Delta Natural Gas Company Inc. DGAS has signed a deal to be acquired by a subsidiary of Pittsburgh-based gas distribution firm Peoples Natural Gas. The deal has an estimated valuation of $270 million.
Per the deal, shareholders of Delta Natural Gas will receive $30.50 in cash per share. This figure reflects a premium of around 17% to Delta’s closing price of $26.15 on Feb, 17, the last trading day before the declaration of the deal. The agreement is scheduled to close by the end of 2017, subject to federal and regulatory approvals.
The deal would not affect the dividend distribution as shareholders of Delta will continue to receive dividend at the rate of 83 cents per share annually. On the conclusion of the deal, Delta Natural Gas will become the wholly owned affiliate of PNG Companies LLC, which is the parent company of Peoples. It is to be noted that Delta will be regulated by Kentucky Public Service Commission even after the transaction.
Peoples Natural Gas, a former subsidiary of Dominion Resources, Inc. D is currently owned by Steel River Infrastructure Partners, a private equity firm.
Peoples is a natural gas distribution company which will acquire Delta Natural Gas to expand its footprint in Kentucky which is evolving as a bigger natural gas hub. Peoples started its acquisition program in Kentucky by acquiring Equitable Gas in 2013.
Peoples presently serve around 700,000 customers and will increase its customer base by around 36,000 after the acquisition of Delta. Peoples aims to upgrade its infrastructure which in turn will increase Delta Natural Gas’ investments in such improvement projects.
Headquartered in Kentucky, Delta Natural Gas provides retail gas distribution and transportation service in central and south-eastern Kentucky. The company presently carries a Zacks Rank #2 (Buy).
Over the last three months, the Zacks categorized Utility-Gas Distribution industry has recorded growth of 4%. However, shares of Delta Natural Gas have significantly outperformed the industry by registering growth of around 19%.
Some favorably placed players in the industry include ONE Gas, Inc. OGS and Vectren Corporation VVC. Both the companies sport a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ONE Gas has posted a positive earnings surprise in each of the last four quarters, the average being 12.46%.
Vectren Corporation is expected to deliver year-over-year growth of 6.77% and 6.72% in its revenues and earnings in 2017.
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Dominion Resources, Inc. (D): Free Stock Analysis Report
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ONE Gas, Inc. (OGS): Free Stock Analysis Report
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