UGI Corporation, a distributor and marketer of energy products and services, has signed an agreement to acquire Mountaintop Energy Holdings LLC, owner of Mountaineer Gas Company, for $540 million. Mountaineer is the largest local gas distribution company in West Virginia.
The acquisition includes the assumption of about $140 million of debt. Mountaineer serves about 215,000 customers across 50 of West Virginia’s 55 counties. UGI (UGI) believes that the acquisition will increase its regulated utility rate base and customers served by nearly 14% and 30%, respectively. The deal is in line with the company’s strategy to direct its growth investments towards natural gas and renewable energy solutions opportunities.
UGI expects the acquisition to be completed in the second half of 2021. It anticipates the transaction to be accretive to adjusted EPS in the first full year of combined operations. (See UGI stock analysis on TipRanks)
Robert F. Beard, Executive Vice President, Natural Gas of UGI, stated, “Mountaineer is a great fit for our natural gas businesses and UGI as a whole.”
“Like UGI Utilities, Mountaineer’s customers are situated in the prolific Marcellus shale production region and have access to clean, abundant, reliable, and affordable natural gas,” added Beard.
On Dec 23, Merrill Lynch analyst Richard Ciciarelli reinstated coverage of UGI with a Hold rating and price target of $35. In a research note to investors, Ciciarelli stated that he sees the company being "somewhat caught in the cross-hairs" from an ESG [Environmental, Social, and Governance] perspective amid the debate on de-carbonization versus energy cost considerations.
The analyst feels that the shares are fairly valued as he awaits execution given uncertainty associated with expansion opportunities and the company’s projects.
Overall, the Street remains sidelined on UGI with a Hold analyst consensus based on 2 recent Hold ratings. With shares down 23.7% year-to-date, the average price target of $37 indicates an upside potential of 7.4% over the coming year.
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