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Peoples acquires Delta in $270m natural gas merger

The acquisition continues the expansion of Peoples Natural Gas, an affiliate of private investment firm SteelRiver and Pennsylvania’s leading natural gas utility, into Kentucky.

Peoples Natural Gas, a Pittsburgh-based affiliate of SteelRiver Infrastructure Partners, has entered an agreement to acquire Delta Natural Gas in a $270 million merger.

Peoples, which serves approximately 700,000 customers in Pennsylvania, West Virginia and Kentucky, will expand its presence in Kentucky with the merger, as Delta has around 36,000 customers in the central and south-eastern parts of the state. Peoples chief executive Morgan O’Brien said Kentucky is “a good place to do business and there are strong growth opportunities in this region”.

Under the deal, Delta shareholders will receive $30.50 in cash per share, a 17 percent premium over Delta’s share price. The transaction is not expected to affect Delta’s dividend prior to closing, the companies said, with Delta shareholders still receiving dividends at an annualised rate of $0.83 per share until closing, subject to the authorisation of Delta’s board of directors.

Founded in 1885, Peoples has grown through acquisitions since 2011, becoming Pennsylvania’s largest natural gas utility. In 2013, Peoples acquired Equitable Gas, adding around 250,000 customers in Pennsylvania while expanding into West Virginia and Kentucky.

Headquartered in Winchester, Delta Natural Gas was founded in 1949. Glenn Jennings, the company’s chief executive and the chairman of its board of directors, said the board “believes merging with Peoples is in the best interest of Delta’s shareholders, customers, employees and the communities we serve”.

Peoples is controlled by the $1.91 billion SteelRiver Infrastructure Fund North America. Investors in the vehicle include mostly public and corporate pensions.

The companies said the merger will not impact Delta’s rates or customer service, and Delta employees are planned to continue with the company. Peoples plans to up Delta’s investment in infrastructure improvements, with one member of Delta’s board of directors becoming an independent representative of that company's constituents following the close of the deal.