By OGJ editors
HOUSTON, June 21 -- Atmos Energy Corp. agreed to acquire its Dallas counterpart TXU Gas Co., a wholly owned subsidiary of TXU Corp., for $1.925 billion to create a natural gas distribution company having 3.1 million customers in 12 states.
"This transaction clearly fits within our stated strategy of growth through acquisitions in our core business," said Robert W. Best, Atmos Energy chairman, president and CEO. "Our seasoned management has successfully completed nine major acquisitions during the past 18 years."
The merger transaction is expected to close by the end of the year, subject to review under the federal Hart-Scott-Rodino Act and certain state regulatory approvals in Missouri, Virginia, and Iowa.
The transaction is expected to be "immediately accretive to earnings," said J. Patrick Reddy, Atmos Energy's senior vice-president and chief financial officer.
TXU Gas is a largely regulated natural gas transmission and distribution business in Texas with 26,000 miles of distribution main pipeline, 8,000 miles of distribution services, 6,800 miles of transmission pipeline, and more than 1.4 million customers. It also owns five natural gas storage reservoirs with a working capacity of 38 bcf.
C. John Wilder, TXU's CEO, said that the deal "represents our continued commitment to unlocking value and focusing on core businesses." TXU is in the process of selling assets to reduce debt. Like other merchant energy companies, TXU previously borrowed heavily to expand its business.
Transaction reactions
Moody's Investors Service and Standard & Poor's credit rating agencies both are considering cutting Atmos Energy's debt ratings. Moody's analysts said that they probably will cut the ratings by several levels.
Moody's affirmed its Baa3 senior unsecured rating for TXU. S&P analysts said they might downgrade Atmos' ratings.
Atmos said it would raise cash for the transaction through long-term debt and by issuing $500-600 million of stock. Merrill Lynch & Co. is expected to provide a bridge loan, Atmos said.