El Paso Energy Agrees to Acquire Coastal

El Paso Energy Corp. said it has agreed to acquire Coastal Corp. in a $9.75-billion stock swap that would consolidate its position as North America’s biggest operator of natural gas pipelines and make it the third-largest U.S. producer of natural gas. El Paso would also assume $5 billion in debt and $800 million in preferred stock in the transaction, which it expects to complete in the fourth quarter. Analysts said that the two Houston-based companies’ have complementary gas pipeline networks and that the move was driven by the increasing intertwinement of North American natural gas and electric power markets in an era of rapid deregulation. Under terms of the deal, each share of Coastal common stock would be converted on a tax-free basis into 1.23 shares of El Paso Energy common stock. At Friday’s closing prices of $36 for Coastal and $37.13 for El Paso, the offer values Coastal at $45.66 per share. On the New York Stock Exchange, El Paso shares closed down $2.13 at $35, and Coastal shares rose $3 to close at $39.