Fitch: Laclede Group's Proposed LDC Acquisitions Neutral to Ratings

NEW YORK--(BUSINESS WIRE)-- The Laclede Group's (LG, IDR rated 'BBB+'/Stable Outlook) planned acquisition of natural gas local distribution companies (LDCs), Mobile Gas and Willmut Gas, from Sempra Energy for a purchase price of $344 million plus working capital will prove neutral to credit quality, according to Fitch Ratings.

LG is acquiring 100% of the outstanding equity of EnergySouth, Inc., the parent of Mobile Gas and Willmut Gas, for $344 million plus a working capital adjustment of $46 million including the assumption of $67 million of existing debt, resulting in a net cash payment of $323 million. Fitch expects the acquisition to be funded at the parent level through a balanced mix of debt and equity.

Fitch expects the acquisition to close by the end of this year, subject to regulatory approval by the Alabama Public Service Commission (APSC) and Mississippi Public Service Commission (MPSC). Mobile Gas is headquartered in Mobile and serves over 89,000 customers in southwest Alabama and Willmut gas is headquartered in Hattiesburg and serves 19,000 customers in Southern Mississippi. Post-merger EnergySouth, Inc. will be a subsidiary of LG.

Given the size of this transaction compared with LG's $3.8 billion capitalization, Fitch expects the proposed acquisition to have a marginal impact on LG's pro-forma credit metrics. The acquisition is a good fit strategically, modestly expanding LG's existing operations as the largest gas distribution company in Alabama and extending its service territory into Southern Mississippi. With completion of the merger, LG will own five utilities in three states.

In Fitch's opinion, Alabama and Mississippi have credit supportive regulatory environments and favorable rate recovery mechanisms. However, the acquisition underscores LG's acquisitive growth strategy, following the acquisition of Alabama Gas (IDR: 'A-'/Stable) in 2014 and Missouri Gas Energy in 2013. Fitch last reviewed the Laclede Group on Dec. 17, 2015 and affirmed the Long-Term IDR at 'BBB+' with a Stable Rating Outlook.

Date of Relevant Committee: Dec. 17, 2015

Additional information is available at 'www.fitchratings.com'.

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Fitch Ratings
Primary Analyst
Daniel Neama
Associate Director
+1-212-908-0561
Fitch Ratings Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Kevin Beicke
Director
+1-212-908-0618
or
Committee Chairperson
Philip W. Smyth, CFA
Senior Director
+1-212-908-0531
or
Media Relations:
Alyssa Castelli, New York, +1 212-908-0540
[email protected]

Source: Fitch Ratings

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