Plato may have said it, Shakespeare wrote about it, and anyone who has engaged in a friendly debate about the best classic car, hunting rifle, or wristwatch knows it to be true: beauty lies in the eye of the beholder. Of course, not everyone sees value the same way, or value in the same things. That’s at the heart of the dispute over the recently announced acquisition of Questar Pipeline LLC by Southwest Gas Holdings. The prospective buyer sees Questar as a picture-perfect addition, while an activist investor sees it as a butt-ugly mistake. In today’s RBN blog, we continue an examination of the Southwest Gas/Questar deal with a look at Questar’s relationship with its local distribution companies, potential competition with the nearby Kern River Pipeline, and challenges Questar may face in serving power generators and direct industrial load.
As we discussed in We Just Disagree, Part 1, the planned acquisition of Questar Pipeline by Southwest Gas has stirred up a hornet’s nest. The story began with Dominion Energy’s July 2020 decision to sell a broad set of its natural gas transmission and storage assets to Warren Buffett’s Berkshire Hathaway Energy for $9.7 billion, but it became more complicated a year later when Dominion and Berkshire decided to terminate the Questar part of the sale over lingering concerns that it would be held up by the Federal Trade Commission. That put Questar back on the market and Southwest Gas quickly moved in, announcing a deal to buy the midstream company on October 5. Dominion said during its third-quarter earnings call on November 5 that it expects the Questar sale to be completed in the fourth quarter of 2021. But the $1.975 billion price tag, which included the assumption of $430 million in debt, brought with it a lot of attention, and questions.
Southwest Gas sees the Questar acquisition as a milestone that will allow it an increased role in the energy transition, but activist investor Carl Icahn, owner of a 4.9% stake in Southwest Gas, sees the deal as a serious blunder that would make all previous management missteps pale in comparison. That dispute has led to a proxy fight, a tender offer for Southwest Gas, and a lot of harsh words. Southwest Gas said November 8 that Icahn’s offer was inadequate and advised shareholders to reject it.
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