Updated from 5:08 p.m. EDT with deal details, background on Kinder Morgan's purchase of El Paso.NEW YORK ( TheStreet) -- Kinder Morgan ( KMI) has agreed to buy El Paso ( EP) for $21.1 billion in a cash and stock deal. The transaction, which values El Paso at $38 billion including El Paso's outstanding debt, creates the largest network of natural gas pipelines in the U.S. and is the largest energy merger this year. It's also the second largest takeover this year after AT&T's ( T) $39 billion purchase of T-Mobile in March, although that deal has been blocked by the U.S. Department of Justice on antitrust concerns.
Kinder Morgan said it would expect to pay a dividend of $1.45 a share in 2012, a big increase from the $1.20-a-share dividend for 2011. The company also expects its dividend to grow 12.5% a year through 2015, an increase from its previously forecast 10% growth.By the end of 2015, Kinder Morgan said it expects its assets to consist almost exclusively of its general partner interests in Kinder Morgan Energy Partners and El Paso Pipeline. At that point, significantly more than 80% of Kinder Morgan's cash flows are expected to come from the general partner interests in its pipeline businesses. Evercore Partners ( EVR) and Barclays Capital were the financial advisers to Kinder Morgan. Morgan Stanley ( MS) was the financial adviser to El Paso. The merger is a boost to dealmaking markets, which have cooled significantly since the beginning of the summer. According to quarterly numbers released by financial data firm Dealogic this month, global merger and acquisition activity fell 19% in the third quarter, the poorest performance of the year, after rising by more than 20% in each of the first two quarters of 2011. After starting on its best merger pace since 2008, M&A is tracked at its worst level since the second quarter of 2010, making the risk of a double-dip in the deal market for 2011 a reality. For banks relying on deals for fees, the slowdown has hurt earnings. On Thursday, JPMorgan ( JPM) reported that its investment banking fee revenue fell 46% to $1.04 billion, after growing 23% and 37% in the first and second quarters respectively when compared with 2010. It's currently the highest earning investment banking operation and seen as a harbinger for a slowdown in other investment bank earnings this quarter. -- Written by Antoine Gara in New York