South Jersey Industries has entered into agreements for the assets of two gas companies.
Folsom-based SJI will become the state’s second-largest natural gas provider after completing the deal for Elizabethtown Gas and Maryland-based Elkton Gas from Pivotal Utility Holdings Inc., a Southern Company Gas subsidiary.
Both companies will come at a total consideration of $1.7 billion, with an effective purchase price of $1.4 billion after taking into consideration the present value of tax benefits associated with the transaction.
Adding Elizabethtown’s 288,000 customers and 6,000 from Maryland, SJI will be serving more than 675,000 customers.
SJI expects the transaction to be accretive to earnings by 2020, the first full year of operation post-transaction impacts, without synergies.
“The acquisition of Elizabethtown Gas and Elkton Gas is a great fit for SJI and reinforces our commitment to high quality, regulated earnings growth,” said SJI CEO and President Michael J. Renna. “We share the same business model and are committed to the highest standards of safety, reliability and environmental stewardship. We look forward to welcoming the customers and employees of these two utilities into our SJI family of companies, and to working with New Jersey and Maryland regulators on a successful transition.”
The transaction is expected to close in mid-2018, and is subject to approvals by the New Jersey Board of Public Utilities and the Maryland Public Service Commission, with limited approvals by the Federal Energy Regulatory Commission and the Federal Communications Commission. In addition, the transaction is subject to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
The transaction supports SJI’s strategy of earnings growth from high-quality, regulated businesses. Utility earnings contribution will grow to over 80 percent of total earnings, up from approximately percent.
“Importantly, this deal is entirely consistent with our core strategy and allows us to leverage our combined scale, talent and culture to accelerate growth and drive shareholder value while maintaining a strong balance sheet,” Renna said. “It will also further our commitment to operational excellence and an outstanding customer experience. Elizabethtown Gas, Elkton Gas and SJI are deeply tied to the communities we serve and we look forward to building upon those relationships.”
SJI has a fully committed $2.6 billion bridge financing facility in place, led by BofA Merrill Lynch, TD Securities and Guggenheim Securities. Permanent financing of the transaction is expected to be obtained prior to closing by one or more issuances of common equity, mandatory convertible securities and long-term debt.
Guggenheim Securities is acting as lead financial adviser and BofA Merrill Lynch is acting as financial adviser to South Jersey Industries. Gibson, Dunn & Crutcher LLP, is acting as lead legal adviser to South Jersey Industries.