Southwest Gas to sell MountainWest, spin off Centuri on heels of Icahn settlement

Dec 15 (Reuters) - Southwest Gas Holdings Inc (SWX.N) will sell its MountainWest Pipelines business to Williams Companies Inc (WMB.N) for $1.07 billion, months after settling a bitter battle with activist investor Carl Icahn.

Las Vegas, Nevada-based Southwest also confirmed on Thursday it will spin off Centuri, its utility infrastructure services business, a decision it first announced in March.

Southwest had bought MountainWest, formerly known as Questar Pipelines, from Dominion Energy (D.N) for nearly $2 billion including debt last year. The purchase had sparked a months-long proxy war between Icahn and Southwest that eventually settled with the ousting of former chief executive John Hester and three board seats being awarded to Icahn-appointed directors in May.

Icahn had said the Questar deal hurts shareholders and referred to Hester and his management team as "a great liability".

The company is weighing several options to recapitalize Centuri for the spin-off, it said during a call discussing the deals. Options include equity or debt issuance, a Centuri stake sale, or a sponsor for the spin-off. Southwest expects the separation to take about a year.

Shares of Southwest were down about 6% in mid-day trading.

"A significant chunk of equity is one of the options on the table," said Siebert Williams Shank analyst Chris Ellinghaus in a call with Reuters.

"And that puts investors on the defensive when they know there's a possible equity sale to come."

Southwest will use proceeds from the MountainWest sale, expected to close next year, to pay off its term loan of about $1.1 billion, and will take an estimated loss of $350 million to $425 million on the sale, net of tax.

Williams will assume $430 million of MountainWest's debt as part of the deal.

Reporting by Ruhi Soni, Additional Reporting by Ankit Kumar in Bengaluru; Editing by Vinay Dwivedi and Krishna Chandra Eluri

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