The ETRACS Alerian MLP Infrastructure Index ETN (NYSEArca: MLPI) is not the most widely heralded master limited partnership exchange traded product. Nor is it the most obscure. Regardless, MLPI is enjoying a day in the sun Monday thanks to Kinder Morgan Inc’s (NYSE: KMI) mega-consolidation news.
Shares of MLPI are higher by 4.6%, making the ETN comfortably the best-performing ETP to this point in Monday’s session. Kinder Morgan Inc. said it will acquire the stakes in Kinder Morgan Energy Partners, L.P. (NYSE: KMP), Kinder Morgan Management, LLC (NYSE: KMR) and El Paso Pipeline Partners (NYSE: EPB) that it does not already own. The deal, the second-largest in U.S. energy sector history, will create the fourth-largest U.S. energy firm.
That is good news for MLPI, which allocates 9.24% of its weight to Kinder Morgan Energy Partners, making the stock the ETN’s second-largest holding. Shares of Kinder Morgan Energy Partners are up nearly 17%. KMP unitholders will receive 2.1931 KMI shares and $10.77 in cash for each KMP unit. This results in a price of $89.98 per unit, a 12 percent premium based on the Aug. 8, 2014, closing prices, according to a statement issued by Houston-based Kinder Morgan Inc.
MLPI, which debuted in 2010, also has a 3.61% weight to El Paso Pipeline Partners. That is a good thing when that stock rises almost 21% in half a trading session as it has today. “El Paso unitholders will receive .9451 KMI shares and $4.65 in cash for each EPB unit. This results in a price of $38.79 per unit, a 15.4 percent premium based on the Aug. 8, 2014, closing prices,” said Kinder Morgan Inc. in the statement. [These ETFs Should Benefit From the Kinder Morgan Consolidation]
MLPI and other MLP ETFs and ETNs have recently traveled down Consolidation Boulevard. MLP ETFs and ETNs, prized by income investors for juicy yields, surged in June when Williams Cos. (NYSE: WMB), the Oklahoma-based operator of a natural gas pipeline system that stretches from Texas into the Southeast and up through the mid-Atlantic region, said it will pay almost $6 billion for the 50% of Access Midstream Partners (NYSE: ACMP) it does not already own. [MLP M&A Lifts These ETFs]
MLPI allocates a combined 7.6% of its weight to Williams Partners (NYSE: WPZ) and Access Midstream, according to UBS data.