Hi Grommit -
Re: AGL Resources Inc. (AGL) & Nicor Inc. (GAS)
December 7, 2010
AGL Resources to Buy Nicor for $2.4 Billion
blogs.barrons.com
From the article:"...AGL Resources (AGL), the owner of Atlanta’s natural-gas utility, announced it would buy Nicor (GAS) for $2.4 billion in cash and stock, almost doubling its gas customer base..."
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I looked at GAS when researching NG utility stocks and passed because of their higher PE (16 next year) and somewhat lower dividend yield (4.1%). I was attracted to their business as they had one of the largest NG storage and distribution systems in the US. Their NG storage facilities include 8 underground storage fields w/ the largest storage capacity in the industry. This should be a good fit with AGL.
Note: GAS also owns a hidden asset subsidiary (a container shipping company that services Florida & the Bahamas), that will probably be sold or spun off to share holders. I figured it was worth $3-$4 per shares if sold.
The Oppourtunity
A lot of the domestic NG begins to come on line from the different recently developed U.S. shale fields (ie. Marcellus, Williston Basin, Bakken, Eagle Ford, and Niobrar). This new production is going to "squeeze out" much of the current Canadian NG. An AGL and GAS combination should benefit from this development.
finance.yahoo.com
Now I am thinking of selling my TransCanada Corp. (TRP) holdings and buying moreAGL Resources (AGL). The PE for a combined AGL & Nicor s/b less than TRP (12 vs 16) and the dividend yield s/b a bit higher (4.7% vs 4%). The future prospects looks better to me for the new AGL than for TRP.
Therefore, I am going to close out my TRP position and increase my AGL holding by 60%.
I am also going to take the additional proceeds and buy Provident Energy Trust (PVX). This Canadian Trust yields over 9% and provides NG midstream services into markets in central Canada and the eastern United States. ( providentenergy.com ). I am betting that their Midstream infrastructure build out will benefit from the increased NG production in the U.S. and also take advantage of the TRP "squeeze out" volume distributed w/i Canada. My previous buy in PVX was in 10/2007 at $10.80/share.
The new AGL and PVX should out perform TRP. The net dividend yield is much higher too. PVX distributions made monthly (9.1%); AGL quarterly - 4.7% (Feb, May, August & Nov). Both TRP and PVX has a 15% Canadian foreign tax withheld from all distributions made.
The blended yield for the new AGL & PVX shares s/b around 6.5% vs a TRP investment yield of 4.1%.
EKS |
