We Just Disagree, Part 2 - Perceived Value at Heart of Dispute Over Questar Pipeline Sale

The recently announced acquisition of Questar Pipeline LLC by Southwest Gas has stirred up a hornet’s nest. Southwest sees it as a milestone moment that will allow it an increased role in the energy transition, but activist investor Carl Icahn sees it as a serious blunder that would make all previous management missteps pale in comparison. As Dave Mason sang in “We Just Disagree,” a dispute over value is at the heart of the matter, one which has led to a proxy fight, a tender offer for Southwest Gas, and a lot of harsh words. In today’s RBN blog, we take a closer look at Questar’s natural gas pipelines and other assets, the roles they play in relation to the Rockies’ other pipelines, and how it all factors into Questar’s perceived value.

As we noted recently in We Just Disagree, Part 1, the planned acquisition of Questar Pipeline LLC by Southwest Gas has brought with it a lot of conflict. The story began with Dominion Energy’s decision to sell a broad set of its gas transmission and storage assets to Warren Buffett’s Berkshire Hathaway Energy for $9.7 billion in July 2020, but it turned more complicated when Dominion and Berkshire decided to terminate the Questar part of the sale in July 2021 over lingering concerns 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 for Questar on October 5. The price tag — $1.975 billion, which included the assumption of $430 million in debt — brought with it a lot of attention, and questions. For starters, it’s significantly more than the $1.3 billion that Berkshire had committed to pay for the same assets a year earlier. But the price tag did more than just raise a few skeptics’ eyebrows — it got Icahn involved as well. On October 4, as reports of the planned Southwest Gas-Dominion deal for Questar came to light, Icahn revealed that he held a 4.9% stake in Southwest and would fight to block the transaction. The price tag was one of the primary objections he raised in a letter to investors.

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