NIPSCO to acquire Bay State gas for 1.1 times revenue

Weekly Corporate Growth Report, Dec 22, 1997

The Deal: NIPSCO has agreed to acquire Bay State Gas Company in a merger worth $780 million ($540 million in equity and $240 million in debt and preferred stock). The stock-for-stock transaction values Bay State Gas at $40/ share, a 35% premium over the average Bay State share price for the previous 30 trading days. Bay State shareholders are going to have the option of taking up to 50% of the total purchase price in cash On the news, NIPSCO fell 18.75 cents,, or 0.4%, to $47.125/share, while Bay State rose $5.25, or 16.6%, to close at $36.875/share.

Discussion: Bay State Gas Company is one of the largest natural gas utilities in New England It provides natural gas distribution services to over 300,000 customers in Massachusetts, New Hampshire and Maine. The new combined company will be one of the 10 largest natural gas distribution systems in the nation, with over 1 million gas customers.

Customers are expected to benefit greatly from the merger. Aside from the expansion of product and service options in both the Midwest and Northeast regions, the new company will offer its customers a rate freeze until 2005. Bay State is planning to propose a similar regulatory plan for its customers in Maine and New Hampshire. Therefore, it is expected that Bay States rates for natural gas will be significantly lower than they would have been without the merger.

The deal is expected to result in significant growth opportunities and the expansion of the customer base in New England No layoffs are expected to result because of the deal and NIPSCO will honor all existing union contracts.