Dover, Delaware-based Chesapeake Utilities Corp. announced it will purchase Maryland utility Elkton Gas Co. from South Jersey Industries Inc. in a deal valued at about $15 million.
The deal expands Chesapeake's current gas utility territory in Delaware and Eastern Maryland. The company services part of Cecil County, Md., where Elkton Gas distributes gas to about 7,000 residential and commercial customers.
"This is an exciting fit and aligns with our Company's growth strategy to identify new investment opportunities to further our future earnings growth. The acquisition of Elkton Gas is significant in that it jumpstarts our current operation, enabling us to more quickly expand our footprint in Cecil County," Chesapeake President and CEO Jeff Householder said in a Dec. 9 news release.
Chesapeake subsidiary Eastern Shore Natural Gas Co., which operates an interstate gas pipeline, has long counted Elkton Gas as a customer, according to the company.
The companies did not release specific transaction terms. They expect the deal to close in the first half of 2020, following pending approval from the Maryland Public Service Commission.
Shares of Chesapeake were down marginally in morning trading, roughly in line with the broader S&P 500 utilities sector. The stock price for South Jersey Industries, or SJI, was moderately higher.
The sale will allow SJI to focus on integrating into its operations Elizabethtown Gas Co., a New Jersey utility it purchased alongside Elkton Gas in October 2017. The Folsom, New Jersey-based company is seeking to expand its rate base by replacing leak-prone pipes in Elizabethtown's territory. Elizabethtown Gas is a more natural fit with SJI's legacy South Jersey Gas Co. utility operations because the company has experience navigating the regulatory environment in New Jersey.
"The sale of this asset supports the goals of our strategic plan, to focus on our core business in New Jersey while identifying opportunities to strengthen our balance sheet," SJI President and CEO Mike Renna said in a statement.