Southern Company Acquires AGL Resources Creating Country’s Second Largest Utility

Energy

Published: August 24, 2015 3:08 pm

Last Updated: April 28, 2020 5:12 am

Southern Co. (NYSE: SO) announced Monday that it is acquiring AGL Resources Inc. (NYSE: GAS) in a deal worth $8 billion in equity value and approximately $12 billion including debt. The merged company will become the second-largest utility in the U.S. based on customer numbers. Only Exelon is larger.

Southern is paying $66 in cash for each share of AGL stock, a premium of more than 36% to Friday’s closing price for AGL shares. The deal is expected to close in the second half of 2016.

AGL Resources is a natural gas distribution company with operations in seven states that serves about 4.5 million end-users. Southern is the largest operator of coal-fired electricity generation plants in the U.S. and has clearly seen the writing on the wall as far as the future of coal-fired generation is concerned.

The Obama administration’s recently announced Clean Power Plan has received a lot of criticism from the coal industry and from power plant operators, but that criticism is not likely to prevent the large utilities from acquiring more clean assets whenever possible. Outfits like AGL Resources are going to become increasingly valuable as time goes on.

Southern’s stock traded down about 4.4% late Monday afternoon at $43.80 in a 52-week range of $41.40 to $53.16. The consensus price target on the stock is $45.27, and Southern pays a dividend yield of 4.7%.

AGL Resources has seen its shares rise by nearly 30% to a new 52-week high of $63.37. The stock’s 52-week low is $46.36. The company’s dividend yield is 4.3%.

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