TECO Energy Inc. (TE) has inked a deal to acquire New Mexico Gas Company (NMGC) from Continental Energy Systems LLC and its affiliate New Mexico Gas Intermediate Inc., enabling it to establish its presence in one of the fastest growing regions of the U.S. while strengthening its market penetration.
The completion of the acquisition − valued at $950 million − is subject to government approvals. The company expects to complete the transaction in the first quarter of 2014.
NMGC supplies gas mainly to the residential customers in New Mexico through a combination of transmission pipelines and distribution lines.
As of Mar 31, 2013, TECO Energy’s cash balance was $212.9 million and cash provided by operating activities during first three months of 2013 was $157.9 million. The company intends to utilize its available cash, a long-term debt worth $200 million at NMGC and a fully committed bridge financing facility with Morgan Stanley (MS) for this acquisition.
TECO Energy expects this transaction to be accretive to the earnings from 2015. Prior to this acquisition, the company did not have a strong presence in New Mexico. As a result of this transaction, the company will able to provide regulated electricity and gas to over 1.5 million customers, including 509,000 gas customers of NMGC, in Florida and New Mexico.
It is evident from TECO Energy’s actions that it follows certain rules in terms of acquisition strategy, including acquiring an organization having the same line of business, provided the take-over is immediately accretive. The company’s significant buys included Peoples Gas, West Florida Gas and Griffis Gas. All these acquisitions enabled TECO Energy to strengthen its presence in the state along with adding significant number of customers.
Tampa, Fla.-based TECO Energy is involved in the generation, purchase, transmission, distribution, and sale of electricity and gas in the state.
The company currently has a Zacks Rank #3 (Hold). Apart from TECO Energy, other stocks in the industry that are worth considering include CPFL Energia S.A. (CPL) and Companhia Paranaense de Energia (ELP) with a Zacks Rank #1 (Strong Buy).
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment