Energen To Sell Natural Gas Utility Business To Laclede Group For $1.6 Bln

(RTTNews) - Energen Corp. (EGN) Monday said it has signed a definitive stock purchase agreement to sell its natural gas utility business, Alabama Gas Corp., to utility holding company The Laclede Group, Inc. (LG). The value of the transaction is $1.6 billion, comprising $1.28 billion in cash and around $320 million of debt.

Energen's after-tax proceeds are estimated to be $1.1 billion, after considering accelerated intangible drilling costs. The deal is expected to close this year.

Alagasco, a subsidiary of Energen, is the largest natural gas utility in Alabama and serves over 422,000 customers. This transaction allows Energen to clarify its corporate structure by becoming a pure exploration and production company.

James McManus, Energen's chairman and chief executive officer, said, ''Laclede is an outstanding natural gas utility holding company that ranks as the fifth largest pure-play natural gas utility in the United States, with approximately 1.13 million customers in Missouri."

With over 422,000 residential, commercial, and industrial customers, Alagasco would be a significant part of Laclede's expanding utility footprint, McManus added.

Energen plans to use the cash from the sale to reduce short-term debt, thus enhancing its financial capacity to accelerate the pace of drilling and development of its Permian Basin assets in 2015 and beyond.

Energen will continue to be a Birmingham-based company and plans to continue its strong tradition of civic and community involvement.

Meanwhile, Laclede said in a separate statement that it expects the purchase to be strongly accretive to net economic earnings per share in the first full year.

Suzanne Sitherwood, president and CEO of Laclede, 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."

With Alagasco, Laclede's utility customer base increases from around 1.13 million to 1.55 million. According to the company, the deal fits its regulated growth strategy and supports additional dividend growth at a sustainable payout ratio.

The transaction is supported by a fully committed $1.35 billion bridge facility with Credit Suisse and Wells Fargo Bank, N.A., Laclede added.

Purchase consideration will include assumption of $250 million of existing Alagasco long-term debt as well as assuming or replacing any short-term borrowing at closing.

Laclede expects the remaining permanent financing to include the issuance of Laclede Group common stock, mandatory convertible securities and long-term debt, as well as the use of corporate cash.

EGN closed down 0.9 percent on Friday at $81.52. LG settled down around 1 percent at $46.23.