Duke Energy announced that it would buy Piedmont Natural Gas, a natural gas distributor who is also its partner in the $5 billion Atlantic Coast Pipeline.

According to USA Today, Duke Energy is reported to pay Piedmont Natural for $4.9 billion in cash for the company buyout. This deal will give Piedmont shareholders $60 in cash for each of their shares, representing a 40 percent premium to Piedmont's last closing stock price.

Shares of the natural gas company soared by 36.8 percent in pre-market trading. The transaction, which will require regulatory approval, is expected to close by the end of 2016.

According to Lynn Good, president and CEO of Duke Energy, "We look forward to welcoming Piedmont's employees and one million customers in the Carolinas and Tennessee to Duke Energy. This combination provides us with a growing natural gas platform, benefiting our customers, communities and investors."

In a related report by PR News Wire, Tom Skains, Chairman and CEO of Piedmont Natural Gas said, "This is an exciting moment for Piedmont Natural Gas, its shareholders, customers and employees,"

He added, "The strategic combination of our two companies will deliver compelling value to our shareholders, greatly expand our platform for future growth, enhance our ability to provide excellence in customer service and give our employees more opportunities in one of the largest energy companies in the United States."

The 550-mile long Atlantic Coast Pipeline will be the first major natural gas pipeline to serve Eastern North Carolina. Furthermore, under the terms of the merger, Piedmont will still get to retain its name and operate as a business unit of Duke Energy. In addition, it will still maintain its headquarters in Charlotte, N.C.

As reported by the New York Times, as Duke shifted from coal to gas, the buying of Piedmont seems like a natural move for the company to do. Moreover, Piedmont could also help provide needed growth opportunities according to Andrew Bischof, an analyst.

But those benefits did not come cheap as Duke's offer was twice what the analyst estimated to be the fair value for the stock and even higher than other local gas distribution companies' valuations.

Regarding the deal, Barclays served as the financial adviser to Duke Energy, on the other hand, Goldman Sachs represented Piedmont. For their legal counsels, Sidley Austin served Duke Energy while Kirkland & Ellis advised Piedmont.

Duke Energy started in the Charlotte in 1904 while Piedmont Natural Gas began later in 1951. Both companies have played leading roles in supporting economic development of the people of Carolina and establishing the city as a major hub for energy companies.