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CMS buys Duke units
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November 2, 1998: 1:25 p.m. ET
CMS to pay $2.2B for Panhandle Eastern and Trunkline Gas from rival
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NEW YORK (CNNfn) - CMS Energy Corp. agreed Monday to acquire Panhandle Eastern Pipe Line Co. and Trunkline Gas Co. from Duke Energy for $2.2 billion.
CMS Energy, a Dearborn, Mich., global energy company, also will buy from Duke Energy the storage related to those systems and the Trunkline LNG Co. terminal.
The company will pay $1.9 billion of the total purchase price in cash and the remaining $300 million in existing Panhandle debt.
"This acquisition positions CMS Energy as the premier diversified energy company in the U.S., Midwest and an even stronger global energy company," said CMS Chairman and Chief Executive Officer William T. McCormick, Jr.
From Panhandle alone, McCormick said he expects a return on equity of about 15 percent and return on assets of about 12 percent. The acquisition of Panhandle should add 5 cents to 10 cents a share in 1999.
The company's stock (CMS) was trading up 1-13/16 following the announcement Monday morning at 45-7/8 on the New York Stock Exchange. (Click here for a chart of CMS's stock activity)
Shares of Duke Energy (DUK) were off 7/8 at 63-13/16 on the Big Board. (Click here for a chart of Duke's stock activity.)
He added Panhandle's energy assets are a good strategic fit with CMS Energy because of their physical connection to CMS's gas distribution and storage assets in Michigan and its gas gathering and processing assets in the U.S. mid-continent area.
Moreover, he said, the acquisition will add to CMS's earnings in 1999 and it will help the company expand its presence in the Midwest.
The deal is expected to close in January.
"I think that the key here is that the Panhandle pipeline system when it was originally built in the 1940s was built for our utility company, Consumers Energy," Victor Fryling, CMS Energy's chief operating officer, told CNNfn. "We have a number of assets that are related to the pipeline industry, particularly some intrastate pipeline operations [here] in Michigan, huge underground gas storage facilities, and then gas-gathering facilities down in the Texas-Oklahoma Panhandle region.
Fryling said CMS expects the acquisition to add to earnings by as much as 10 cents to 20 cents a share after next year.
Under the buyout, CMS will acquire 11,500 miles of mainline gas pipe from Texas to Michigan and from Kansas to Michigan, with a combined capacity of 3.5 billion cubic feet per day.
CMS also will acquire 340 miles of pipeline in the offshore Gulf of Mexico, 70 billion cubic feet of underground gas storage facilities and LNG port, unloading and regasification facilities.
CMS has sales of about $5 billion that operates in the U.S. and in 21 countries worldwide. The company provides energy and natural-gas utility operations, independent power production, natural-gas pipelines, storage, oil and gas exploration, and energy marketing services. 
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CMS Energy
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