Southwest Gas Set to Acquire Questar Pipeline From Dominion Energy In $1.97B Deal

A key Rocky Mountain energy hub may have a new owner by the end of the year.

Las Vegas-based natural gas company Southwest Gas Holdings, Inc. (NYSE: SWX) is set to acquire Dominion Energy Questar Pipeline, LLC, its subsidiaries and certain affiliates, such as Overthrust Pipeline, White River Hub and Questar Field Services (Questar Pipelines) from Dominion Energy, Inc. (NYSE: D) in a $1.97 billion deal, announced on October 5, that allows Southwest Gas to gain a key Rocky Mountains energy center.

According to the press release, “Questar Pipelines is an essential Rocky Mountain energy hub with 2,160-miles of highly contracted, FERC-regulated interstate natural gas pipelines providing transportation and underground storage services in Utah, Wyoming and Colorado.” Meanwhile, Southwest Gas “engages in the business of purchasing, distributing and transporting natural gas, and providing comprehensive utility infrastructure services across North America” and delivers gas to customers in Nevada, Arizona and California.  

Pursuant to the terms of the agreement, Southwest Gas will acquire all of Questar Pipelines for $1.545 billion in cash and assume $430 million of Questar Pipelines debt, for a total value of approximately $1.97 billion. Accordingly, the transaction is expected to be accretive to earnings per share in 2022.

The transaction is expected to close at the end of 2021. Upon closing, Questar Pipelines will operate as a standalone subsidiary of Southwest Gas. While the deal has customary closing requirements, it is not subject to a financing condition. Shareholders will also not vote in the deal because of the all-cash offer.

Southwest Gas is represented by Morrison & Foerster LLP and its financial advisor is Lazard Frres & Co. LLC. Dominion Energy is represented by McGuire Woods LLP and its financial advisor is Barclays Capital Inc.

The stock price for Dominion Energy on the close of October 4, the day before the deal was $73.35 and on October 5, was $72.78; meanwhile on October 6, the day after the deal it jumped to $74.17. Dominion energy prices dipped from highs in August and September prices.

Southwest Gas’s stock price on October 4 was $66.07, on October 5 – the day of the announcement – the stock price was $70.42, and on October 6, the stock price was $68.00. Southwest Gas’s stock price is lower than it was in August and September, but it has not dipped as much as Dominion Energy’s stock prices. Southwest Gas shareholder, Carl Icahn, greatly opposed the deal claiming it would diminish share value, according to Reuters.

Questar’s last large transaction was when Dominion Resources merged with Questar Corporation in 2016 in a $6 billion deal consisting of $4.4 billion cash and assuming Questar’s debt.