In order to double its retail services business, energy services holding company AGL Resources Inc. (GAS) has acquired certain assets of gas supplier NiSource Inc. (NI) for roughly $120 million.
The acquisition comprises of warranty plans for appliances and gas lines of nearly 500,000 utility customers in Ohio, Massachusetts, Indiana, Kentucky and Pennsylvania. Hence, customers who have enrolled for NiSource’s extra service protection plans will get their appliance repair and gas line protection services from AGL Resources.
AGL Resources believes that this transaction will strengthen its competitive position in this particular niche of retail services. The deal is expected to be accretive by 2013.
Founded in 1856, Atlanta, Georgia-based AGL Resources is an energy services holding company whose principal business is gas distribution. Following the Dec 2011 acquisition of Naperville, Illinois-based Nicor Inc., AGL Resources has become the largest domestic natural gas-only distribution entity with about 4.5 million customers across seven states.
Operating results for AGL Resources are affected by weather conditions and may vary on a seasonal and quarterly basis. Natural gas distribution is usually a temperature-sensitive business with about half of all deliveries used for space heating. Usually, almost 75% of the deliveries and sales occur during the six-month period of October through March. Consequently, milder-than-normal weather conditions could adversely affect the company’s operating results, cash flow and financial condition.
AGL Resources currently carries a Zacks Rank #5 (Strong sell), implying that it is expected to significantly underperform the broader U.S. equity market over the next one to three months.
The energy firms, which are expected to significantly outperform the equity markets in the next one to three months, are Amyris Inc. (AMRS) and Cabot Oil & Gas Corporation (COG). Both these stocks carry a Zacks Rank #1 (Strong Buy).