Kinder Morgan Incorporation Harvard Case Solution & Analysis

Kinder Morgan Incorporation Case Solution 

Is Richard Kinder buying or selling

 Mr. Richard Kinder is the president of Kinder Pipeline and Kinder Incorporation. According to the current and previous situation of company in which Kinder Incorporation has diversified their businesses in pipeline, natural gas retailing and power industry. Richard Kinder is selling due to facing current difficult financial situation.The financial position of the company is not suitable to further operate the business. The recession started at January 2006 and finally sold out within the same year in August 2006 on the contracted share price. In addition to this, Mr. Kinder is also buying the shares through this transaction and it is expected that buying shares will increase its current holding to more than 30% which is currently just 17%.

It is expected that Kinder will facilitate this buyout with the help of venture capital firms and investment banks.Mr. Richard is very powerful decision maker; therefore he is also playing his part as a member of the BOD in the organization.

Conflict of interest

The performance of the company was good previously as it had three diversified businesses that created financially sound and effective performance of the company. The share price was $ 93 and the expected price is$102. Before 2006, the company had owned 63% equity and 37% debt financing,which provided financial support to the three diversified projects. The profit percentage of these projects is about 50% to 98% and there is conflict of interest with respect to profit sharing between Kinder and Morgan and each of them are trying to get the maximum share of the profit.

In addition to this, there is a conflict of interest between Kinder and the management of the company with respect to the selling and buying transactions. The economic turn down and financial recession affect most of companies by lowering their share prices, similarly the economic downturn affected the share price of the company and it started declining.

With respect to this financial crisis, the management of the company decided to buy shares from the market to increase capital and the potential buyers were interested to repurchase shares. However, Richard sold out 81% of the shares and it is expected that after selling the shares, the company was just left with the holding of 19%. Moreover, it is expected that Kinder sold the shares for the personal benefit, which created conflict of interest between him and the management of the company..................

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