Duke Energy (DUK) Completes $6.7 Billion Piedmont Buyout

Duke Energy Corporation (NYSE:DUK) has closed the acquisition of Piedmont Natural Gas Co. Inc. (NYSE:PNY) . The transaction, worth $6.7 billion, was announced in Oct 2015.

Details of the Transaction

The purchase consideration of the transaction was approximately $4.9 billion in cash and assumption of around $1.8 billion in Piedmont’s existing net debt, which translates to a total enterprise value of about $6.7 billion.

Last week, Duke Energy received the North Carolina Utilities Commission’s (“NCUC”) approval for the acquisition — the final regulatory approval required to close the transaction.

Post-Acquisition Scenario

Charlotte-based Piedmont will retain its name and its headquarters, but will operate as a wholly owned subsidiary of Duke Energy. With the completion of the transaction, Piedmont's 1 million natural gas customers will be added to Duke Energy's portfolio of 525,000 natural gas customers and 7.4 million electric customers.

Initially, the companies plan to keep the changes to a minimum, and are especially in support of retaining service phone numbers, billing options or service request procedures in order to lessen the impact of the change on customers.

However, internally, Duke Energy’s management will be working to incorporate Piedmont's corporate functions such as accounting, human resources and information technology with the company.

Duke Owns More of Atlantic Coast Pipeline

The Atlantic Coast Pipeline, in which both Duke Energy and Piedmont are partners, had undergone changes in its controlling ownership due to the consolidation of the two companies. On the same day, Duke Energy has closed a deal with Dominion Resources Inc. (NYSE:D) , wherein the latter acquired 3% of the pipeline.

Post the transaction, Dominion owns 48% of the pipeline, Duke Energy holds 47% and Southern Co. (NYSE:SO) has a 5% interest in the pipeline. Previously, Dominion had owned 45%, Duke held 40%, Piedmont had 10%, and Southern Company owned 5%.

Importance of the Acquisition

The latest merger will lay the foundation for a broad gas infrastructure platform within Duke Energy based on its recent gas pipeline investments. It will also complement its existing gas business in the Midwest. The acquisition will increase its total regulated business mix to over 90%, thereby supporting its earnings and dividend growth objectives. Moreover, the acquisition will be accretive to its earnings in 2017.

Zacks Rank

Duke Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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