Nicor Inc. (GAS), a natural gas utility, has been put up for sale, Bloomberg News has reported. The company is working with JPMorgan Chase & Co. (JPM) to find a buyer, according to people familiar with the situation, who declined to be identified because a sale has not been announced.
Some utility companies and infrastructure funds have looked at the company and decided the price was too high for a bid, said sources. Naperville, Illinois-based Nicor’s shares are currently trading at 15 times estimated 2011 earnings, compared with about 12 times for the Standard & Poor’s 500 Utilities Index.
Nicor Inc. is a holding company whose principal business is gas distribution. The company’s largest subsidiary is Nicor Gas, a distributor of natural gas that provided almost 80% of the company’s 2009 sales. Nicor also owns Tropical Shipping, a transporter of containerized freight serving the Bahamas and the Caribbean region.
Founded in 1954 as Northern Illinois Gas, Nicor Gas is one of the biggest gas utilities in the nation with a large customer base (more than 2 million Illinois homes and businesses) and an enviable supply position that includes access to eight interstate pipeline connections and significant underground storage assets. It maintains a low base rate (even after the rate relief received in 2009), compared with the other major gas utilities in Illinois and in the country.
Nicor’s shipping segment carries containerized freight between Florida, the eastern coast of Canada, the Bahamas and the Caribbean region. The company’s shipments mainly consist of southbound cargo, such as building materials, food and other necessities for developers, manufacturers and residents in the Caribbean and the Bahamas, plus tourist-related shipments for use in hotels and resorts and on cruise ships.
Nicor, with a market value of about $2 billion, surged more than 7% in Thursday trading on the New York Stock Exchange following news of the potential sale.
Nicor currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.
NICOR INC (GAS): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
Zacks Investment Research
