UGI Corp. has agreed to acquire the equity interests of Columbia Midstream Group LLC, from a subsidiary of TC Energy Corp. for approximately $1.275 billion. The acquisition significantly expands UGI’s midstream portfolio and provides an opportunity to invest an additional $300 million to $500 million over the next five years at attractive returns.
CMG holds five gathering systems, with capacity of roughly 2,675,000 MMBtu/day and 240 miles of pipeline, located in the southwestern core of the Appalachian Basin.
Valley Forge-based UGI expects the transaction to be EPS neutral in fiscal year 2020, and accretive beginning in fiscal year 2021 excluding transaction and integration costs. The acquisition was made through its UGI Energy Services LLC subsidiary.
“This transaction expands our midstream capabilities in the prolific gas producing region of the Southwest Appalachian Basin and provides an initial investment into both wet gas gathering and processing,” UGI CEO John L. Walsh said, in a statement. "The CMG assets fit nicely into our strategy and further support our long-term commitments to shareholders of 6 percent – 10 percent adjusted EPS growth and 4 percent dividend growth."
UGI Energy Services expects to fund this transaction with a combination of new debt at UGI Energy Services, a credit facility at UGI to support both this transaction and the AmeriGas Merger transaction, and available liquidity at UGI. In connection with this transaction, UGI Energy Services has secured a commitment from Credit Suisse (USA) LLC to provide a $700 million bridge facility. UGI expects consolidated pro forma leverage, for both the completion of the AmeriGas Merger transaction and the acquisition of CMG, to be between 4.3x and 4.4x at closing and approximately 3.5x by the end of 2021.
The transaction is expected to close in UGI’s fiscal fourth quarter and is subject to closing conditions.