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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.

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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.

Travis Miller does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.