AGL committed to investment-grade rating after acquisition of Nicor

By Jennifer Lanning Drey

Savannah, Ga., Dec. 7 - AGL Resources is committed to maintaining strong investment-grade ratings after it completes the acquisition of Nicor Inc. in a transaction with an enterprise value of $3.1 billion, Andrew Evans, AGL's chief financial officer, said during a Tuesday conference call held to discuss the transaction.

AGL and Naperville, Ill.-based natural gas distributor Nicor announced Tuesday that their boards of directors had approved a definitive merger agreement under which Nicor will merge with a subsidiary of AGL Resources.

"The combined company will have a strong credit profile, supported by the financial strength of both its regulated and unregulated operations, as well as the cultural emphasis on risk management and controls that are currently shared by both companies," Evans said during the call.

AGL will fund the transaction through an exchange of stock with Nicor shareholders in addition to $1 billion of cash. The company said it has committed financing from Goldman Sachs Bank USA and plans to put long-term bonds in place prior to the closing of the transaction.

AGL is assuming the longer-term financing will have mixed maturities, keeping its maturity profile stable, Evans said.

The companies expect to complete the transaction in the second half of 2011.

'Logical combination'

AGL's merger with Nicor will both enhance the scope, scale and geographic reach of its regulated cash utility operations, while also providing wider market opportunities for AGL and Nicor's complementary unregulated retail, wholesale and storage business, AGL's chief executive officer John Somerhalder II said during Tuesday's call.

"This is a logical combination of highly complimentary unregulated businesses where we will leverage our collective experience to take advantage of new market opportunities," Somerhalder said.

In addition to eliminating overlapping public company costs, the combined company will realize efficiencies from similar and complimentary unregulated wholesale and retail businesses as well as from areas where there is duplication in those businesses, he said later in the call.

Synergies will be fully realized in 2012, he added.

"This is an exciting transaction that makes strong financial and strategic sense for both of these companies. I am confident that together we will create a company with superior growth prospects to what either company could achieve on its own," Somerhalder said.

Additionally, the combined company is expected to generate strong cash flow, Evans said.

"Given the strength of the operating cash flow generated by the combined company, there will be significant opportunity to fund growth capital requirements," he said.

The combined company is expected to spend about $450 per year on gas utility infrastructure.

AGL Resources is an Atlanta-based natural gas distributor.

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