Indiana Firms Seek to Form State's Largest Utility
Indiana Energy Inc., parent of Indiana Gas Co., and Sigcorp, the
holding company for Southern Indiana Gas and Electric Co. (Sigeco),
announced plans to merge and create a new $1.9 billion holding
company called Vectern Corp. The transaction was approved by the
boards of directors of both companies Monday. If the regulators and
the companies' shareholders give their nods to the deal, Vectren
would become the largest combined utility in the state, serving
650,000 gas and electric customers.
"The energy industry is converging and successful participants
will be able to offer a broad array of products and services to
customers," said Niel Ellerbrook, Indiana Energy CEO. "With this
combination, our asset mix will be split evenly between gas and
electric, balancing our earnings while positioning the combined
company to deliver energy in whatever form our customers need."
Indiana Energy's and Sigcorp's utility companies will remain
separate subsidiaries of Vectren and will continue to operate under
their respective names. Under the merger agreement, the corporate
headquarters of Vectren and of Sigeco will be in Evansville, IN.
Indiana Gas Co. will continue to be headquartered in Indianapolis.
"From our latest numbers, their 650,000 customers would be
slightly larger than Nipsco's 644,000, and the combination would
make them the largest combined utility we've got," said Ryan
Soultz, a spokesman for the Indiana Utility Regulatory Commission
By merging, the two companies expect to realize net savings of
$200 million over 10 years from the elimination of duplicate
corporate and administrative programs and greater efficiencies in
operations, business processes and purchasing. The merger is
expected to cause 120 people to lose their jobs, a 7% reduction in
work force. Both companies said they will seek alternatives to
minimize the impact on current personnel. All union contracts will
The two companies are no strangers to each other. They have been
partners for two years in the energy-related service provider
Energy Systems Group LLC. The partnership provides energy
management to clients throughout the Midwest.
"Simply put, this combination makes sense. It's a marriage of
strengths. Sigcorp has the lowest average retail electric rate in
the state and each company has among the lowest gas rates," said
Andrew Goebel, Sigcorp's COO. "Furthermore, over the last several
years, our customer growth rates have exceeded the national
The IURC's Soultz said it's too early to tell if the combination
will run into regulatory trouble. "Obviously, we'll take a long
look at all the aspects of the merger once it has been filed with
us. Right now, we don't know a lot." The companies anticipate that
the regulatory processes can be completed in six to nine months.
Under the agreement, Sigcorp shareholders will receive one and
one-third shares of the new company's common stock for each share
of Sigcorp they currently hold. Indiana Energy shareholders will
receive one share of the new company's common stock for each share
of Indiana Energy they currently hold. The tax-free stock-for-stock
transaction would create a combined company with $1.4 billion in
equity and $500 million in debt and subsidiary preferred stock
based upon Indiana Energy's closing stock price of $22.563 and
Sigcorp's closing stock price of $29.50 per share on Friday, June
11. Shareholders of each company will control 50% of Vectren's
Following the merger, Ellerbrook will be chairman and CEO of the
new company and Goebel will be president and COO. Indiana Energy
Chairman L.A. Ferger, and Sigcorp Chairman Ronald Reherman, will
retire but will serve on the board of directors of the new company.
Both Indiana Energy and Sigcorp each will designate six directors
to the new company's board.
Ellerbrook said he wants to grow non-regulated operations to a
point where they would be contributing more than 25% of the
consolidated total earnings by 2003. Vectren's non-utility
subsidiaries will offer energy-related products and services,
fiber-optic based telecommunication services, materials management,
locating and trenching services and energy marketing to customers
throughout its service area.