For Southwest Gas, paying $1.545 billion in cash and assuming $430 million of debt, the acquisition marks a northward expansion of its operations and boosts its regulated business.
"The acquisition ... will provide significant financial and strategic benefits to our company, shareholders, employees and partners," said Southwest Gas Chief Executive John Hester, adding the deal would be accretive to earnings per share in 2022.
The announcement confirmed a Reuters report from Sunday, saying Southwest Gas was in advanced talks to acquire Questar, citing people familiar with the matter.
Referencing the article in a letter to Southwest Gas' board, released earlier on Tuesday and detailing he holds a large stake in the company, Icahn said the acquisition would seriously diminish shareholder value and urged its abandonment.
Southwest Gas should instead focus on improving share price performance, which lagged peers, said the investor who has a history of agitating against U.S. utilities.
Given Southwest Gas is paying cash, its shareholders will not vote on approving the acquisition, as they would if the company was issuing a large amount of stock to finance it.
For Dominion, the divestment comes after a previous attempt to sell Questar to the energy arm of Warren Buffett's Berkshire Hathaway was called off in July over uncertainty whether antitrust regulators would approve it.
In its own statement, Dominion said proceeds would pay down debt and support spending plans. The deal will close before year-end, subject to regulatory approval.
Questar Pipelines provides interstate natural gas transportation and underground storage services in Utah, Wyoming and Colorado. (https://bit.ly/3osJeML)
Southwest Gas serves more than two million customers in Arizona, Nevada and California.
Investment bank Lazard and law firm Morrison & Foerster LLP worked on the deal for Southwest Gas. Dominion received financial and legal advice from, respectively, Barclays and McGuireWoods LLP.
(Reporting by David French in New York and Rithika Krishna in Bengaluru; Editing by Shailesh Kuber and Stephen Coates)
By David French