Dominion announces $4B deal for Utah firm

Dominion ftd

Dominion’s headquarters on East Cary Street.

Just days after another multibillion-dollar deal, Richmond has its second major merger of the year.

Dominion Resources announced Monday it is buying Questar Corp., a Utah-based natural gas company, in an all-cash deal valued at $4.4 billion.

The deal extends Dominion’s reach from the Mid-Atlantic to the Rockies, where Questar serves nearly 1 million homes and businesses in Utah, Wyoming and Idaho. The combined company would serve about 2.5 million electric utility customers and 2.3 million gas utility customers in seven states.

The deal, expected to close by the end of this year, will see Dominion pay Questar shareholders $25 per share and assume Questar’s outstanding debt.

Dominion CEO Tom Farrell. Photos by Jonathan Spiers.

Dominion CEO Tom Farrell. Photo by Jonathan Spiers.

In an announcement, Dominion CEO Thomas Farrell said the acquisition will enhance the company’s geographic diversity and add to its assets and infrastructure. Questar employs about 1,700 workers and has about $4.2 billion in assets, including 27,500 miles of gas distribution pipeline, the value of which Dominion expects to rise over time.

“Questar boasts best-in-sector customer growth in states with strong pro-business credentials and constructive regulatory environments. These high-performing regulated assets will improve Dominion’s balance between electric and gas operations and provide enhanced scale and diversification into Questar’s regulatory jurisdictions,” Farrell was quoted as saying.

The deal requires clearance from the Federal Trade Commission and approval of Questar shareholders and various utilities commissions. If approved, Questar would operate as a wholly owned subsidiary of Dominion and maintain its presence and management structure, including keeping its headquarters in Salt Lake City.

Committed financing has been provided by RBC Capital Markets and Mizuho Bank, which are also serving as financial advisors to Dominion. McGuireWoods served as Dominion’s legal counsel.

Questar was advised by Goldman, Sachs & Co, which served as exclusive financial adviser, and by Kirkland & Ellis as legal counsel.

The deal comes just days after Richmond-based Media General announced it will be acquired by Texas-based Nexstar Broadcasting Group in a cash-and-stock deal valued at $4.6 billion.

It is also the second in the past year related to Dominion, whose limited partnership, Dominion Midstream Partners, announced last April it had acquired Dominion Carolina Gas Transmission LLC from the parent power company for $495 million.

Also last year, local packaging giant MeadWestvaco merged with Georgia-based Rock-Tenn Co. to form WestRock, which in turn acquired SP Fiber Holdings in a $288.5 million deal.

Steve Zacharias, a managing partner of local investment banking firm Transact Capital, said the recent wave of big-dollar acquisitions has been driven by a mix of inexpensive financing, a need or desire by companies to grow revenues beyond their revenue base, and a strategy of buying new revenues rather than building them to even out growth.

Add to that an unprecedented drop in oil and energy prices, and Zacharias said the Dominion deal makes sense.

“It fits the sector strategy of electric utilities or gas utilities to diversify their exposure,” Zacharias said. While his Richmond-based firm advises privately held companies with less than $100 million in revenues, Zacharias said the challenges are similar for both sectors.

“It’s a continuation of a theme that both corporates and small, privately owned companies are pursuing,” he said. “That is they’re finding it’s difficult to grow organically, or grow their own revenue base, so they’re pursuing acquisitions – good, quality, strategic acquisitions – to grow revenues.”

Dominion also released its earnings report on Monday for the fourth quarter and full year of 2015. Operating earnings for the quarter totaled $416 million, compared to $490 million the same quarter the year before. Full-year operating earnings totaled $2 billion, the same amount reported for 2014.

The company’s stock rose slightly in response to Monday’s announcement, peaking at $71.42 during a conference call for investors before dropping to a a day low of $69.94 and closing at $70.18.

Dominion ftd

Dominion’s headquarters on East Cary Street.

Just days after another multibillion-dollar deal, Richmond has its second major merger of the year.

Dominion Resources announced Monday it is buying Questar Corp., a Utah-based natural gas company, in an all-cash deal valued at $4.4 billion.

The deal extends Dominion’s reach from the Mid-Atlantic to the Rockies, where Questar serves nearly 1 million homes and businesses in Utah, Wyoming and Idaho. The combined company would serve about 2.5 million electric utility customers and 2.3 million gas utility customers in seven states.

The deal, expected to close by the end of this year, will see Dominion pay Questar shareholders $25 per share and assume Questar’s outstanding debt.

Dominion CEO Tom Farrell. Photos by Jonathan Spiers.

Dominion CEO Tom Farrell. Photo by Jonathan Spiers.

In an announcement, Dominion CEO Thomas Farrell said the acquisition will enhance the company’s geographic diversity and add to its assets and infrastructure. Questar employs about 1,700 workers and has about $4.2 billion in assets, including 27,500 miles of gas distribution pipeline, the value of which Dominion expects to rise over time.

“Questar boasts best-in-sector customer growth in states with strong pro-business credentials and constructive regulatory environments. These high-performing regulated assets will improve Dominion’s balance between electric and gas operations and provide enhanced scale and diversification into Questar’s regulatory jurisdictions,” Farrell was quoted as saying.

The deal requires clearance from the Federal Trade Commission and approval of Questar shareholders and various utilities commissions. If approved, Questar would operate as a wholly owned subsidiary of Dominion and maintain its presence and management structure, including keeping its headquarters in Salt Lake City.

Committed financing has been provided by RBC Capital Markets and Mizuho Bank, which are also serving as financial advisors to Dominion. McGuireWoods served as Dominion’s legal counsel.

Questar was advised by Goldman, Sachs & Co, which served as exclusive financial adviser, and by Kirkland & Ellis as legal counsel.

The deal comes just days after Richmond-based Media General announced it will be acquired by Texas-based Nexstar Broadcasting Group in a cash-and-stock deal valued at $4.6 billion.

It is also the second in the past year related to Dominion, whose limited partnership, Dominion Midstream Partners, announced last April it had acquired Dominion Carolina Gas Transmission LLC from the parent power company for $495 million.

Also last year, local packaging giant MeadWestvaco merged with Georgia-based Rock-Tenn Co. to form WestRock, which in turn acquired SP Fiber Holdings in a $288.5 million deal.

Steve Zacharias, a managing partner of local investment banking firm Transact Capital, said the recent wave of big-dollar acquisitions has been driven by a mix of inexpensive financing, a need or desire by companies to grow revenues beyond their revenue base, and a strategy of buying new revenues rather than building them to even out growth.

Add to that an unprecedented drop in oil and energy prices, and Zacharias said the Dominion deal makes sense.

“It fits the sector strategy of electric utilities or gas utilities to diversify their exposure,” Zacharias said. While his Richmond-based firm advises privately held companies with less than $100 million in revenues, Zacharias said the challenges are similar for both sectors.

“It’s a continuation of a theme that both corporates and small, privately owned companies are pursuing,” he said. “That is they’re finding it’s difficult to grow organically, or grow their own revenue base, so they’re pursuing acquisitions – good, quality, strategic acquisitions – to grow revenues.”

Dominion also released its earnings report on Monday for the fourth quarter and full year of 2015. Operating earnings for the quarter totaled $416 million, compared to $490 million the same quarter the year before. Full-year operating earnings totaled $2 billion, the same amount reported for 2014.

The company’s stock rose slightly in response to Monday’s announcement, peaking at $71.42 during a conference call for investors before dropping to a a day low of $69.94 and closing at $70.18.

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