NEW YORK (AP) -- AGL Resources Inc. will buy Nicor Inc. for about $2.38 billion in a cash-and-stock deal that would create one of America's largest natural gas distributors.
The deal, announced Tuesday, comes as numerous companies like Exxon Mobil and Royal Dutch Shell rush to develop America's vast shale gas deposits this year. With production rising to historic levels, the industry has been looking for ways to build more pipelines and storage facilities.
Together "we're going to have a bigger, better, stronger platform to continue to grow both companies," Russ Strobel, Nicor Chairman and CEO, told The Associated Press.
The new company is expected to have about $5.1 billion in annual revenue and serve more than 1 million retail customers in its unregulated businesses. Customers will continue to be served by their current gas utility companies, and they shouldn't see any change in services or prices because of the combination, Strobel said
The combined business will include seven regulated natural gas distribution companies providing natural gas service to about 4.5 million customers in Illinois, Georgia, New Jersey, Virginia, Florida, Tennessee and Maryland.
Robert W. Baird analyst David Parker said Nicor is an attractive acquisition target, given its strategic location in the Midwest with access to eight interstate pipelines. AGL also gains Nicor's storage facilities and access to shale gas fields that will help it expand faster and serve more power plants as utilities shift away from coal, he said.
"These guys are preparing for that," Parker said. "Pipelines and storage are expensive, and a bigger balance sheet will make this easier for them."
AGL said it will keep its corporate headquarters in Atlanta and house its gas distribution headquarters in Naperville, Ill, a suburb of Chicago where Nicor is based. AGL's John Somerhalder will remain as chairman, president and CEO, though the new board will include four Nicor directors.
Both companies' boards have approved the transaction, which is expected to close in the second half of 2011.
AGL will pay a premium of about 12 percent for Nicor. Under terms of the deal, Nicor stockholders will receive $21.20 in cash for each Nicor share and 0.8382 shares of AGL. Based on AGL's Monday closing price of $37.13, the deal has a value of $52.32 per share.
Nicor shares rose $2.24, or 4.8 percent, to $49 in morning trading. AGL lost $1.68, or 4.5 percent, at $35.45.