Utilities: Who Are the Next M&A Targets?
Given the high prices acquisitors have been willing to pay, Atmos Energy, WGL Holdings, and New Jersey Resources could all be prime targets.
Given the high prices acquisitors have been willing to pay, Atmos Energy, WGL Holdings, and New Jersey Resources could all be prime targets.
Travis Miller: Recently, Duke Energy (DUK) became the latest regulated utility in the U.S. to add natural gas distribution at what we think is an extraordinarily high price. Their proposal for Piedmont Natural Gas (PIED) comes at a 31 times multiple to our earnings forecast and almost $7 billion for a relatively small utility in North Carolina.
This is the third time in the last couple of months where we've seen very high prices paid for natural gas distributions. In August, Southern Company (SO) paid almost $12 billion for AGL Resources (GAS); in September, Emera (EMRAF), a Canadian utility, paid almost $10 billion for Teco Energy (TE), mostly a natural-gas-distribution and electric-distribution company. And we think there are three more natural-gas-distribution pure-play utilities that could be next in line.
The largest of those--and the most likely--is Atmos Energy (ATO). This is one of the largest natural-gas-distribution utilities in the U.S. It serves eight states. Right now, we think it's about 20% overvalued; but at the prices we've seen utilities pay right now, that could be cheap. The other two are WGL Holdings (WGL) and New Jersey Resources (NJR), both are smaller natural-gas-distribution utilities, and we think both are overvalued right now. But the prices that utilities have been willing to pay have been exorbitantly high.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.