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Dominion buys Dreyfus
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September 10, 2001: 2:45 p.m. ET
Utility company to pay $1.8B in cash and stock for natural gas producer
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NEW YORK (CNNfn) - Dominion Resources, a utility holding company, agreed Monday to buy Louis Dreyfus Natural Gas Corp., an exploration and production (E&P) company, for $1.8 billion in stock and cash.
The deal would pay Louis Dreyfus (LD: up $5.46 to $38.42, Research, Estimates) shareholders $20 cash and 0.3226 share of Dominion Resources (D: down $3.11 to $59.52, Research, Estimates) for each of their shares, a premium of 22 percent based on Friday's closing prices. Dominion Resources also will assume about $500 million in debt as part of the deal.
"The goal in acquiring Louis Dreyfus Natural Gas is to enhance our portfolio of fully integrated energy businesses, not to become a bigger E&P company," Dominion Resources Chairman and CEO Thomas Capps said.
Paul Fremont, utility analyst at Jefferies and Co., said Dominion has bought assets in the past to enhance its utility business, which has turned out to be great for both shareholders and the company. (328KB WAV)(328KB AIFF)
Fremont also said Dominion has a history of buying gas properties when gas prices have been cheap.
"We're still comfortable with our target of a 25 percent earnings contribution over the long term from our E&P operations," Capps said.
Dominion said it expects to meet or exceed its earlier guidance of full-year earnings per share of $4.15 this year, and that it also should meet or beat its EPS target of $4.85 to $4.90 for next year on a stand-alone basis. The company said the Louis Dreyfus deal should add at least 5 cents to EPS next year and add even more in subsequent years.
Analysts surveyed by earnings tracker First Call forecast EPS of $4.16 this year, up from $3.33 in 2000, and EPS of $4.88 in 2002.
The deal is subject to approval of regulators. Louis Dreyfus Natural Gas has agreed to a $70 million breakup fee.
Both companies said they expect the deal to close in the fourth quarter. 
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