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.
The role of Piedmont’s chairman and CEO, Thomas Skains, and the impact on the two companies’ local employment footprint is unclear.
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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 securities 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.
“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.
Piedmont serves about 1 million customers in the Carolinas and Tennessee. It employs 1,900.
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.