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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 average.
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 AGL Resources.
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 the close.
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 gas market.
"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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