Dominion Buys Consolidated; Sempra Announces KN Deal

A fresh spate of mergers hit the gas and electric industry Monday, with Dominion Resources Inc. buying Consolidated Natural Gas Co. for $6.3 billion and San Diego-based Sempra Energy announcing, as expected, that it will acquire KN Energy for $1.8 billion in cash and stock.

Meanwhile, a bidding war looked likely to erupt for Las Vegas-based natural gas utility Southwest Gas Corp., which said Monday it received an unsolicited takeover bid of $960 million from Southern Union Co. of Texas. That’s about 12% more than Oneok Inc. had offered for the company in December.

“The U.S. energy utility industry is one of the most fragmented in the world. It is a $300-billion-a-year market, and there is a lot of room for consolidation,” said Phil Giudice, vice president at Mercer Management Consulting in Boston.

Southwest Gas, which serves about 1.2 million customers in California, Nevada and Arizona, said that while the merger agreement with Oneok remains in effect, its board has authorized management “to commence substantive discussions” with Southern Union.

The Dominion deal combines the owner of Virginia’s largest power company with a Pittsburgh-based gas producer and distributor to form the fourth-largest U.S. energy utility. The Sempra transaction would merge the owner of two major California utilities with the second-largest gas pipeline company in the country.