Atmos Energy acquires gas in Texas

In a major expansion of its natural gas distribution business, Atmos Energy Corporation (ATO) is to buy the TXU Gas Company, a wholly owned subsidiary of TXU, in an all-cash transaction valued at $1.925 billion.

The deal, which was unanimously approved by the board of directors of Atmos Energy, creates one of the US’ largest natural gas distribution companies with 3.1 million customers in 12 states.

Under the terms of the agreement, Atmos Energy will pay total cash consideration of $1.925 billion for TXU Gas. It is anticipated that permanent funding for the acquisition will consist of approximately $500 million to $600 million of equity, with the remainder of the purchase price funded with long-term debt.

TXU Gas, which was founded as Lone Star Gas in 1909, has approximately 26,400 miles of intrastate distribution pipelines and sells approximately 140 billion cubic feet (Bcf) of natural gas to nearly 1.4 million residential and business customers in approximately 550 cities and towns, including the Dallas-Fort Worth Metroplex.

TXU Gas also is one of the largest pipeline operators in Texas. Its pipeline system consists of approximately 6,800 miles of transmission pipeline within Texas, delivering approximately 400 Bcf annually. TXU Gas owns five natural gas storage reservoirs connected to the pipeline system with a working capacity of 38 Bcf.

The transaction, to be accounted for as an asset purchase, is expected to close in the first quarter of Atmos Energy’s 2005 fiscal year.

Although the deal does not require the approval of Atmos Energy shareholders, it will require limited regulatory approvals and Hart-Scott-Rodino clearance.

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