In a $4.275 billion deal, Pittsburgh natural gas company Peoples has agreed to be acquired by a Bryn Mawr water utility.
Aqua America Inc. announced the deal Tuesday morning, saying the all-cash transaction includes the assumption of $1.3 billion in debt.
Peoples, which is based on the North Shore, includes Peoples Natural Gas Co., Peoples Gas Co. and Delta Natural Gas Co. Inc., according to the announcement. Aqua’s release stated the deal to acquire Peoples would create a new infrastructure company that would claim one of the largest water utilities in the country serving 1 million water customer connections, as well as one of the largest natural gas distribution operators serving more than 740,000 customer connections.
Although the new company will work in 10 different states, the announcement said more than 77 percent of its total rate base will be in Pennsylvania. Aqua said the deal won’t affect rates.
The deal was not designed to achieve cost efficiencies and won’t affect rates or employees at either company, Aqua said on Tuesday.
"This is going to be a big one for us," Aqua CEO Christopher Franklin said about the acquisition. "It's really not about synergies."
In 2008, Peoples was acquired by the private equity-backed SteelRiver Infrastructure Fund. Since then, Peoples has grown through acquisitions, including the deal that added Equitable Gas to its portfolio, increasing its customer base by 50 percent.
In recent years, the gas company has tried to dip its toe into the water business with a proposal to operate the troubled Pittsburgh Water and Sewer Authority. Aqua was also interested in taking over the municipal water system.
It still is, Mr. Franklin said on Tuesday.
"There are acute water issues in Pittsburgh with the water supply," he said. "If we're invited in, it would be a great interest to us."
“By bringing together water and natural gas distribution utility companies that share a core mission of providing essential services to customers, the resulting company will be positioned to grow and drive value, as well as make a longterm positive contribution to our nation’s infrastructure challenges and ensure service reliability for generations to come,” Mr. Franklin said in a prepared statement.
Mr. O’Brien, who will continue as head of the natural gas operation, said, “The planned combination with Aqua creates a larger strategic utility committed to growing our nation’s economic future using the most responsible and innovative tools in our longtime infrastructure replacement programs in Pennsylvania, West Virginia and Kentucky.”
The combined organization will be headquartered in Bryn Mawr, but Peoples operations will continue to be in Pittsburgh. Mr. Franklin will lead the combined company.
Regulators in Pennsylvania, Kentucky and West Virginia would need to approve the deal. It is expected to close mid-2019.
Kris B. Mamula: kmamula@post-gazette.com or 412-263-1699. Anya Litvak contributed.
First Published: October 23, 2018, 1:13 p.m.