Laclede's $1.6B Alagasco Deal Could Drive Dividend Growth

Updated from 12:42 p.m EDT to include CEO interview, updated share prices.

NEW YORK (TheStreet) -- St. Louis-based utility Laclede Group (LG) is buying Alabama Gas, otherwise known as Alagasco, from Energen (EGN) for $1.34 billion in a deal the company said would boost its earnings per share figures. Alagasco also represents the second major acquisition for Laclede CEO Suzanne Sitherwood's since taking the company's reins in 2012.

Sitherwood said in an interview with TheStreet that Monday's transaction fits within her vision of growing the regulated gas utility and marketing firm through a combination of acquisitions, organic growth and investment in new technologies in natural gas transportation. 

When including tax benefits of Monday's transaction, Laclede will acquire Alagasco for a total consideration of $1.6 billion. The company will also assume $250 million of Alagasco debt. Alagasco is the largest natural gas utility in Alabama and serves more than 422,000 customers.

Sitherwood believes that when Laclede's acquisition closes, it could open the company to a lager base of investors. "Given our new scale there will be other investors that are interested in us and move into our stock because of our sheer scale," Sitherwood said in a telephone interview. 

When combined, Laclede said in an investor presentation it forecast pro-forma earnings before interest and taxes (EBIT) to be $255 million, with Algasco contributing $97 million to EBIT. Laclede's utility customer base is expected to increase from about 1.13 million to 1.55 million after the acquisition close.

Alagasco will add "meaningfully" to Laclede's net economic earnings per share and will drive the cash flow to reinvest in its utility business and boost capital returns to investors, Laclede said on Monday. Overall, Laclede forecast 4%-to-6% earnings growth in coming years, inclusive of its Alagasco transaction.

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