AltaGas Expands its Footprint

A smart deal by a smart team.

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The Motley Fool

One of this Fool’s favourite Canadian energy companies, is getting bigger, and better.

AltaGas (TSX:ALA) is acquiring a 25% stake in Petrogas Energy Corp., a privately held North American midstream company.  To “pay” for this deal, AltaGas is issuing 2.8 million shares and an undisclosed amount of cash.  In addition, AltaGas has the option to acquire an additional 25% of Petrogas later this year.

One of the things that I like most about AltaGas is the company’s savvy management team.  And when your stock is trading at a P/E in the upper-30’s, it’s awfully savvy to use it as currency and make an acquisition that improves the long-term prospects of your business.

The strategic fit here appears near perfect as Petrogas owns and operates midstream facilities in Canada and the U.S. that line-up very nicely with AltaGas’ current footprint.  Its collection of facilities, as well as its fleet of rail cars and trucking capabilities will allow the combined entity to more effectively move natural gas liquids and oil throughout the continent.

The Foolish Bottom Line

With its stable of natural gas, power and regulated utilities, AltaGas has the potential to earn shareholders a lot of money over the long-term.  This possibility however comes at a price, as indicated by the rather lofty valuation that is currently ascribed to the shares.

Even though AltaGas is a company that earns high praise from this Fool, it wasn’t good enough to make the cut in our special FREE report “5 Companies to Replace Your Canadian Index Fund”.  Click here now to learn about which companies did make the grade.  One of which, just got taken out at a huge premium.  To learn about the other 4, click here now.

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Fool contributor Iain Butler doesn’t own shares in any companies mentioned.  The Motley Fool doesn’t own shares in any of the companies mentioned.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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