Nicor Inc. is seeking a buyer and has hired JPMorgan Chase & Co. to run the auction, Bloomberg News reported Thursday, citing people with knowledge of the matter.
Some utility companies and infrastructure funds that were approached decided the price was to high to submit a bid, some of the people said. JPMorgan began seeking buyers about two to three months ago, according to Bloomberg.
Annette Martinez, a spokeswoman for Nicor, said she couldn’t comment.
The Chicago-area natural-gas utility has a market value of about $2 billion and its shares are trading at 15 times estimated 2011 earnings. The stock was trading at $46.82 as of 2:50 p.m. EST, and news of the potential sale today triggered a single-stock circuit breaker.
What’s the matter NICOR, are you worried about what will happen because of your involvement in the current WHITE HOUSE COUP?
Marty Didier
Northbrook, IL
Great. Nicor gets bought out. The new owner has to raise rates to pay for the takeover, and they have to cut expenses by cutting staff.
Service levels go down, prices go up. Consumer be damned.
YUMMY!!! Rate increases!!! Cost Hikes!!!!
Drooling … I can’t WAIT to see what happens to WE THE PEOPLE in this debacle.
[please note: all sarcasm intended]
Mergermarket
Nicor in advanced talks with two parties: AGL Resources flagged as likely buyer – sources
By Amanda Levin and Yana Morris
5 December 2010
Nicor (NYSE:GAS), the Naperville, Illinois-based energy concern, is set to announce a deal to sell itself to Atlanta, Georgia-based AGL Resources (NYSE:AGL) and a transaction could be announced as early as Monday, 6 December, said a source claiming knowledge of the matter.
A separate source close to the process said Nicor has been in advanced talks with an infrastructure fund and a strategic buyer for the past two to three weeks. The same source confirmed that despite market skepticism over the deal, providing the price expectation is met, the deal is likely to be announced shortly.
Negotiations over the final terms of the deal and its timeline were expedited over the past few days, in light of several media reports of the on-going sale of the company, this source said.
Despite strong interest from financial buyers, some sponsors were discouraged by the perceived difficult regulatory environment in Illinois, the source close to the process said.
Further commenting on the potential challenge with finding a buyer to pay for Nicor’s richly valued stock, this source said: “Valuation is a challenge in any deal. There is a possibility that the deal could be done at a low end of the premium”
Two industry deal-making sources, who were unaware of any impending deal, expressed doubt that that Nicor and AGL could overcome pricing issues. In fact, the first source said he had heard that Nicor had contacted some infrastructure funds and regional strategic players regarding a sale, but no one was able to get there on price.
AGL’s stock price is trading at a lower multiple than Nicor’s, and thus, it would be difficult to engage in an all-stock transaction and keep it accretive, the second industry source said. AGL’s share price stands at USD 37.45, against a 52-week high and low of USD 40.08 and USD 34.26, respectively and on a price to earnings ratio of 12.07. Meanwhile, Nicor is at USD 44.86, against USD 46.80 and USD 37.99, and trades at a PE ratio of 13.36.
Still, the source close to the process said a smaller strategic player that looked at the company, considered structuring a deal through a reversed merger, whereby Nico’s leverage light balance sheet could be used to raise financing to take over the company.
Nicor has one of the healthiest balance sheets in the industry, with a debt/capital ratio of 49% at the end of 2009.
A transaction between natural gas distributors Nicor and AGL would create a USD 4.96bn company, given their market capitalizations of USD 2.04bn and USD 2.92bn, respectively.
Speculation about a deal involving Nicor has been widespread in the wake of a number of newswire reports published over the past two days indicating that Nicor was being shopped in a process run by JPMorgan. Chicago, Illinois-based Integrys Energy had expressed an interest in Nicor, according to a Crain’s report. An analyst recently told this news service that both AGL and Atmos Energy were logical buyers on the basis that they operates in the same space.
The previously-mentioned source claiming knowledge confirmed that JPMorgan was Nicor’s sell-side advisor for the process. JPMorgan declined to comment. An AGL spokesperson also declined to comment and calls to Nicor were not returned.
AGL has six utilities that provide local gas distribution to approximately 2.3 million customers in Georgia, New Jersey, Virginia, Florida, Tennessee and Maryland, according to its website. It is also involved in retail energy, wholesale services, energy investments and liquefied natural gas, it said.
Nicor’s largest subsidiary, Nicor Gas, is one of the largest natural gas distribution companies in the country, it has a network of more than 34,000 miles of pipelines, and serves more than two million customers, according to the company’s website. It also owns a containerized shipping business serving the Bahamas and Caribbean regions. It also owns and has equity interest in several unregulated energy-related businesses.
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