Carl Icahn holds stake in Southwest Gas and rejects Questar deal

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Oct. 5 (Reuters) – Carl Icahn has a significant stake in Southwest Gas Holdings Inc (SWX.N) and is urging the gas utility to abandon a potential acquisition and instead focus on improving the share price, detailed a letter from the activist investor on Tuesday.

Southwest Gas has agreed to acquire Questar Pipeline Co, a gas transportation and storage company owned by Dominion Energy Inc (DN), in cash only. The total value of the transaction, including the debt assumption, is $ 1.98 billion, according to a statement from Dominion. Continue reading

The announcement confirmed a Reuters report on Sunday that Southwest Gas was in advanced talks to buy Questar. Continue reading

In July, Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) energy division abandoned a $ 1.7 billion acquisition of Questar, including debt, for fear that antitrust authorities would not sanction it. This was part of a larger transaction to purchase Dominion’s gas infrastructure business.

Icahn, who has advocated change in US utilities in the past, said in a letter to the board of directors of Southwest Gas dated Oct. 4 that the proposed purchase “would result in a serious reduction in shareholder value” and other management mistakes made in recent years Years.

The letter – released before the deal was announced – said Southwest Gas trades below its peers, with financial performance being held back by high spending and a poor relationship with regulators. Icahn also questioned whether the board could hold management accountable, given that many directors have been in office for over a decade.

In a statement accompanying the announcement of the deal, Southwest Gas chief executive John Hester said Questar “will provide significant financial and strategic benefits to our company, shareholders, employees and partners.” The statement did not apply to Icahn’s letter, and Southwest Gas did not respond to a request for comment on the letter.

Shares in Southwest Gas, which serves more than 2 million customers in Arizona, California and Nevada, initially rose nearly 8% before giving up some profits, following the news in the letter, first reported by the Wall Street Journal. They closed 6.6% higher at $ 70.42 and valued the company at $ 4.16 billion.

Questar’s natural gas pipeline and storage network spans Colorado, Utah and Wyoming. Its 1,867-mile (3,005 km) pipeline connects to other pipeline systems in the western and midwestern United States, while the company also owns the Clay Basin storage facility, the largest underground storage reservoir in the Rocky Mountains, according to its website.

In March, Ohio-focused utility FirstEnergy Corp (FE.N) announced that it would add two Icahn-backed members to its board of directors.

Reporting by Svea Herbst-Bayliss in New York and Sahil Shaw in Bengaluru; Letter from David French; Editing by Maju Samuel, Nick Zieminski, Marguerita Choy and David Gregorio

Our Standards: The Thomson Reuters Trust Principles.

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