Under the terms of the transaction, Dominion Resources will pay Questar shareholders $25 in cash for each share of Questar common stock held by them and also assume Questar's outstanding debt, which amounts to approximately $1.6 billion. Dominion Resources' $25-per-share offer represents a near 23% premium to Questar's Jan. 29 closing price. Dominion intends to finance the transaction using equity, mandatory convertibles and debt at Dominion, and equity at Dominion Midstream Partners LP (NYSE: DM).
Questar, which is based in Salt Lake City, Utah, is a natural gas distribution, pipeline, storage, and cost-of-service gas supply company. The combined company would serve approximately 2.5 million electric utility customers and 2.3 million gas utility customers in seven states, and would also operate more than 15,500 miles of natural gas transmission, gathering, and storage pipelines and approximately 24,300 megawatts of generation.
The purchase of Questar, which has 1 million residential and commercial customers mostly in Utah, will increase Dominion Resources’ service territory, along with its revenue from delivering the fuel. Questar also owns approximately 3,400 miles (5,470 kilometers) of gas transmission pipelines and 56 billion cubic feet of gas storage that will benefit Dominion Midstream LP, a master-limited-partnership controlled by Dominion.
Of note, said Thomas F. Farrell II, chairman, president and CEO of Dominion, in a statement, "Dominion Midstream investors will benefit from the addition of Questar, as it is expected to contribute more than $425 million of EBITDA to Dominion's inventory of top-quality, low-risk MLP-eligible assets, supporting Dominion Midstream's targeted annual cash distribution growth rate of 22%."
RBC Capital Markets LLC and Mizuho Bank Ltd. advised Dominion Resources and have provided financing for the deal. Goldman Sachs Group Inc. advised Questar and Kirkland & Ellis LLP represented Questar Corp. in the deal, which is expected to close by year-end 2016.