Pacific Gas & Electric to purchase natural gas operations of Valero

Journal Record, The (Oklahoma City), Feb 4, 1997

NEW YORK (AP) -- Pacific Gas & Electric Co. has agreed to buy the natural gas business of Valero Energy for $722.5 million in stock, or $14.25 a share.

The move edges out four other companies who were competing for the same deal and bolsters PG&E's marketing position and natural-gas pipeline. It comes at a time of consolidation as the energy industry faces new competition under deregulation.

The deal, announced Friday, marks the San Francisco-based company's third big push into natural-gas markets in the last four months. It previously bought Teco Pipeline Co., in Corpus Cristi, Texas, and Energy Source Inc., based in Houston. PG&E will acquire the San Antonio-based company's natural gas services business, Valero Natural Gas Co., which operates a 7,500- mile natural gas pipeline system and eight natural gas processing plants in Texas. The sales give PG&E "a very broad marketing reach that is literally coast to coast and up to Canada," Robert D. Glynn, the company's president and chief operating officer, told The Wall Street Journal. According to the deal, Valero's shareholders will receive about 0.63 share of PG&E common stock for each Valero share. PG&E also will assume an estimated $780 million in debt and other liabilities of Valero, raising the value of the deal to about $1.5 billion. PG&E is an energy-based holding company whose subsidiaries include Pacific Gas and Electric Co., Pacific Gas Transmission, and PG&E Enterprises. The merger is subject to approval by Valero stockholders and regulatory agencies. It also requires Federal antitrust clearance. The merger is expected to be completed by mid-1997. The deal does not include Valero's refining and marketing unit.