In a letter to Southwest’s board, the active investor said that its purchase of the Questar Pipeline for approximately $2 billion would reduce shareholder value.
Shares of Southwest closed up 7% on Tuesday at $70.42 after the release of Mr Icahn’s letter, which Businesshala reported earlier that day. Shares traded for over $90 two years ago. The Las Vegas company serves more than two million customers in Arizona, Nevada and California.
Mr Icahn, whose son Brett now works with him, said in the letter that buying Questar for around $2 billion would be a big mistake and reduce shareholder value.
“But even if you weren’t overpaying, this isn’t the time for management to start a huge new investment with many of the problems you have (including regulators), especially when you’re trying to manage what you already owned. and has shown an inability to control,” the octogenarian investor wrote. He said in the letter that he tried to reach out to the company and did not hear back.
Southwest did not respond to a request for comment on Tuesday. Dominion declined to comment.
Mr Icahn said the company’s shares have underperformed their regulated gas-utility counterparts, have increased spending and have little business across its board.
Mr Icahn said that with the appropriate changes, the company’s shares could rise as much as 75%. He said he held 4.9% of the company’s shares and derivatives.
Warren Buffett’s Berkshire Hathaway Inc.
It had agreed to buy Questar, a natural gas pipeline company that provides transportation and storage services, for about $1.7 billion, including loans. The parties abandoned the deal in July because of uncertainty over whether it would be approved by regulators. Dominion said at the time it was beginning a sale process for Questar and was aiming to close a deal by the end of the year.
Mr Icahn has agitated other utilities including FirstEnergy Corporation
earlier this year. He now holds seats on the board of the Ohio utility.
Cara Lombardo at [email protected]