Updated from 9:57 a.m. ET to include closing share prices and additional information throughout.

NEW YORK (TheStreet) -- Kinder Morgan (KMI) - Get Report is consolidating its master limited partner interests with the $71 billion acquisition of Kinder Morgan Energy Partners (KMP) , Kinder Morgan Management (KMR) and El Paso Pipeline Partners (EPB) , in a deal founder Rich Kinder said could pave the way for acquisitions. Kinder may be able to push the nation’s largest pipeline company into the market for oil, gas and coal reserves.

Sunday’s consolidation dramatically simplifies Richard Kinder’s pipeline empire, removing incentive distribution rights (IDRs) that Kinder Morgan's MLP interests paid to the general partner, Kinder Morgan. That simplification may provide a significant tailwind to Kinder Morgan’s stock, removing some investor scrutiny of distribution rights, while also creating significant tax savings and financing benefits.

Ultimately, however, the deal may allow Richard Kinder to expand his focus in the U.S. energy industry from pipeline infrastructure and into actual reserves in oil, coal and natural gas, one source familiar with the deal told TheStreet. Kinder may also be able to increase the company’s presence in energy infrastructure, possibly within crude oil and refined products logistics and tankers.

"They are trying to capture the entire energy value chain," that source said, who wasn’t authorized to speak on record. Richard Kinder similarly indicated that new direction on a call with analysts announcing Sunday’s deal.

Consolidating MLPs will allow Kinder Morgan to convert to a so-called "c-corporation" that is expected to lower the company’s overall cost of capital as a result of the elimination of IDRs. It will also transform Kinder Morgan’s various businesses into one single company with a market capitalization of about $140 billion, meaning the company’s stock may be a more acceptable currency for acquisitions.

"We are going to be able with this low cost of capital to do a lot more capital expenditure and be a more active acquirer," Kinder said on a call with analysts. TheStreet’s source noted that when combined, Kinder Morgan will need to spend as much as $4 billion annually on both capex and M&A to maintain its growth rates.

"Just watch what we could do now," Kinder added, while noting that the company may not look to buy trucking or railroad assets. He also said that Kinder Morgan will still be able to acquire MLP-structured companies even after removing distribution rights. Kinder Morgan would likely transform those businesses to c-corps, Kinder said.

As a C-corp., Kinder Morgan may also be opened to a broader market of investors, one source toldTheDeal's Claire Poole. Had Kinder Morgan's MLP acquired the general partner, a move analysts speculated on in June, it may have limited the company's growth prospects to the retail-dominated MLP market.

Kinder Morgan didn't immediately respond to an email seeking comment. Briefly, the company owned upstream assets in its $21.1 billion purchase of El Paso in 2011, however, it quickly divested those oil and gas assets to private equity firm Apollo Global Management. The company also already is a significant energy producer in the state of Texas.

"[W]e are inclined to think Kinder Morgan's greatest M&A opportunities likely lie in additional gathering & processing assets," Bank of America analysts said on  Monday.

Shoring up investment grade ratings across Kinder Morgan’s empire may also allow for a cheaper access to credit markets, especially if credit spreads widen in coming years. Sunday’s deal removes structural subordination across Kinder Morgan’s different businesses.

The Terms of the Deal

Kinder Morgan will acquire all of the outstanding securities of Kinder Morgan Energy Partners, Kinder Morgan Management and El Paso Partners, generally at mid-teen premiums to Friday’s close. Because former MLP holders may see a stock uplift from owning Kinder Morgan’s combined company, the deal may be even more attractive to former MLP shareholders.

“We will all be KMI shareholders now,” Kinder said on Monday. The combined Kinder Morgan is forecast to yield $2 a share in 2015, with a dividend growth rate of 10% in coming years. The company is also forecast to increase its dividend coverage ratio, putting overall coverage $2 billion in excess of planned dividend payments.

Some Kinder Morgan MLP holders will see a tax event from Sunday’s consolidation, but the company, itself, may see significant tax savings by simplifying its businesses.

In a presentation to investors, Kinder Morgan said it expects $20 billion in tax savings over the next 14 years. Over half of Kinder Morgan Energy Partners and El Paso Partners cash flows are taxed at Kinder Morgan, the company noted in its presentation.

"While Kinder Morgan Energy Partners currently benefits from lower taxes, this deal would decrease Kinder Morgan’s tax burden by utilizing tax depreciation from existing basis and future capex at the Kinder Morgan level as well as improving tax depreciation from asset step-up," JPMorgan analysts said on Monday.

"As over half of the combined Kinder Morgan Energy Partners and El Paso Pipeline Partners cash flows are currently taxed at the Kinder Morgan level, these mechanisms will significantly lower the Kinder Morgan tax rate," they added.

Enterprise Products Partners (EPD) - Get Report and Markwest Energy Partners (MWE) have made similar consolidations of their MLP interests in recent years.

Refinancing Possibly Limited

One source told TheStreet they expected Kinder Morgan to be able to quickly refinance some of the company's higher-cost debts once a deal closes. CFO Kimberly Dang emphasized that refinancing isn’t projected as a part of Sunday’s deal and she indicated the company may not immediately refinance some debts, such as those taken on to acquire El Paso Pipeline Partners, due to make whole provisions on the debt.

Overall, Dang said Kinder Morgan expects to the combined company to have a low-investment grade rating. Dang said Kinder Morgan is targeting debt levels of 5-to-5.5-times earnings before interest, taxes, depreciation and amortization (EBITDA).

Kinder Morgan shares rose 9% to $39.37 in Monday trading. Kinder Morgan Energy Partners shares rose over 17% to $94.08, while Kinder Morgan Management shares surged over 23% to $95.44. El Paso Pipeline Partners shares rose over 20% to $4.56.

Barclays and Citigroup advised Kinder Morgan on Sunday’s deal, with Barclays also providing financing. Jefferies acted as financial advisor to Kinder Morgan Energy Partners and Kinder Morgan Management. Tudor, Pickering, Holt advised El Paso Pipeline Partners.

For Jefferies, Kinder Morgan’s consolidation continues the company’s strength in advising the largest energy deals, while Barclays continues to win major financing mandates in the North American energy market.

-- Written by Antoine Gara in New York

Follow @AntoineGara