Company founder and Chief Executive Richard Kinder, pictured in 2009 Reuters
Kinder Morgan Inc. KMI +7.20% is consolidating its vast oil-and-gas pipeline empire into a single company in a $44 billion deal amid investor worries about the enterprises' growth prospects.
The reorganized company will abandon the financial structure it helped popularize in the late 1990s: the master limited partnership. These complex tax-oriented offerings have caught on among energy companies facing substantial investments in infrastructure because of the U.S. oil and gas boom.
But Kinder now is so big that the MLP structure is limiting, said Richard Kinder, the companies' founder and chief executive. Combining all four of its publicly traded units into one corporation, he said in an interview, "will allow us to further expand the reach of the kind of projects we can do."
Acknowledging the difficulty that companies like his are having building big new pipelines because of regulatory scrutiny and public opposition, Mr. Kinder suggested that the newly consolidated Kinder Morgan would be able to move aggressively to acquire rivals and to expand its existing 80,000 miles of pipelines.

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Kinder Morgan said it would pay about $40 billion in stock and $4 billion in cash to investors in the other three related companies. The company also will assume $27 billion in debt, bringing the total value to approximately $71 billion, Kinder Morgan said.
Master limited partnerships basically give special tax breaks to companies that get almost all their revenues from natural-resource businesses. That typically has meant pipeline companies, which charge toll-like fees to move oil and gas. The partnerships don't pay corporate taxes to the federal government, distributing most of their cash flow to shareholders—and to the general partners who run the MLPs—in dividend-like payments.
These payouts have made them increasingly popular with investors, especially baby boomers hungry for high yields in an era of ultralow interest rates. Energy companies have also embraced them as a way to raise equity and issue debt backed by specific assets such as pipelines.
But investors have been concerned that with a $37 billion market value, Kinder Morgan's flagship partnership, Kinder Morgan Energy Partners KMP +15.75% LP, is so big that it is difficult for the partnership to achieve substantial revenue growth—and thus increase its distributions to shareholders. Analysts also have cited the hefty payments—about 46% of its cash—that the partnership has been making to the publicly traded company that runs it, Kinder Morgan Inc. Mr. Kinder owns 23% of that company, though his stake will decline to about 11% after the consolidation.
"The biggest problem facing Kinder Morgan is how to maintain growth," Morningstar analyst Jason Stevens wrote last month. To increase its distributions by a projected 5% to 6%, he continued, Kinder would have to put "$3 billion-$4 billion to work each year on attractive projects, a daunting task for any firm."
Kinder Morgan's interrelated companies include a smaller master limited partnership, El Paso Pipeline Partners EPB +19.37% LP, and Kinder Morgan ManagementKMR +22.24% LLC, which has a slightly different financial structure intended to attract institutional investors.
"This is a very simple and elegant solution to a problem of complexity," said Robert W. Baird analyst Ethan Bellamy. "I think ultimately this will prove to be a very good deal." He doesn't think other master limited partnerships will follow in Kinder Morgan's footsteps because other companies still benefit from the financial structure as a way to attract investment.
After the deal announced Sunday is completed, only Kinder Morgan Inc. will remain. In exchange, owners of the other three other securities will receive a mixture of cash and shares of Kinder Morgan Inc. at premiums ranging from 12% to 16.5%, based on last Friday's closing prices. Each of the stocks has slipped about 5% since late last month, however. Kinder Morgan said it had secured financing for the cash needed to pay its investors.
Under the consolidation, many individual investors in Kinder Morgan partnerships at first could receive smaller regular distributions, though the investors will also receive an initial cash payment of $4.65 or $10.77 a unit, depending on which partnership they own. The new combined entity will offer a $2 annual dividend that is expected to increase 10% annually through 2020, the company said. The value of the new entity's debt and equity is expected to be $140 billion.
Mr. Kinder, a lawyer with a penchant for deal making, left Enron Corp. in 1996 after being passed over for the CEO position. He and another lawyer, William Morgan, created Kinder Morgan the next year. They started with $40 million in assets purchased from Enron, which was eager to jettison the staid pipeline business in favor of conducting flashier financial engineering.
In 2006, Mr. Kinder announced a plan to take Kinder Morgan Inc. private in what was then the largest management-led buyout of a public company. Five years later, the company went public again in a large public offering. Later that year, a $21.1 billion purchase of rival El Paso Corp. made Kinder Morgan the largest natural-gas pipeline operator in the U.S.
U.S. energy production has soared since 2009 because of widespread use of hydraulic fracturing and other technologies that have made it possible to tap energy trapped in shale deposits. Oil output has increased 55%, or nearly three million barrels a day, over the period, while natural-gas production has risen 23%, much of it in parts of the country without sufficient existing pipelines.
At the same time, getting new pipelines off the drawing board has been tough. Heightened regulatory scrutiny and public opposition have derailed or delayed some of the largest pipeline projects, including Kinder Morgan's proposed Trans Mountain Pipeline to Canada's West Coast. Infrastructure companies including Kinder have increasingly have invested in rail terminals and other equipment so that oil can be shipped by railroad, barge and truck.
Kinder Morgan's new structure, Mr. Kinder said, will allow the company to move more rapidly to take advantage of the need for more energy infrastructure.
"What has happened in shale plays across country has stood the transportation network on its ear," he said. "We would look upon this as an opportunity to grow even faster in the future."
The deal is expected to be completed by year-end, subject to shareholder and regulatory approval.
—Ryan Dezember contributed to this article.