Proposed Merger with Southern Company

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Proposed Merger with Southern Company

Proposed Merger with Southern Company

On August 23, 2015, we entered into the Merger Agreement with Southern Company and a new wholly owned subsidiary of Southern Company (Merger Sub), providing for the merger of Merger Sub with and into AGL Resources, with us surviving as a wholly owned subsidiary of Southern Company. At the effective time of the merger, which is expected to occur in the second half of 2016, each share of our common stock, other than certain excluded shares, will convert into the right to receive $66 in cash, without interest, less any applicable withholding taxes. Following the effective time of the merger, we will become a wholly owned, direct subsidiary of Southern Company. 

Completion of the merger remains subject to various closing conditions, including, among others (i) the receipt of required regulatory approvals from the Federal Communications Commission, California Public Utilities Commission, Georgia Commission, Illinois Commission, Maryland Commission, New Jersey BPU and Virginia Commission, and such approvals having become final orders and (iii) the absence of a judgment, order, decision, injunction, ruling or other finding or agency requirement of a governmental entity prohibiting the closing of the merger.

At a special meeting of shareholders held on November 19, 2015, the proposed merger was approved by our shareholders. The waiting period under the Hart-Scott-Rodino Act expired on December 4, 2015. We and Southern Company have made joint filings seeking regulatory approval of the proposed merger with all of the required state regulatory agencies.

The Merger Agreement contains certain termination rights for each party. In addition, the Merger Agreement, in certain circumstances, provides for the payment by AGL Resources of a $201 million termination fee to Southern Company and, in certain circumstances, provides for the reimbursement of expenses up to $5 million upon termination of the Merger Agreement (which reimbursement would reduce on a dollar-for-dollar basis any termination fee subsequently paid by us). As of December 31, 2015 we had recorded no liability for termination fees.

In connection with this transaction, we recorded merger-related costs in the accompanying Consolidated Statements of Income of $44 million ($26 million, net of tax) for the year ended December 31, 2015. The transaction costs incurred to date are comprised of $24 million of additional stock-based compensation expense associated with the proposed merger as we remeasured our performance share unit awards based upon the increase in trading price of our common stock since the announcement of the Merger Agreement, $16 million of expenses associated with financial advisory, legal and other merger-related costs and $4 million of board of directors stock-based compensation related to the aforementioned increase in the trading price of our common stock. We treated these costs as tax deductible since the requisite closing conditions to the merger have not yet been satisfied. Once the merger is closed, we will evaluate the tax deductibility of these costs and reflect any non-deductible amounts in the effective tax rate.

Additionally, subsequent to the announcement of the merger, AGL Resources and each member of the Board were named as defendants in four purported shareholder class action lawsuits relating to the merger, which were dismissed during the first quarter of 2016.