KeySpan Locks Up Two Northeast Distributors

KeySpan expanded its presence in the Northeast this week, with a $2.5 billion acquisition of Weston, MA's Eastern Enterprises and Manchester, NH's EnergyNorth. The deal creates the largest natural gas distribution company in the Northeast and fifth largest in the United States, with 2.4 million natural gas customers.

The acquisition, financed with $1.96 billion in equity and the assumption of $550 million in debt, was called a "milestone" by KeySpan CEO Robert B. Catell. The purchase gives the New York-based company assets of more than $10 billion, and projected annual revenues of $5 billion, primarily from the consolidation of six utilities in New York and New England.

Catell said the acquisition was a "major step in implementing our strategy of growth and our vision of becoming the premier energy and services company in the Northeast." Going further, Catell said KeySpan expects to see "tremendous growth for regulated and unregulated sales of natural gas and energy-related products and services throughout the region."

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

KeySpan expects the acquisition to yield pre-tax annual savings of approximately $40 million, mostly from eliminating duplicate corporate and administrative programs, more efficiencies in operations and business processes, increased purchasing efficiencies and a consolidation of the information systems.

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

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