Daily GPI / M&A / NGI The Weekly Gas Market Report / NGI All News Access

Laclede Buying Alabama Utility From Energen

The Laclede Group Inc. is buying Alabama's largest natural gas utility, Alabama Gas Corp. (Alagasco), from Energen Corp. in a $1.6 billion deal that continues to grow Laclede's utility footprint while making Energen a pure-play exploration and production (E&P) company.

Alagasco has more than 422,000 customers. The value of the transaction is composed of $1.28 billion in cash and about $320 million of debt. The effective price of the acquisition is $1.34 billion after accounting for the present value of tax benefits to Laclede from the transaction, the utility holding company said.

"Alagasco is an excellent fit for Laclede, and allows us to leverage our combined scale, industry expertise and more than 150 years of experience to drive customer and shareholder value," said Laclede CEO Suzanne Sitherwood. "Now, with Alagasco, our utility customer base increases from approximately 1.13 million to 1.55 million."

Founded in 1857 as The Laclede Gas Light Co., Laclede Group's gas utility segment serves St. Louis and eastern Missouri through Laclede Gas Co. and Kansas City and western Missouri through Missouri Gas Energy, which was acquired by Laclede last year from Energy Transfer partners (see Daily GPI, Sept. 4, 2013).

Following the acquisition, Laclede Group will rank fifth among U.S. gas distributors based on number of customers after AGL Resources Inc., Atmos Energy Corp., ONE Gas Inc. and Southwest Gas Corp., according to the company.

With the addition of Alagasco, Laclede Group adjusted earnings before interest and taxes will increase to $255 million from $158 million, with Alagasco accounting for $97 million of the new total, according to the company.

Laclede Group, "under CEO Sitherwood, has become arguably the most acquisitive player among gas distributors in recent years," said U.S. Capital Advisors in a note Monday. "In 2012, LG acquired cross-state utility Missouri Gas Energy (MGE) and noted an intention to continue an external growth path beyond its closing in 2013. The Alagasco acquisition, like MGE, will be transformational for LG, boosting customer count 37% and extending operations for the first time in their history outside of Missouri."

Alagasco is ideal in terms of size, scope and culture, Laclede said. "By...expanding its footprint beyond Missouri, Laclede builds on the synergies that have come about through the acquisition of Missouri Gas Energy and adds to the scale of its regulated business."

The transaction is expected to close this year, subject to antitrust and regulatory approvals, and be accretive to Laclede net economic earnings during the first year.

The deal is supported by a $1.35 billion bridge facility with Credit Suisse and Wells Fargo Bank NA and includes assumption of $250 million of Alagasco long-term debt as well as assuming or replacing any short-term borrowing at closing. Laclede expects the remaining permanent financing to include issuance of Laclede Group common stock, mandatory convertible securities and long-term debt, as well as the use of corporate cash.

After-tax proceeds for Permian Basin-focused E&P company Energen are estimated to be $1.1 billion, after consideration of accelerated intangible drilling costs, the company said. "This transaction allows Energen to clarify its corporate structure by becoming a pure exploration and production company, a trend being rewarded by the financial markets," said Energen CEO James McManus.

Energen said it plans to use cash proceeds to immediately reduce short-term debt, which will enhance its ability to accelerate drilling and development in the Permian next year and beyond. Through Energen Resources Corp., the company has about 3.3 billion boe of proved, probable and possible reserves and contingent resources as of year-end 2013.

The total number of natural gas customers in Alabama declined each year between 2007 and 2012, led mostly by a shrinking residential base.

ISSN © 2577-9877 | ISSN © 1532-1231 | ISSN © 1532-1266

Recent Articles by Joe Fisher

Comments powered by Disqus