Duke Energy Corporation (NYSE: DUK) has agreed to purchase Piedmont Natural Gas Company (NYSE: PNY) in a $4.9 billion cash deal.
Duke Energy is taking a cue from Black Hills Corp. (NYSE: BKH), Emera Inc. (TSE: EMA) and Southern Co. (NYSE: SO), who have all purchased gas distributors within the last year.
The acquisition will increase Duke’s stake in the Atlantic Coast Pipeline, worth $5 billion, to 50%. Once completed, this line will connect gas fields in West Virginia to Duke Energy’s North Carolina service area. For each share of common stock, Piedmont shareholders will obtain $60 cash. This is a 40% premium to the closing price on October 23.
As for Piedmont’s net debt, Duke will assume approximately $1.8 billion.
Piedmont’s shares jumped 37% to $57.97 during morning trading, the highest price seen since 1980. Duke’s shares slipped 1.8% to $72.41. The acquisition will increase Duke’s earnings per share growth rate forecast from 4% to 6%.
The combined company will now have three times as many gas customers as Duke alone. Piedmont will keep its name and simply operate as a unit of Duke Energy. One member from Piedmont’s Board of Directors will join Duke’s board.
The transaction will still need to be approved by the North Carolina utilities commission before it can be completed.