we will have even better levels of service."

He described Kinder Morgan as "a very, very successful company, very much an operating company focused on the same types of assets, the same type of business as Terasen, focused on good customer service and efficiency.

"I think it's a business culture that will be consistent with ours."

The union representing some 400 workers at Terasen condemned the deal, saying the B.C. government should take action to protect B.C. jobs, the province's supply of natural gas and fair consumer pricing.

"This is a terrible way to celebrate B.C. Day, by seeing a former Crown Corporation and an important B.C.-owned and based company move to Houston, Texas," Andy Ross, president of Canadian Office and Professional Employees' Local 378, said in a news release.

"The provincial government has a lot to answer for, since it made this corporate runaway possible in the first place."

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Peter Brieger and Paul Vieira
National Post
02-Aug-2005

One of the biggest energy distribution companies in the United States -- headed by the former president of Enron Corp. -- offered yesterday to buy Terasen Inc., the Vancouver oil and gas distribution giant, for $6.9-billion, including debt.

In another sign that takeover activity in North America's oil and gas sector appears set to continue, Houston's Kinder Morgan Inc. said Terasen, formerly B.C. Gas Inc., would give it access to the fast-growing production from Alberta's oilsands and a stable, cash-producing gas distribution business.

Under the proposed deal, investors have three options: they can tender each Terasen share they own for $35.75 in cash -- a 20% premium over the average closing price in the three weeks ended July 29; trade one Terasen share for 0.3331 shares of Kinder Morgan; or take $23.25 in cash and 0.1165 Kinder Morgan shares.

Yesterday, Kinder Morgan stock finished at US$52.31, down US10 cents, on the New York Stock Exchange, short of its 52-week high of US$53.96 while Terasen closed on Friday near its 52-week high of $31.40.

In its most recent quarter ended June 30, Kinder Morgan posted a profit of US$221.8-million, a 13.6% increase from the year-ago period, based on sales of US$2.1-billion.

The company is led by Richard Kinder, who left now-disgraced Enron in 1996 because he was reportedly uncomfortable with its "asset light" strategy.

Mr. Kinder, ranked as one of the 400 richest people in the world and one who enjoys close ties with the White House, built the company after buying Enron's liquid-gas pipeline operations with a college classmate.

Yesterday, he described the Terasen bid as a way to buy a stable business and "dramatically broaden our footprint into Canada," particularly in the oilsands.

Mr. Kinder will stay on as chairman and chief executive of the new company that will include Terasen, although some of the Canadian assets will retain the Terasen brand.

If the deal garners shareholder approval, earnings per share in 2006 are expected to be US$5 with almost US$800-million of free cash flow, Kinder Morgan said. The company's annual dividend would also rise to US$3.50 from US$3 a share.

According to U.S. Securities and Exchange Commission filings, Kinder Morgan has spent more than US$500-million in acquisitions since January, 2002; Terasen is its biggest catch yet.

Both companies said their respective boards have approved the deal. John Reid, Terasen's chief executive, has urged shareholders to accept the offer, which would create a company of 9,000 employees.

"The offer represents a significant premium to our recent share price at a time when Terasen is trading at all-time highs," he said.

"This transaction ... gives us the scale, resources and access to capital we need to accelerate our business strategy."

Vancouver-based Terasen, which reported $2-billion in 2004 sales, distributes natural gas to 875,000 customers -- about 95% of the British Columbia market. Through its pipeline division, the company transports oil from Alberta to B.C., Washington state and the U.S. Midwest. Together, the company would be the second-largest operator of natural gas pipelines in the United States with 40,000 miles of oil and gas pipelines and more than 1.1 million natural gas distribution customers.

The proposed transaction would also create the largest owner of storage terminals in the United States, handling 80 million tons of coal and storing up to 72 million barrels of petroleum products annually, Kinder Morgan said.

Kinder Morgan has a spotty record with U.S. state regulators. Last month, it was fined US$500,000 in California in relation to a pipeline explosion in California that killed five people. It is the subject of a U.S. nationwide review of its pipeline operations and maintenance practices as a result of those and other mishaps.

- - -

TERASEN INC.

Ticker: TER/TSX

Fri. close: $31.40, down 24 cents

Friday volume: 231,010

Avg. 6 mo. vol.: 131,580

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Scott Simpson
Vancouver Sun
02-Aug-2005

A solid connection to Alberta's booming oil sands was the driving force behind Kinder Morgan's stunning $6.9-billion bid for Terasen Inc., the chair and CEO of the Houston, Texas-based pipeline company said Monday.

The company is offering Terasen shareholders a premium of almost 20 per cent on the trading value of company shares over the past month, via options that include straight cash at $35.75 per share, or cash and Kinder Morgan shares, or Kinder shares.

