Southern Company (SO) Acquires 50 Percent Stake in Pipeline System From Kinder Morgan
Shares of Southern Company (SO) were trading down -0.14 or -0.26 percent to $54.00 per share in Monday’s premarket after news over the weekend that the company would be acquiring a 50 percent stake in a natural gas pipeline from Kinder Morgan (KMI) for $1.47 billion. Southern Company stock closed at $54.14, up +0.48 or +0.89 percent in Friday’s regular trading session.
Atlanta, Georgia based Southern Company in an electric utility holding company ranked as the second largest utility company in the United States and 16th largest in the world.
Kinder Morgan Inc. is North America’s largest energy infrastructure company, operating approximately 84,000 miles of pipelines and about 180 terminals. The pipelines owned by Kinder Morgan transport crude oil, gasoline, natural gas, CO2 and other products. The company’s terminals store chemicals and petroleum products and are capable of handling bulk materials such as petroleum coke and coal.
The purchase by Southern Company consists of a 50 percent stake of Kinder Morgan’s Southern Natural Gas pipeline system. The 7,600 mile pipeline system connects natural gas fields along the U.S. Gulf Coast and Gulf of Mexico to markets in the Southern United States where Southern Co. has the majority of its operations.
The acquisition of the pipeline stake complements Southern Company’s $8 billion takeover of AGL Resources Inc., a natural gas distributor. Southern Company received clearance for the acquisition last month and will give Southern Company 11 regulated utilities which provide service to over 9 million customers in nine states.
Southern Company Chairman, President, and Chief Executive Officer Thomas A. Fanning said in the press release that, “This transaction is consistent with the infrastructure development strategy we have discussed for well over a year. The company's strategic venture with Kinder Morgan, combined with our recent additions, AGL Resources, and PowerSecure, underscore Southern Company's leadership position in electricity and natural gas and our commitment to developing America's energy infrastructure. Our new ownership stake in SNG will position Southern Company for future growth opportunities and enhanced access to natural gas, which are expected to benefit customers and investors alike.”
With the inclusion of existing SNG debt, the deal equates to an SNG total enterprise value of about $4.15 billion, implying a value of approximately $1.47 billion for Southern Company’s 50 percent stake of the equity interest. The transaction is still subject to notification and clearing and reporting requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and is expected to be completed by this year’s third quarter or early in the fourth quarter.
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