El Paso Energy in pact to buy company considering Nevada pipeline

Mark Babineck

Wednesday, Jan. 19, 2000 | 11:58 a.m.

HOUSTON - El Paso Energy Corp. is buying rival Coastal Corp. for about $10 billion in stock, solidifying El Paso's status as one of the nation's leading natural gas companies.

It's not clear if the purchase would affect Coastal Corp.'s consideration of plans for a possible pipeline and power plant near Carlin, Nev.

The deal announced Tuesday would create a Houston-based firm with more than $18 billion in annual revenues. The two companies combined have 18,000 employees worldwide, though officials said there will be an undetermined number of job cuts.

The boards of both Houston companies already have approved the transaction, which includes El Paso Energy's assumption of $6 billion of Coastal debt. Pending regulatory and shareholder approval, the deal is expected to close by year end.

"With this merger, El Paso Energy will become the only company that is one of the top five in every sector of the wholesale natural gas and power arena," said William A. Wise, president and chief executive officer of El Paso Energy.

Wise will lead the combined company.

Coastal Corp. has been working with Newmont Gold Corp. and Barrick Golstrike to provide a gas-fired power plant near Carlin, Nev.

If the proposed plant becomes a reality, Coastal would then develop a natural gas pipeline from Price, Utah, through the Interstate 80 corridor in conjunction with Southwest Gas Corp.

The pipeline would bring natural gas to northeastern Nevada and provide for a variety of opportunities for industrial expansion. But city and county officials in Elko say they don't know when or if the project will become a reality.

El Paso Energy already owns a coast-to-coast natural gas pipeline. Coastal is engaged in natural gas gathering, transport and marketing as well as oil refining, chemicals and mining.

Wise said the addition of Coastal's assets will help the company develop a telecommunications network over its 58,000 miles of interstate natural gas pipelines in the United States.

"It will be a tremendous path for data, voice and telephone," Wise said. "This expands our footprint to 70 to 75 percent of the country."

Under the terms of the agreement, each share of Coastal will be exchanged for 1.23 shares of El Paso Energy. At Friday's closing prices, the deal values each share of Coastal at about $45.66 - about a 27 percent premium for Coastal shareholders.

Since spinning off from Burlington Resources in 1992, El Paso has grown considerably through acquisitions. It acquired Tenneco Inc.'s pipeline business in 1996 for $4 billion and last year acquired Sonat Inc. for $6 billion in stock and assumed debt.

At 5:15 p.m. EST on the New York Stock Exchange, El Paso Energy shares were down $2.12 1/2 to $35, and Coastal shares closed up $3 at $39.