The Laclede Group Inc. is buying EnergySouth Inc. -- parent of utilities Mobile Gas in Alabama and Willmut Gas in Mississippi -- from Sempra U.S. Gas & Power for $344 million.
Mobile Gas serves 85,000 customers, and Willmut Gas serves 19,000. Laclede is acquiring 100% of EnergySouth’s outstanding equity. However, all non-utility businesses within EnergySouth are being retained by Sempra. After the inclusion of working capital adjustments and the assumption of $67 million in debt, the transaction is expected to result in total cash proceeds of $323 million. Closing is expected this year.
"These additions allow us to build on our significant presence in Alabama, where we are the largest natural gas distribution company in the state, and expands our geographic reach into Mississippi," said Laclede CEO Suzanne Sitherwood.
Laclede said the acquisition aligns with its growth strategy of acquiring and organically growing gas utilities, expanding its footprint in the South. Willmut Gas gives Laclede entry into Mississippi, providing "...further regulatory diversity, adding another state with a highly rated regulatory environment."
During a conference call Tuesday to discuss the deal, Laclede Group COO Steven Lindsey said that there are opportunities to expand commercial and industrial load at both utilities being acquired. Additionally, there are opportunities for infrastructure upgrades, such as replacement of cast iron pipeline. Deployment of automatic meter reading systems at both utilities also is contemplated, he said.
The transaction is expected to be neutral to net economic earnings per share in 2017 and accretive in 2018, and is expected to support a long-term annual earnings growth target of 4-6%.
Financing is expected to include a mix of common stock and new long-term debt, cash on hand and available credit facilities.
The Laclede Group is to renamed Spire Inc. on Thursday (April 28) subject to shareholder approval. The St. Louis, MO-based company's primary business is providing natural gas service to more than 1.56 million residential, commercial and industrial customers across Missouri and Alabama.
The Laclede gas utility segment consists of three natural gas utilities: Laclede Gas Co. (serving St. Louis and eastern Missouri), Missouri Gas Energy (serving Kansas City and western Missouri) and Alabama Gas Corp. (serving central and northern Alabama, including Birmingham and Montgomery).
The $1.6 billion deal to acquire Alabama Gas, the state's largest natural gas utility, was announced two years ago (see Daily GPI, April 7, 2014). Missouri Gas Energy was acquired the year before for $975 million (see Daily GPI, Sept. 4, 2013).
Laclede's non-utility businesses include Laclede Energy Resources Inc., providing non-regulated natural gas services, and Spire, which provides compressed natural gas fueling solutions for transportation fleets.