Southwest Gas Gets Interest ‘Well in Excess’ of Icahn Offer

Apr 18, 2022

(Bloomberg) Southwest Gas Holdings Inc. said it received an indication of interest from a potential buyer that’s “well in excess” of a bid from billionaire Carl Icahn, raising the stakes in a months long takeover battle.

The undisclosed interest prompted the utility’s board to review its strategic options, including selling the company or a separate sale of its units, Las Vegas-based Southwest Gas said in a statement Monday.

The disclosure adds a new player to the takeover battle that dates to October when Southwest Gas rebuffed Icahn’s objections and moved forward with a $2 billion pipeline acquisition. The activist shareholder has criticized Southwest’s board and management for underperformance, while the utility has said his latest offer of $82.50 per share is inadequate.

“As a board, we determined that the best path forward is to explore a range of strategic alternatives, including a sale of the company,” Southwest Gas Chairman Michael J. Melarkey said in the statement. “We plan to move forward expeditiously.”

That strategic review could open the door for a potential sale of utility owner or other options that would yield well above Icahn’s tender offer, Bloomberg Intelligence said in a note Monday. Possibilities include separate sales of its gas utilities, pipelines and the Centuri Group construction unit that Southwest is already planning to spin off.

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Southwest Gas soars as potential buyer emerges to challenge Icahn offer

Southwest’s current valuation undervalues each of its three business units: the utility, its midstream business and its construction unit, Bloomberg Intelligence utilities analyst Nikki Hsu said. The company would have no trouble finding buyers for each of those three units at a price higher than what Icahn offered.

“It’s a very effective way to fend off Icahn,” Hsu said of a potential sale. “It could be just buying them time. We don’t know how this will play out.”

Southwest Gas shares gained 5.2% to $87.80 as of 9:30 a.m. in New York.

A representative for Icahn didn’t immediately respond to request for comment. Icahn, who owns about 5% of Southwest, initially objected to its plans to buy Questar Pipelines from Dominion Energy Inc. He’s nominated a slate of directors to replace the entire board.

Lazard is serving as financial adviser to Southwest Gas. Icahn is invited to participate in the sale process, the company said.