COLUMBIA, S.C. -- Scana Corp., looking to expand operations and opportunities in a changing utilities marketplace, said Wednesday it would buy Public Service Co. of North Carolina for $680 million in cash and stock.
The natural gas utility will become a subsidiary of Scana, a $5.3 billion energy holding company whose other principal subsidiary is South Carolina Electric & Gas. Co. The deal, in which Scana also will assume about $220 million in debt, will give the company 1.2 million electric and gas customers in the Carolinas and Georgia.
The acquisition will give Columbia-based Scana firm footing in the higher-growth areas of North Carolina, said William B. Timmerman, its chairman, president and chief executive
"We are positioning our company into some higher growth areas around the South," he said.
North Carolina has had a residential consumer growth rate of 5 to 6 percent, compared with South Carolina's rate of 2 to 3 percent, Timmerman said.
It is another sign of the era of deregulation and increased competition, said David Burks, a Hilliard and Lyons analyst in Louisville, Ky.
"Utilities are finding it more important to gain added size to become more effective competitors," Burks said.
One of Scana's nearest competitors, North Carolina-based Duke Energy Corp., has been on an acquisition spree, investing $1 billion in six months last year. That included the purchase of three California power plants from Pacific Gas & Electric for $500 million and a deal with United Illuminating Co. to invest $265 million for a new gas-fired power plant in Bridgeport, Conn. Duke merged with Houston-based PanEnergy Corp. in 1997.
Carolina Power & Light Co. in Raleigh is buying North Carolina Natural Gas Corp. in a $354 million stock swap as part of its strategy to expand its energy business.
Public Service shares surged on the news, rising 29 percent to $29.43Ü, up $6.87´ cents on the New York Stock Exchange.
However, investors were lukewarm about the Scana deal. Scana's stock closed down 81¨ cents to $26 a share on the New York Stock Exchange. Analysts fear an interest rate hike, which would hurt utilities because most of them carry heavy debt loads, said Joan Goodman, an analyst with Pershing.
With a combined annual revenue of about $2 billion, the enlarged Scana would serve 517,000 electric customers in South Carolina and more than 750,000 natural gas customers in South Carolina, North Carolina and Georgia.
Gastonia, N.C.-based PSNC is a $656 million company with about 340,000 North Carolina customers, mostly in the Raleigh-Durham and Chapel Hill area and west of Charlotte. North Carolina regulations will keep Scana from providing electric service to those customers.
Its approximately 1,000 employees will be cut to 850 at the end of August as part of a previous restructuring plan, said Charles E. Zeigler Jr., PSNC chairman, president and chief executive. No other immediate job cuts are planned. Scana has about 4,500 workers.
Zeigler will become a Scana director and president and chief operating officer of the PSNC subsidiary, with responsibility for all North Carolina operations.
PSNC approached Scana because it needed more capabilities in information technology, Zeigler said. Scana also is an investor in telecommunications companies with more than 350,000 customers across the Southeast.
The merger will generate new capacity that Scana is considering marketing.
"We certainly have the financial capability of handling that kind of project and we understand and we're in the electric business and understand how to build low-cost plants that run well," he said.
Regulators in North Carolina and South Carolina, as well as the Securities and Exchange Commission and both companies' shareholders, must approve the deal.