Southern Falls After Pricing 32.5 Million Share Offering

  • Proceeds to fund acquisition of pipline stake from Kinder
  • Barclays, Goldman, Morgan Stanley, Wells Fargo managing sale

Southern Co., the Atlanta-based utility owner, fell to the lowest in more than two months after pricing a 32.5 million share offering that is expected to net about $1.6 billion.

Proceeds from the offering will help fund Southern’s previously announced purchase of a 50 percent stake in Kinder Morgan Inc.’s Southern Natural Gas pipeline system, according to a statement after markets closed trading Tuesday. Shares fell as much as 1.9 percent to $50, the lowest since June 6, before trading at $50.33 at 11:53 a.m. in New York. 

Southern is among electric utility owners buying natural gas pipeline assets to boost sales and profit growth after power use flattened. The pipeline purchase is expected to close by the end of the year, the companies said in a July 10 statement. On July 1, Southern said it completed the $7.9 billion acquisition of AGL Resources Inc., an Atlanta-based gas distributor and pipeline developer.

“If you have a substantial amount of new stock on the market, you have a little bit of trouble swallowing it that day,” Kit Konolige, an analyst at Bloomberg Intelligence, said Wednesday by phone. “It’s not a surprise.”

Southern needed to sell about $2 billion of new stock in the second half,
Chief Financial Officer Art Beattie told investors on a July 27 earnings call. The company priced the 32.5 million shares for gross proceeds of about $1.6 billion.

Barclays Plc, Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co. are handling the sale, which is expected to close Aug. 19, according to the statement.

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