AGL Resources to Buy Virginia Natural Gas
AGL Resources Inc. announced last week it has signed a
definitive agreement to acquire Virginia Natural Gas (VNG), a
wholly owned subsidiary of Dominion Resources, for $500 million in
cash. Dominion was required by regulatory authorities to sell the
property as part of its merger completed earlier this year with
Consolidated Natural Gas.
The purchase price includes $22 million in working capital. The
pending acquisition would boost AGL's base of customers to nearly
1.8 million, making it the second largest natural gas-only
distributor in the U.S. and establishing its presence in one of the
fastest growing gas markets.
Virginia Natural Gas, headquartered in Norfolk, VA, serves
approximately 230,000 natural gas customers. Customer growth at VNG
has averaged 4% in recent years --- three times the national
Under the agreement, AGL Resources would acquire all of the
outstanding stock of VNG. At the option of the seller, the parties
may elect to treat the transaction as a sale of assets for tax
purposes, in which case the purchase price will be increased to
$550 million to reflect the increased value of the transaction to
Upon completion of the transaction, expected by Dec. 31 of this
year, VNG will become a wholly owned subsidiary of AGL Resources.
The transaction will be accounted for as a purchase and will be
accretive to AGL Resources' earnings no later than 12 months after
Walter M. Higgins, chairman and chief executive officer of AGL
Resources, said the move is timely in light of AGL's success in
improving operations and earnings in a rapidly deregulating natural
"This acquisition is all about growth and competition. Our focus
this past year on achieving excellence in our operations is paying
off for customers and shareholders," said Higgins. "Our
year-to-date results have exceeded analyst expectations and we have
gained valuable experience in operating efficiently and profitably
in a deregulated environment. These strengths, when combined with
the best practices of VNG, will allow us to grow profitably in both
our utility and gas marketing businesses .as our industry continues
to reshape itself for competition."
The Virginia State Corporation Commission and the Federal Trade
Commission earlier this year had required Dominion Resources to
divest VNG as part of Dominion's planned merger with Consolidated
Natural Gas Company. Virginia is transitioning to competition in
gas and electric services, including some pilot programs for
deregulated natural gas services, and Higgins said AGL Resources
would actively support the those efforts.
AGL Resources intends to register as a holding company with the
Securities and Exchange Commission under the Public Utility Holding
Company Act (PUHCA) of 1935 in order to complete the transaction.
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