MDU to Issue $200M in Shares to Fund Acquisition and Other Purposes

MDU Resource Group, Inc. MDU has announced a public offering of $200 million of equity shares, using a forward sale agreement structure with forward sellers — Wells Fargo, BofA Securities and J.P. Morgan (or their respective affiliates).

Wells Fargo Securities, BofA Securities, and J.P. Morgan are serving as joint lead bookrunners for the offering and are acting as representatives of the underwriting group.

MDU’s Offer for Underwriters

The company has granted the underwriters a 30-day option to purchase up to an additional $30 million in common stock. If this option is exercised, MDU may, at its sole discretion, enter into additional forward sale agreements with the forward purchasers (or their respective affiliates) so that the underwriters can issue and sell these additional shares.

How MDU Will Utilize the Proceeds?

The company plans to utilize the fund for general business purposes, such as repayment of debt or debt refinancing, capital expenditure, working capital expenditure, repurchases or redemptions of securities and an acquisition, which includes a 49% undivided stake in the Badger Wind Farm project in 2026.

How Does This Issue Impact MDU’s Financials?

The public offering will provide MDU with a $200 million capital infusion, enabling the company to pursue its investment plans without adding to its debt burden. The proceeds will support long-term capital expenditures and enhance the balance sheet through the repayment of outstanding debt.

At the same time, the increase in the number of shares outstanding will further dilute earnings per share, as the new shares will add to the existing 205.3 million shares outstanding at the end of the third quarter of 2025.

MDU’s Guidance

MDU anticipates its utility customers’ growth to continue at a rate of 1-2% annually. The company continues to expect a long-term EPS growth rate of 6-8%. MDU Resources raised its capital plan to $3.4 billion for 2026-2030, reflecting continued investment in safe, reliable, and environmentally responsible energy infrastructure.

Price Movement of MDU

In the past three months, MDU’s shares have risen 19.9%, which beat the industry’s growth of 9.5%.

How Do Utilities Fund Their Capital Needs?

Utilities fund their future capital requirements through internally generated cash, the issuance of new debt, loans from financial institutions, or the issuance of new equity shares.

Sempra Energy SRE is involved in the sale, distribution, storage and transportation of electricity and natural gas. The company is selling its non-core assets and plans to use the proceeds to fund the growth of its core U.S. assets. In the recent past, SRE has made strategic deals and channeled the proceeds into capital projects, reducing its reliance on equity-based funding.

ONE Gas, Inc. OGS is a 100% regulated natural gas distribution utility. Due to an expanding customer base and rising demand for its services, the company expects to invest $4 billion through 2029 to strengthen its operations. OGS plans to fund its capital expenditure through a mix of equity and debts.

Zacks Rank & Key Pick

MDU Resource Group, Inc. (MDU) currently carries a Zacks Rank #5 (Strong sell). A better-ranked stock in the same industry is Atmos Energy Corporation ATO, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ATO has a long-term (three to five years) earnings growth rate of 7.98%. The Zacks Consensus Estimate for fiscal 2026 earnings has increased 1.78% to $8.02 per share in the past 60 days.

 

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This article originally published on Zacks Investment Research (zacks.com).

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