NiSource to separate into two publicly traded companies

(Clarifies the structure of the separation)

By Ryan Vlastelica

NEW YORK, Sept 28 (Reuters) - NiSource Inc on Sunday announced its board had approved plans to split into two publicly traded companies, separating its utilities and pipeline businesses.

Under the plan, NiSource will list its natural gas pipeline division as Columbia Pipeline Group, which is expected to trade on the New York Stock Exchange under the ticker "COLP." NiSource will remain a natural gas and electric utilities business, and its listing will not change.

A source briefed on the matter said Lazard was NiSource's financial advisor.

NiSource will file for a new master limited partnership (MLP), named Columbia Pipeline Partners LP. The MLP's initial assets are seen consisting of a 14.6 percent interest in CPG OpCo LP, which will own almost all of NiSource's natural gas transmission and storage assets.

Noting that NiSource management had stated a need for an equity infusion of $400 to $500 million to fund its growth, Jefferies analyst Christopher Sighinolfi on Sept. 22 wrote that an MLP, which pay no federal income tax, "represents its most attractive alternative financing solution." In that note, Jefferies raised its price target on the stock by $3 to $40.

In the separation, NiSource shareholders will retain their current shares and receive a pro-rata dividend of stock in Columbia Pipeline Group. NiSource expects to file an S-1 with the Security and Exchange Commission on Monday.

The Merrillville, Indiana-based company said the separation is expected to occur in mid-2015.

Shares of NiSource closed Friday at $38.58. They have risen about 17 percent thus far this year, outperforming the S&P 500.

(Additional reporting by Mike Stone; Editing by Nick Zieminski)