MidCon Corp. said Monday it would sell Mississippi River Transmission Corp. to Arkla Inc. for about $305 million cash, following an agreement with the Federal Trade Commission that MidCon sell the pipeline subsidiary as a condition of its acquisition by Occidental Petroleum Corp.
Occidental, of Los Angeles, and MidCon, based in west suburban Lombard, will seek shareholder approval of the merger in special meetings March 27.
Since merger plans were announced Jan. 1, Occidental has acquired 21 million of MidCon`s 42 million common shares outstanding. The $3 billion transaction calls for exchanging one-half of MidCon`s shares for $75 cash, and remaining shares for about 2.25 Occidental shares or equivalent Occidental securities. The exchange of stock is expected to occur next month.
The sale of MRT to Arkla, based in Little Rock, Ark., and Shreveport, La., must be approved by the FTC; however, the FTC itself asked MidCon to divest MRT earlier this month as a condition of its planned merger. The MRT sale is expected to be completed in April, following the merger, according to a MidCon statement.
Selling MRT at the announced price would ”easily improve (MidCon`s)
balance sheet to offset” the loss of revenue from the company, said Don Bustos, analyst at Duff & Phelps Inc. In the fiscal year, ended Sept. 30, MRT provided about $625 million of MidCon`s $4.07 billion revenue, and turned a profit exceeding $26 million.
MidCon purchased MRT from Union Pacific Corp. in September, 1983, for $256.3 million, about $50 million less than its sale price.
”The $305 million is a nice piece of change by anyone`s account,”
Bustos said. Moreover, MRT`s $47 million in long-term debt outstanding will remain on its own books.
St. Louis-based MRT operates 2,200 miles of interstate natural gas transmission pipelines in Illinois, Texas, Louisians, Arkansas and Missouri, and primarily serves natural gas utilities in metropolitan St. Louis. Arkla operates a 9,600-mile interstate system in five middle states, which interconnects with MRT at two points.
