AGL Resources, Nicor to Combine; New Firm Would Have Over 1 Million Unregulated Retail Customers

AGL Resources has entered into an agreement to purchase Nicor Inc. for $2.4 billion, in a transaction that would create a combined firm with over 1 million unregulated retail customers.

AGL Resources is the majority owner of retail supplier SouthStar Energy Services, which is active in Georgia, Florida, and Ohio, and undertaking processes to enter several additional markets such as New York and Maryland.

Nicor owns several uniquely branded retail supply and energy service companies, with a particular emphasis on bill management products (including a fixed bill product which does not require the customer to take competitive supply), warranty plans, and HVAC-related services.

Both companies also operate various wholesale supply and asset management subsidiaries.

AGL Resources' Atlanta Gas Light distribution utility has exited the merchant function, while its Elizabethtown Gas and Florida City Gas operating companies also offer various levels of retail choice. Nicor Gas also offers a choice program.

"As a result of this transaction, we will have increased scale and greater diversity in both our regulated operations and unregulated businesses," said John Somerhalder II, AGL Resources' chairman, president and chief executive officer. "AGL Resources and Nicor have complementary unregulated businesses, which will be a source of significant incremental growth opportunities and savings," Somerhalder added, as executives during an investor call said that the combined firm could leverage the retail experience of both companies, including the "unique" Nicor service offerings.

The combined company would be active in retail marketing in Georgia, Illinois, Ohio, Indiana, Florida, North Carolina, South Carolina, Tennessee, Alabama, and Texas.

The firms expect new revenue opportunities and cost synergies across their unregulated wholesale and retail businesses, with minimal cost to achieve.

The transaction has an enterprise value of $3.1 billion, and the combined entity will have an enterprise value of $8.6 billion.

Under the terms of the agreement, Nicor shareholders will be entitled to receive for each share of Nicor common stock, $21.20 in cash and 0.8382 shares of AGL Resources common stock, which together represent a value of $53.00 based on the volume-weighted average price for AGL Resources common stock for the 20 trading days ended December 1, 2010 (the last unaffected Nicor trading day). Following the completion of the merger, it is anticipated that AGL Resources shareholders will own approximately 67 percent and Nicor shareholders will own approximately 33 percent of the combined company.

The consideration of $53.00 per share for Nicor shareholders represents a premium of approximately 22 percent to the unaffected closing stock price of Nicor on December 1, 2010, and an approximately 17 percent premium to the average stock price of Nicor over the last 20 days ending December 1, 2010.

The combined company will be known as AGL Resources. Somerhalder will continue to serve as chairman, president and chief executive officer of AGL Resources. The AGL Resources Board of Directors will include four directors from Nicor.