(WIBW) - The parent company of Kansas Gas Service announced its spinning off KGS and its two other natural gas distribution businesses.
The board of directors of ONEOK, Inc. unanimously approved the move Thursday.
Under the plan, Kansas Gas Service, Oklahoma Natural Gas and Texas Gas Service will separate into a standalone, publicly-traded company called ONE Gas, Inc. The company will be headquartered in Tulsa, Okla.
In a news release, company officials said ONE Gas will be one of the largest natural gas utilities in the United States. They say it will serve more than 2 million customers in three states. ONE Gas will be the only publicly traded, 100 percent regulated, pure-play natural gas distribution utility in the United States.
ONEOK says it is making the move to tailor its growth strategies, improve efficiencies and better align shareholders. ONEOK says the separation should lead to higher values for both companies.
"This transaction should unlock the value of the assets currently in the ONEOK structure and is consistent with the board of directors' commitment to create long-term, sustainable shareholder value," said John W. Gibson, ONEOK chairman and chief executive officer. "Creating two well-capitalized entities will help ensure that each has the financial strength and flexibility to pursue its own independent strategic priorities.
"We are confident that through this new structure ONE Gas will be well positioned for long-term success as a standalone company," Gibson said. "It will have the ability to raise its own capital to grow its rate base, while paying a competitive dividend consistent with its natural gas utility peers. ONE Gas will continue to deliver safe, reliable and efficient service to its customers."
Kansas Gas Services has more than 630,000 customers in Kansas and some 1035 employees.
Further details from ONEOK:
Under the plan, ONEOK shareholders would retain their current shares of ONEOK stock and receive a pro-rata dividend of shares of stock in the new company in a transaction that is expected to be tax-free to ONEOK and its shareholders. The actual number of ONE Gas shares that will be distributed to ONEOK shareholders will be determined prior to closing, which is expected during the first quarter 2014.
Upon completion of the transaction, ONEOK will continue to hold its interests in ONEOK Partners, L.P. (NYSE: OKS), which include the sole general partner interest and limited partner interests that together currently represent 43.3 percent.
ONEOK Partners is not affected by the proposed transaction.
"ONEOK – through its ownership of the general partner and limited partner interests in ONEOK Partners – will continue to pursue value-creating growth opportunities to benefit its shareholders. In addition, ONEOK shareholders are expected to benefit from a higher dividend and a higher potential valuation based on current and future shareholders applying a cash-flow multiple and dividend yield consistent with other pure-play general partners," Gibson said.