Nipsco, Bay State Gas Merger Cleared at Last
After a long, drawn-out regulatory process, Nipsco Industries
(NI) finally completed its merger with Massachusetts-based Bay
State Gas Co., giving the Indiana-based holding company a powerful
East Coast influence. The $780 million merger originally was
announced in December 1997 and was expected to close before the end
of 1998. Final documents were signed last Friday.
Under the terms of the agreement, Bay State and its subsidiary,
Northern Utilities Inc., will become wholly-owned subsidiaries of
NI. Each share of Bay State common stock will be converted into the
right to receive $40 in cash, or 1.4 shares of NI common stock as
determined by the average NI closing price reported in the Wall
Street Journal for the 20 days ending Feb. 9. Bay State will still
operate with local management, employees and directors. No layoffs
are expected to result from the merger.
"I think lots of people are wondering why it took so long," said
Nipsco spokesperson Kris Falzone. "There were no snags, and
actually state approvals have been in since last fall. It was just
a matter of getting through the SEC. Dotting the 'i's and crossing
Nipsco CEO Gary Neale said the delay will cause a small problem
because Nipsco did not have access to Bay State's Northeast markets
during a critical time. "[Earnings] will be slightly less because
we missed the premier earnings month, which is January in this
business. We are not ready to re-forecast yet until we get our
hands on the books." Neale said previous projections had the merger
adding $0.04-$0.05 per share.
Ed Tirello, an analyst with BT Alex Brown, gave Nipsco high
marks for the move. "It gives them a very good foothold to access
the East, which seems to be the popular thing these days. This
helps Nipsco not only in terms of gas, but Bay State also has very
good energy service assets that Nipsco can now utilize. I think
Nipsco has done a very good job of implementing the strategy of
drawing a line from the Southwest to the Northeast, then buying
along that line." Tirello added that the deal should be accretive
in its first full year of operation.
Falzone said the big winner of this deal will be the Bay State
customers, who will receive a five-year rate freeze of their basic
gas rate. The customers will also benefit from receiving their gas
from a larger company that can offer a variety of services along
with reliable gas.
"Our merger with Nipsco Industries will provide Bay State the
size and scope we need to succeed in the changing energy markets of
the future," said Roger Young, chairman of Bay State Gas, which
serves 305,000 natural gas customers in Massachusetts, New
Hampshire, and Maine.
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