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Home News Regions Central Virginia Dominion Resources to acquire Questar Corp. for $4.4 billion

Dominion Resources to acquire Questar Corp. for $4.4 billion

Published February 1, 2016 by Paula C. Squires

Dominion Resources Inc. and Questar Corp. announced an agreement Monday for the companies to combine in an all-cash transaction in which Dominion has agreed to pay Questar shareholders $25 per share – about $4.4 billion – and assume Questar's outstanding debt.


Dominion, based in Richmond, said acquisition of the Salt Lake City-based natural gas company is expected to close by year-end.
Dominion said the deal would give its natural gas operations enhanced geographic diversity.  Dominion's existing operations lie in the mid-Atlantic, whereas Questar's system is the “hub of the Rockies” and a principal source of gas supply to Western states, Dominion said.


Questar is a natural gas distribution, pipeline, storage and cost-of-service gas supply company. It serves nearly 1 million homes and businesses in Utah, Wyoming and Idaho, with about 97 percent of those customer accounts in Utah. The company employs about 1,700 people and has about $4.2 billion in assets, including about 27,500 miles of gas distribution pipeline, 3,400 miles of gas transmission pipeline and 56 billion cubic feet of working gas storage.


Dominion said it intends to finance the transaction in a manner that supports the company's existing credit ratings targets, using equity, mandatory convertibles and debt at Dominion, and equity at Dominion Midstream Partners.


Commenting on the deal, Thomas F. Farrell II, chairman, president and chief executive officer of Dominion, said in a statement, “This addition is well-aligned with Dominion's existing strategic focus on core regulated energy infrastructure operations. 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 added that Dominion Midstream investors will benefit from the addition of Questar, as the transactions is expected to contribute more than $425 million of EBITDA  (earnings before interest taxes depreciation and amortization) to Dominion's inventory of top-quality, low-risk MLP(master limited partnership)-eligible assets, supporting Dominion Midstream's targeted annual cash distribution growth rate of 22 percent.
“Questar is the ideal mix for Dominion shareholders and Dominion Midstream unit holders alike,” Farrell said.


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.


The combined company would serve about 2.5 million electric utility customers and 2.3 million gas utility customers in seven states. It also would operate more than 15,500 miles of natural gas transmission, gathering and storage pipelines, one of the nation's largest natural gas storage systems, and approximately 24,300 megawatts of generation.


Separate from this transaction, Dominion has committed about $1 billion for three solar generating facilities located in Beaver, Iron and Millard counties, Utah. These solar facilities are backed by long-term power purchase agreements with local electric utilities.


Upon the transaction closing, Questar shareholders will receive $25 in cash for each share of Questar common stock. This represents an approximate 30 percent premium to the volume-weighted average stock price of Questar's last 20 trading days ended Jan. 29, 2016.


Pending approvals, Questar will operate as a first-tier, wholly owned subsidiary of Dominion and maintain its significant presence, local management structure and headquarters in Salt Lake City. Dominion also has also agreed to increase community involvement and charitable investment in the communities currently served by Questar.


The transaction requires approval of Questar's shareholders and clearance from the Federal Trade Commission. Questar and Dominion also will file for review and approval, if required, from the Utah Public Service Commission and the Wyoming Public Service Commission, and provide information regarding the transaction to the Idaho Public Utilities Commission.


RBC Capital Markets LLC and Mizuho Bank Ltd.,have provided committed financing and are acting in the role of financial advisers to Dominion. Goldman, Sachs & Co. served as the exclusive financial adviser to Questar.
McGuireWoods LLP served as legal counsel to Dominion and Kirkland & Ellis LLP served as legal counsel to Questar.


Dominion is one of the nation's largest producers and transporters of energy, with a portfolio of approximately 24,300 megawatts of generation, 12,200 miles of natural gas transmission, gathering and storage pipeline, and 6,500 miles of electric transmission lines. It also operates one of the nation's largest natural gas storage systems with 933 billion cubic feet of storage capacity and serves utility and retail energy customers in 14 states.

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