The energy-focused private equity firm First Reserve has agreed to acquire Cleveland-based Gas Natural Inc. and its five subsidiary companies for an all-stock deal worth $196 million in yet another utility merger.

Gas Natural is traded on the New York Stock Exchange and distributes gas to about 68,000 customers in Montana, Ohio, Maine and North Carolina. Under the terms of the agreement, First Reserve, which has long been an investor in the company, would acquire all of Gas Natural's common stock for $13.10/share, or a premium of 39% over the stock's 52-week high.

Pending regulatory approval from state regulators and Gas Natural shareholders, the deal is expected to close in the second half of 2017. Gas Natural would maintain its own leadership team and employees. Its subsidiary companies would continue to provide service in all four states.

First Reserve's Head of Infrastructure Funds Mark Florian said the firm is "excited about the potential of the natural gas distribution sector." Gas Natural owns Energy West in Montana, Frontier Natural Gas in North Carolina, Bangor Gas in Maine and Orwell Natural Gas and Northeast Ohio Natural Gas in the Buckeye state. The companies distribute 21 Bcf of natural gas to customers.

Gas Natural's board unanimously approved the merger. The agreement provides for a 42-day "go-shop" period, during which the company can solicit and receive other offers.

The deal is the latest in a series of announced mergers and acquisitions in the power and utility sectors, where buyers have offered up billions of dollars to bring on more assets as the gas and electric markets continue to evolve (see Daily GPISept. 30Aug. 24Aug. 9Aug. 24, 2015). While the Gas Natural merger is smaller by comparison, some of its companies, such as Bangor Natural Gas in Eastern Maine, have a firm grip on underserved areas where gas consumption is expected to grow in coming years.

Gas Natural also has intrastate pipeline, natural gas production and natural gas marketing operations.