Chesapeake Utilities is acquiring an Ohio gas company in a $59.2 million deal.
Chesapeake, based in Dover, will acquire Gatherco, which will become part of a subsidiary of Chesapeake.
The deal is expected to close in the second quarter of this year, with approval by publicly traded Gatherco’s shareholders. Approval by Chesapeake stockholders is not required.
Chesapeake shares were up about 3.5 percent in trading on Tuesday. The Dow Jones index was up about 1.7 percent for the day.
Gatherco came about with the acquisition of Columbia Gas Transmission’s natural gas gathering assets in Ohio. According to its website, the company is owned by gas producers.
Its assets include 16 gathering systems and more than 2,000 miles of pipelines in central and eastern Ohio.
Gatherco provides natural gas gathering services and natural gas liquid processing services to more than 300 producers, and supplies natural gas to more than 6,000 customers in Ohio through the Consumers Gas Cooperative, an independent entity which Gatherco manages under an operating agreement.
“We believe this transaction provides growth opportunities that will benefit the shareholders and customers of both companies, along with accretive earnings in the first full year of operation following the merger,” said Michael P. McMasters, CEO of Chesapeake Utilities Corporation. “In addition, Gatherco has an established footprint in the Ohio natural gas production area. Over the long term, this may provide opportunities to construct new pipelines to gather and transport natural gas from the production area to the natural gas interstate pipelines that carry gas from the region.”
The Gatherco deal bolsters Chesapeake’s presence in the non-regulated side of the gas business, an area where profits are greater than in regulated gas utilities that company operates in Delmarva and a small portion of Florida.
Gatherco, working with the cooperative, identity more opportunities to provide natural gas service to new end use customers who are currently using propane and/or oil. The cooperative serves about 6,000 customers with another 150,000 potential customers for possible conversion.
Gatherco is also in the shale production area of Ohio, an area that offers additional opportunities in gathering natural gas
The acquisition of Gatherco also positions Chesapeake Utilities in the middle of the shale production region in Ohio, a less developed area where gas production could increase.
