After Icahn Fight, Southwest Sells Pipe Unit, Plans Spinoff

Williams Cos. will acquire MountainWest Pipelines Holding Co., Southwest said Thursday in a statement. The Las Vegas-based utility also said it plans to spin off its construction unit, Centuri Group, within about a year through a transaction that will be tax-free for Southwest and its investors.

The moves will sharpen Southwest’s focus on its regulated natural gas business and come seven months after the company reached a settlement with Icahn, one of the company’s biggest shareholders, to replace its chief executive officer. The fight, which began when Southwest bought a different pipeline company over Icahn’s objections, also led to Southwest agreeing to spin off Centuri and undertake a broad review of its business operations.

“We are creating two growth-oriented leaders,” Southwest Chief Executive Officer Karen Haller said on an investor call Thursday morning. “This is the optimal path forward to unlock value for our stockholders.” After the two transactions, Southwest’s earnings will come entirely from its regulated gas business, she added.

Southwest shares fell as much as 8.8% Thursday morning in New York, the biggest drop since Aug. 3. Williams stock declined as much as 1.8%.

Southwest will use the proceeds of the MountainWest sale to pay off the $1.1 billion loan from its purchase of the unit. When the Centuri spinoff is complete, Southwest investors will keep their shares in the company and also get pro-rata shares of the new Centuri stock, according to the release.

Buying MountainWest will allow Williams, a pipeline giant that moves about one third of natural gas supplies in the US, to boost delivery capacity in Western markets including Salt Lake City, the company said in a statement. Williams has spent nearly $1.4 billion in acquisitions this year, according to data compiled by Bloomberg.

MountainWest comprises roughly 2,000 miles of interstate gas pipelines across Utah, Wyoming and Colorado, with a total 8 billion cubic feet a day of transmission capacity, as well as 56 billion cubic of storage capacity.

The fight between Icahn and Southwest was ugly. The investor said in an April letter to shareholders that company executives’ actions were “corrupt.” The company fired back that his accusations were “blatantly untrue.”