Utility holding company Laclede Group, Inc. (LG) has agreed to buy two Southern Union utilities in a deal valued at $1.035 billion, Laclede, Energy Transfer Equity, L.P. (ETE) and Energy Transfer Partners, L.P. (ETP) said Monday. Southern Union is an affiliate of Energy Transfer Equity and Energy Transfer Partners.
The acquisition of the Southern Union utilities - Missouri Gas Energy and New England Gas Co. - nearly doubles Laclede's scale, while it enables Energy Transfer to continue with its plan to focus on its core asset optimization.
The deal value is comprised of $1.015 billion in cash and nearly $20 million of assumed NEG debt. Two newly formed subsidiaries of Laclede have entered into definitive purchase and sale agreements with Southern Union Co.
For the twelve months ended September 30, 2012, Missouri Gas Energy and New England Gas had combined revenues of about $517 million. The two utilities serve over 500,000 customers in western Missouri and over 50,000 in Massachusetts.
St. Louis, Missouri-based Laclede noted that with this transaction, it will serve Missouri's two largest metropolitan areas. The company expects the transaction to be neutral to its earnings per share in the first full year after close and accretive thereafter. The transaction is expected to close before the end of the third quarter of calendar 2013.
Suzanne Sitherwood, president and chief executive officer of Laclede said, "MGE and NEG will effectively double our size by increasing our utility customer base from approximately 630,000 to nearly 1.2 million in an industry and a state in which we have over 150 years' experience."
Laclede noted that the utilities are ideal in terms of size and scope. The company said that by leveraging its core gas utility expertise and further expanding its footprint, it will be able to support growth initiatives in new markets with new customers.
Laclede expects to have improved trading liquidity and better access to the capital markets, due to a significantly larger market capitalization and enterprise value.
Further, Laclede noted that the transaction is supported by a fully committed $1.020 billion bridge facility with Wells Fargo Bank, National Association, as well as existing company cash. The company expects the permanent financing to be a combination of long-term debt and equity.
LG closed Friday's regular trading at $39.86, down $0.04 on a volume of 62,600 shares.
ETE closed Friday's trading at $46.42, down $0.09 on a volume of 495,600 shares.
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