Questar agrees to $4.4B buyout by Virginia firm

Salt Lake City-based Questar Corp. has been purchased by Dominion Resources Inc. of Richmond, Virginia. The buyout is an all-cash transaction in which Dominion has agreed to pay Questar shareholders $25 per share — a total of about $4.4 billion — and assume Questar’s outstanding debt.

The $25 per share price represents an approximate 30 percent premium to the volume-weighted average stock price of Questar’s last 20 trading days ended Jan. 29. Questar had $1 billion in long-term debt and $305 million in short-term debt as of Sept. 30, according to Thomson Reuters data.

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 approximately 97 percent of those customer accounts in Utah. Questar employs 1,700 people and has about $4.2 billion in assets, including approximately 27,500 miles of gas distribution pipeline, 3,400 miles of gas transmission pipeline and 56 billion cubic feet of working gas storage. Its regional cost-of-service gas supply business has served customers over the past 35 years under a public service commission-approved framework.

The transaction would be accretive to Dominion upon closing — expected by year-end 2016 — with limited impact on the company’s balance sheet, according to a release from the company. Dominion 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 LP. The Dominion-Questar combination also is expected to support Dominion’s 2017 earnings growth rate and allow the company to reach the top of or exceed its 2018 growth targets, Dominion officials said.

“Dominion is very pleased to join with Questar,” said Thomas F. Farrell II, chairman, president and CEO of Dominion. “Like Dominion, Questar has a history of safe and reliable operations, integrity and a firm commitment to its employees and the communities it serves. Questar’s customers can count on a continuation of the high-quality service they have enjoyed for years.

“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 said. “Questar is the ideal mix for Dominion shareholders and Dominion Midstream unitholders alike.”

Ron Jibson, chairman, president and CEO of Questar, said, “Questar is excited to be joining the Dominion family of companies and serve as the hub of its western operations. Our similar cultures and commitment to customers, shareholders, communities and employees make this a win-win transaction. Dominion’s reputation among its peers and analysts is unmatched. We’re proud to become part of America’s most-admired gas and electric utility.”

Questar provides geographic diversity to Dominion’s natural gas operations. 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 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 will serve about 2.5 million electric utility customers and 2.3 million gas utility customers in seven states. It also will operate more than 15,500 miles of natural gas transmission, gathering and storage pipelines and approximately 24,300 megawatts of generation. 

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

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 has also agreed to increase community involvement and charitable investment in the communities currently served by Questar, the release said.

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.

Questar operates through three principal subsidiaries: Questar Gas provides retail natural gas distribution in Utah, Wyoming and Idaho; Wexpro develops and produces natural gas on behalf of Questar Gas; and Questar Pipeline operates interstate natural gas pipelines and storage facilities in the western U.S.