Energy East Corporatioin to buy Berkshire Energy Resources for 1.89 times revenue

Weekly Corporate Growth Report, Nov 29, 1999

The Deal: The Energy East Corporation has agreed to purchase all the common stock of Berkshire Energy Resources for $96 million, or $38 per share. Energy East also said that it would assume $40 million of Berkshire's long-term debt. After the news was announced, Berkshire's shares rose $1.3125, to close at $34.3125.

Discussion: Berkshire Energy Resources' regulated natural gas utility, Berkshire Gas, has 34,000 residential, commercial and industrial customers in western Massachusetts. The firm owns five liquefied petroleum gas plants to supplement natural gas during peak periods. Its also has a propane unit which serves 6,000 customers in western Massachusetts, eastern New York and southern Vermont. Berkshire Energy Marketing provides one-stop energy shopping, selling natural gas, electricity, fuel oil, and other energy services through an alliance with Conectiv/CNE Energy.

Energy East, formerly known as New York State Electric & Gas, supplies electricity and natural gas to eastern, western, and central New York. The company has more than 810,000 retail electricity and 240,000 natural gas customers, and the majority of them live in rural areas. More than 85% of the company's electricity is generated from coal-fired steam; nuclear and hydroelectric power account for the rest. About 85% of the company's revenue comes from electric service.

In an attempt to expand into New England, Energy East has agreed to acquire three natural gas distributors, Connecticut Energy, CTG Resources, and Berkshire Energy Resources, and CMP Group, the parent of electric utility Central Maine Power.