Sempra, KN Energy Unplug Merger

Sempra Energy and KN Energy Inc. said they mutually decided to terminate their merger agreement because “it became clear that the combined company would not be able to realize the business objectives that they originally anticipated.” Sempra, the San Diego-based parent of Southern California Gas and San Diego Gas & Electric, agreed in February to pay nearly $2 billion in stock and cash for KN Energy of Lakewood, Colo., the nation’s second-largest natural gas pipeline operator, with an eye toward eliminating $30 million to $50 million in annual costs with no dilution in earnings. The transaction would have doubled Sempra’s size and expanded the utility into unregulated businesses outside of California. Analysts speculated that KN Energy’s recent poor financial performance and its high debt load scuttled the deal. Both companies agreed to release each other from any claims, and Sempra will reimburse KN Energy for $5.95 million in expenses. In New York Stock Exchange trading, KN shares plunged $5.13 to close at $13, while Sempra fell $1.13 to close at $22.81.