AGL Resources (AGL), the owner of Atlanta’s natural-gas utility, and natural gas distributor Nicor Inc. (GAS) have passed another key milestone on their way to becoming a big new natural gas distributor with the vote of approval from the companies’ shareholders.
AGL and Nicor have already received the necessary antitrust clearance when they were told by the U.S. Department of Justice and the Federal Trade Commission in April that the waiting period required under the American Hart-Scott-Rodino Antitrust Improvements Act of 1976 has ended early, allowing the transaction between the two companies to proceed.
In December last year, AGL announced plans to acquire Nicor for about $3.1 billion in cash, stock and debt. The deal will create a large natural gas-only distribution entity with about 4.5 million customers across seven states, annual revenues of $5.1 billion and an enterprise value of $8.6 billion.
As per the deal – the largest among domestic gas utilities this year – Nicor shareholders would get $21.20 in cash and 0.8382 shares of AGL common stock for each share they hold, representing a total value of $2.4 billion. Based on Nicor’s December 6, 2010’s closing stock price of $46.76, the deal value of the Naperville, Illinois-based company is $53 per share, a 13% premium. Additionally, AGL will assume $700 million in debt.
The transaction, which is still subject to Illinois Commerce Commission approval, is expected to close in the second half of 2011. Following the closure, current stockholders of AGL will own approximately 67% of the combined company, with Nicor shareholders owning the rest.
Nicor Inc. is a holding company whose principal business is gas distribution. The company’s largest subsidiary is Nicor Gas, a distributor of natural gas that provided almost 80% of the company’s 2010 sales. Nicor also owns Tropical Shipping, a transporter of containerized freight serving the Bahamas and the Caribbean region.
Founded in 1954 as Northern Illinois Gas, Nicor Gas is one of the biggest gas utilities in the nation with a large customer base (more than 2 million Illinois homes and businesses) and an enviable supply position that includes access to eight interstate pipeline connections and significant underground storage assets.
The acquisition will allow AGL – an energy services holding company that owns Atlanta Gas Light and five other gas utilities with about 2.3 million customers in six U.S. states – to expand its scope, scale and geographic reach. The merged entity, whose corporate headquarters will be in Atlanta and headquarters for the gas distribution unit in Naperville, would boast of a natural gas distribution system stretching from Illinois to the East Coast, as well as several natural gas storage facilities throughout the U.S.
Nicor shares currently retain a Zacks #4 Rank, which translates into a short-term 'Sell' rating, whereas AGL has a Zacks #3 Rank (short-term 'Hold' rating).
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