KeySpan expanded its presence in the Northeast last week with a$2.5 billion acquisition of Weston, MA’s Eastern Enterprises andManchester, NH’s EnergyNorth. Joined with KeySpan’s Brooklyn UnionLDC, the deal creates the largest natural gas distribution companyin the Northeast and fifth largest in the United States, with 2.4million natural gas customers.

The acquisition, financed with $1.96 billion in equity and theassumption of $550 million in debt, was called a “milestone” byKeySpan CEO Robert B. Catell. The purchase gives the New York-basedcompany assets of more than $10 billion, and projected annualrevenues of $5 billion, primarily from the consolidation of sixutilities in New York and New England.

The acquisition complements KeySpan’s position in the New Yorkpower market, which it consolidated with the $5.4 billionacquisition of the Long Island Lighting Company (LILCO) in 1998(see NGI, Feb. 9, 1998).

Catell said the acquisition was a “major step in implementingour strategy of growth and our vision of becoming the premierenergy and services company in the Northeast.” Going further,Catell said KeySpan expects to see “tremendous growth for regulatedand unregulated sales of natural gas and energy-related productsand services throughout the region.”

Eastern shareholders will receive an acquisition price of$64.558 per share, paid in cash. Eastern shareholders also willreceive a portion of the fourth quarter dividend equal to $0.1692per share paid on Nov. 22. EnergyNorth shareholders will receive anacquisition price of $61.4587 per share, paid in cash and aprorated dividend of $0.2683 per share paid on Nov. 22.

KeySpan expects the acquisition to yield pre-tax annual savingsof approximately $40 million, mostly from eliminating duplicatecorporate and administrative programs, more efficiencies inoperations and business processes, increased purchasingefficiencies and a consolidation of the information systems.

Catell remains chairman and CEO of the new company. Eastern CEOJ. Atwood Ives and EnergyNorth CEO Robert R. Giordano retired fromactive management. Ives will become a KeySpan director.Headquarters will remain in New York, however, there will also be aBoston office.

The Eastern/EnergyNorth acquisition was first announced a yearago as a friendly deal (see NGI, Nov. 8, 1999). At the time Easternwas in the process of completing the takeover of EnergyNorth, itsthird LDC in two years. Eastern also owns and operates Boston Gas,Colonial Gas, and Essex Gas, and along with EnergyNorth, servesmore than 800,000 gas customers in Massachusetts and New Hampshire.

Brooklyn Union distributes gas to 1.6 million customers in NewYork City and on Long Island. Other KeySpan companies market aportfolio of energy services in the Northeast, operateelectric-generation plants in New York City and on Long Island, andprovide operating and customer services to 1.1 million electriccustomers of the Long Island Power Authority.

Carolyn Davis, Houston

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