News Flash: Dominion to buy Questar for $4.4bn to boost gas operations

Dominion Resources (NYSE:D) on Feb. 1 said it has agreed to buy Questar Corporation (NYSE:STR) in an all-cash transaction valued at about $4.4bn that would expand Dominion’s natural gas operations to include assets in Western states.

Dominion said it would pay Questar shareholders $25/share, which is higher than Questar’s closing stock price of $20.39/share on Jan. 29. Questar’s stock price was up to $24.81/share as of 10:26 a.m., EST, Feb. 1.

Dominion said the deal would be accretive to Dominion earnings upon closing, which is expected by the end of 2016, with limited impact on the company’s balance sheet. Dominion plans to finance the deal using equity, mandatory convertibles and debt at Dominion and equity at Dominion Midstream Partners.

Questar is based in Salt Lake City, Utah, with gas pipeline, distribution and storage assets, including 3,400 miles of gas transmission pipelines and 56 Bcf of working gas storage. The company serves customers in Utah, Wyoming and Idaho, with about 97% of customer accounts in Utah.

Dominion said the deal would provide enhanced geographic diversity to its existing gas operations, which are in the mid-Atlantic region, with Questar being a principal supplier of gas to Western states.

“Dominion expects the value of the Questar pipeline system to rise over time as Utah and other Western states seek to comply with the requirements of the U.S. Environmental Protection Agency‘s Clean Power Plan and meet state-mandated renewable standards, with increasing reliance on low-carbon, gas-fired electric generation,” Dominion said.

The addition “is well-aligned with Dominion’s existing strategic focus on core regulated energy infrastructure operations,” Thomas Farrell, chairman, president and CEO of Dominion, said in the Feb. 1 statement.

Questar’s assets “will improve Dominion’s balance between electric and gas operations and provide enhanced scale and diversification into Questar’s regulatory jurisdictions,” Farrell said.

Pending regulatory approvals, Questar would operate as a wholly owned subsidiary of Dominion and maintain its local management structure and headquarters in Salt Lake City, Dominion said.

The deal requires approval from Questar shareholders and clearance from the U.S. Federal Trade Commission, and the companies will file for review and approval, if needed, from the Utah Public Service Commission and the Wyoming Public Service Commission, along with providing information regarding the transaction to the Idaho Public Utilities Commission.