Terasen has been trading in record territory in recent months, and closed at $31.40 last Friday in Toronto.

Richard Kinder, chair and CEO of Kinder Morgan, said in an interview from Houston that he hopes Terasen shareholders taking Kinder shares will hold onto them -- noting that the company is one of the Standard & Poors 500's best performers.

The deal requires 75 per cent shareholder support and cannot exceed 65 per cent cash or 35 per cent stock in Kinder Morgan Inc.

"If you look at the time we formed Kinder Morgan Inc. in July of 1999. . . we've had a compound annual return of 40 per cent which is, if the not the very best, then one of the very best in the S&P 500 from that time to this time," Kinder said.

It's the biggest deal in the Canadian pipeline sector since Houston-based Duke Energy bought Vancouver's Westcoast Energy in 2001 for $8.5 billion US.

The new, combined Terasen-Kinder Morgan entity would be worth $19 billion, Kinder said.

His company began hunting a year ago for ways to expand its profile in the Alberta oilsands play.

"We are strictly a mid-stream company but we have made a practice of trying to find important trends to ride. Certainly we think given the type of production increases we've already seen and expect to see over the next five to seven years in the oilsands, that's something we want to be involved in given the size of our pipeline operations around North America.

"Obviously alternatives ranged from going in and trying to start from scratch to buying a company. The more we saw Terasen, the more we liked them because it's a unique combination."

"You have assets not just in the oilsands play in terms of their pipelines," but in the company's B.C. gas distribution company as well, he said.

"We like that business, too. So what we saw in Terasen was a good stable company with good assets, good people, not much overlap with what we do, and yet we saw a good potential for the future in expanding and extending the pipeline infrastructure.

"We see, and I think this is pretty well the consensus, growth in production from the oilsands from about one million barrels a day to about two million barrels in five to seven years.

"We plan on doing the best we can to capture a significant amount of those growth volumes to go through pipelines that we would either expand present lines or build new lines."

The combined company will have about 64,000 kilometres of natural gas and petroleum transportation pipelines, 1.1 million natural gas distribution customers including 875,000 residential customers in B.C., and 150 terminals around the continent according to a joint news release.

The deal has unanimous approval of the board of directors of each company and by a special committee of independent directors, struck by Terasen, to oversee the deal.

The transaction will require Terasen shareholder approval prior to closing, which is expected by year's end.

The deal is contingent on approval by 75 per cent of Terasen shareholders, as well as assent from the B.C. Utilities Commission.

"We think this an excellent transaction. We think we are creating a real leader in the energy transportation business in North America," said Terasen president and CEO John Reid.

"The combination of the two and the geographical and industry coverage that it's going to give the two of us together and the ability to drive growth further, I think, has to be exciting for both sides."

Terasen at present has plans in the works for more than $2 billion worth of pipeline expansion projects including twinning its Trans Mountain petroleum pipeline from Edmonton to Greater Vancouver and Puget Sound, and Reid said the new parent company will be in a better financial position to finance such projects.

It's the latest move for a company with deep roots in British Columbia. Terasen announced in March 2003 that it was changing its name from BC Gas.

The company was formed 17 years ago in a merger of private and crown-owned gas distribution companies.

In the Lower Mainland, the gas company was previously owned by the province and operated as part of BC Hydro. The Interior B.C. component was a shareholder-owned company, Inland Natural Gas. The two companies were merged into a single, shareholder-owned entity in 1988.

ssimpson@png.canwest.com

A BLOCKBUSTER DEAL:

Monday's $6.9-billion deal to sell B.C.'s Terasen Inc. to the U.S.'s Kinder Morgan Inc. has been unanimously approved by each firm's board of directors and a special committee of independent directors. Here are the details:

THE PAYOUT:

- Terasen shareholders can receive $35.75 per share, a 20-per-cent premium. They can also elect to take 0.3331 shares of KMI or a share/cash combo of $23.25 in cash plus 0.1165 shares of KMI.

- Total purchase price, including assumption of debt, is $6.9 billion

THE FINE PRINT:

- Deal must be approved by regulators

- Kinder becomes CEO of the combined entity

- 75% of shareholders must approve the deal on or before Oct. 31.

- Terasen won't seek competing bids and has agreed to pay a $75-million termination fee under certain conditions if the deal fails.

THE PLAYERS:

John Reid

CEO, Terasen Inc., Vancouver

Heads a firm with:

- 875,000 customers

- 2,553 employees

- 8,000 kilometres of gas and petroleum transmission pipelines

- $5 billion in assets

- Operates 90 water and wastewater infrastructure services in 50 communities in Western Canada.

- Market cap of $3.3 billion.

