Duke Energy to buy Piedmont Natural Gas for $4.9 billion

Duke Energy will buy Piedmont Natural Gas for $4.9 billion in cash, the two Charlotte-based companies announced Monday. The deal is expected to close by the end of 2016.

Lynn Good, Duke Energy chief executive officer, will remain at the helm of the combined company, which will remain headquartered in Charlotte, Duke said. Piedmont will keep its name, operating as a Duke Energy subsidiary.

“We believe this creates a platform for future expansion,” Good told analysts Monday morning.

Piedmont will keep its headquarters in southeast Charlotte and “significant presence” locally. But the role of Piedmont’s chairman CEO, Thomas Skains, and the impact on the two companies’ local employment footprint is unclear.

The companies said “an existing member of Piedmont’s management team” will lead Duke’s natural gas operations in the Carolinas, Tennessee, Ohio and Kentucky, and report to Good.

The agreement was cemented Saturday, according to securitities filings by Piedmont on Monday.

The deal is subject to approval by the North Carolina Utilities Commission and will get antitrust review under federal law. A majority of shareholders will also have to approve.

The agreement allows Duke to back out of the acquisition by paying Piedmont a $125 million breakup fee. If it does not get regulators’ approval, Duke could pay $250 million.

Under the deal, Piedmont shareholders will receive $60 in cash for each share of common stock they own upon closing of the transaction – a 40 percent premium over Piedmont’s trading price Friday.

In early trading Monday, Piedmont Natural Gas shares were up more than 35 percent.

“This combination provides us with a growing natural gas platform, benefiting our customers, communities and investors,” Good said in a statement.

Duke will assume about $1.8 billion in Piedmont existing debt, representing a total enterprise value of approximately $6.7 billion. Duke will finance the deal with a combination of debt, between $500 million and $750 million of newly issued equity and other cash sources.

Duke said a fully underwritten bridge facility is in place with Barclays to complete the deal.

Charlotte-based Piedmont serves about 1 million customers in the Carolinas and Tennessee. It employs 1,900, including about 700 in the Charlotte area.

Duke Energy, the nation’s largest electric utility, operates in North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky. It employs a total of about 29,200.

“Clearly it expands our gas platform, which is an emerging energy sector,” said Duke spokesman Tom Williams.

The acquisition will also expand Duke’s territory in the Carolinas. Piedmont’s customer growth rate is higher than most in its industry, Williams said.

The acquisition expands Duke’s natural gas business. Duke spun off Spectra Energy, which operates pipelines, distribution and liquified natural gas businesses, in January 2007 after its 2006 merger with Cinergy.

Duke has about 500,000 natural gas customers in Ohio and Kentucky.

The acquisition would make Duke a 50 percent owner of $5 billion Atlantic Coast Pipeline, a 564-mile natural gas pipeline that will be the first of its kind to serve Eastern North Carolina. Piedmont now has a 10 percent stake, Duke 40 percent.

This story was originally published October 26, 2015 at 7:52 AM with the headline "Duke Energy to buy Piedmont Natural Gas for $4.9 billion."