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Stop calling AGL-Nicor a nat-gas deal

|Includes: AGL Resources (GAS)

Beware the conventional wisdom. Most financial media loves calling the acquisition of Nicor Inc. by AGL resources as a Natural Gas deal.  They would all have us believe Nicor is a nat gas play. Let’s pump those brakes. Nicor is a holding company engaged in the gas distribution business.  Nicor’s dealings involve shipping gas across the country. This explains why they have been doing so well even though natural gas is currently in a bear market.

Nicor's ticker symbol might be a little misleading -

If you were wise to Nicor in early 2009, you would have already doubled your money. Meanwhile Natural Gas has been trudging along around $4 during the same time frame. This is significantly lower than $15/MCF highs in 2006. Bottom line – Natural gas price fluctuations have no affect on Nicor’s biz.

This acquisition can be summed up in one phrase - cutting out the middle man. The easiest way to improve any business is by cutting costs. By acquiring Nicor, AGL will now gain access to more customers, but also have less cost of business because they will now own the pipelines and the tankers used to transport the commodity. Besides owning the pipelines, AGL should also get into the elite Fortune 500.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.