Richard Kinder

CEO, Kinder Morgan Inc., Houston, Texas

Kinder Morgan Inc. and its partner firms Kinder Morgan Energy Partners and Kinder Morgan Management operate a series of companies with:

- 6,500 employees

- 56,300 km of natural gas and other pipelines.

- 240,000 retail gas customers

- 145 terminals for gas, coal and other energy products.

- Combined market cap of more than $22 billion US.

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Kent Spencer
The Province
02-Aug-2005

The union representing more than 400 workers at Terasen Gas yesterday demanded the provincial government protect their jobs following the sale of Terasen to a U.S. company.

"Premier Gordon Campbell should immediately demand that B.C. jobs be protected in this sale, and that B.C. businesses and residents be guaranteed first right to natural gas from this province and at a fair price," said Andy Ross of the Canadian Office and Professional Employees Union.

Terasen, a natural-gas utility and oil pipeline company that supplies gas to 875,000 customers in B.C., was bought by Houston, Tex.-based Kinder Morgan for cash, stock and debt in a $6.9-billion Cdn deal.

Ross called it "a terrible way to celebrate B.C. Day -- by seeing a former Crown corporation and an important B.C.-owned and based company move to Houston, Tex."

He said "a corporate boardroom in Texas" will decide what's in the best interest of shareholders, not B.C. customers or workers."

"I'm hopeful the head office won't be closed down, but I won't be surprised if it is," he said.

Ross said there was protection against foreign ownership built in when B.C. Gas was split off from B.C. Hydro in 1988, but that protection was removed in 2003 by the B.C. Liberals.

"They have a lot to answer for," he said. "People have been lining up to buy Terasen. I think the name was changed from B.C. Gas to Terasen so it wouldn't tie into B.C."

The Terasen sale is the second major acquisition of a Vancouver-based pipeline company by a U.S. energy giant.

Westcoast Energy, which also operated pipelines, was acquired by Duke Energy several years ago.

"It's interesting and sad," said Vancouver energy analyst David Austin. "There is no major gas or oil-related company with headquarters in B.C. any more."

Austin said B.C. residents shouldn't fear sudden price hikes.

"Given that gas prices are fully regulated by the B.C. Utilities Commission, it doesn't matter who owns it," he said.

But Austin is concerned about the future of employees at Terasen's head office in Vancouver.

"When Duke bought Westcoast, it gutted the whole head-office function," he said.

Kinder Morgan said the head office of Terasen Gas will remain in Vancouver and the name will stay the same.

Kinder Morgan chairman Richard Kinder said his company was interested in Terasen's new pipelines, which transport oil from large reserves in the Alberta oilsands to the U.S. midwest.

Kinder said Terasen's pipelines would "help meet the growing demand of an oil-starved world."

Company spokesman Larry Pierce said North American-based oil is needed as opposed to off-shore supplies.

"Demand is increasing all the time," he said.

Kinder Morgan, which specializes in pipelines, natural gas distribution and storage terminals, will have about 64,000 kilometres of pipelines as a result.

Terasen president John Reid said the deal "marks a significant milestone in our history."

Kinder Morgan has offered $35.91 per Terasen share, a 20-per-cent premium on recent closing averages.

Terasen shareholders, who must approve the deal on Oct. 31, will be able to collect $35.75 cash, 0.331 shares of Kinder Morgan stock or a combination of both cash and stock.

The stock traded as low as $18.08 in 2003 and ended 2004 at $27.71.

The transaction has been unanimously approved by both companies' boards of directors and should be completed by the end of 2005.

The Lower Mainland portion of Terasen Gas was a public utility called B.C. Gas from 1950 to 1988. It was sold by Premier Bill Vander Zalm's government in 1988 and combined with a company called Inland Natural Gas, which served the Interior.

B.C. Gas was renamed Terasen Gas two years ago, a name that means "sent from the Earth."

Terasen is also a large private-sector water operator, supplying 90 locations. It also runs the sewage system for Langford on Vancouver Island.

kspencer@png.canwest.com

QUICK FACTS:

- Price tag: $6.9 billion Cdn, assuming debt. $35.91 in cash or stock per Terasen share.

- Terasen: Formerly B.C. Gas. Vancouver firm is a major gas distributor in B.C. and operates oil pipelines to the Alberta oilsands and into U.S.

- Kinder Morgan: Based in Houston, Tex. Major energy transportation and storage company with more than 56,000 kilometres of natural gas and products pipelines and 145 terminals. KMI owns the general partner interest of Kinder Morgan Energy Partners, a major pipeline operator.

- Combined company: About 64,000 km of natural gas and petroleum pipelines, more than 1.1 million natural gas distribution customers, about 150 terminals, 9,000 employees and a value of more than $19 billion US.

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