Updated at 12:17 p.m., Thursday, January 25, 2007
FTC restricts Carlyle Group's buyout of Kinder Morgan
Wall Street Journal
Wall Street JournalWASHINGTON — The Federal Trade Commission, in a rare restriction on a private-equity deal, told the Carlyle Group that it could complete a $22 billion buyout of energy distribution holding company Kinder Morgan Inc. only if it agrees to give up daily involvement in running a rival company that it also owns.
In a statement, the agency said Carlyle had agreed to consider its 50% holdings in the competing energy distributor, Magellan Midstream, as a "passive investment." This means that while Carlyle owns Magellan, it will have no board representation, ceding control to a third investor, Madison Dearborn Partners, and will have no say in the activities of Magellan.
Carlyle also ownes Hawaiian Telcom.
The scrutiny that federal antitrust enforcers gave the deal underscores the broad scope achieved recently by top-tier private-equity firms, which are building conglomerates that rival the size of the largest public corporations. These firms are eager to put billions more to work, which will make such regulatory tangles more common in the years ahead. Federal media-ownership caps, for instance, already loom over the ambitions of such firms as Providence Equity Partners and Kohlberg Kravis Roberts & Co.
An FTC official could point to only one other deal where the agency took action involving a buyout firm. That also involved KKR back in 1989 when the private equity firm was told to sell some of its food product assets if wanted permission to buy RJR Nabisco Inc.
