Dominion Resources, the owner of the largest utility in Virginia announced it was acquiring Questar Corp at the cost of $4.4 billion to expand holdings in natural gas assets that are better performing, extending a new trend of power companies purchasing shippers of fuel.
Questar holders will receive $25 per share in this deal, which is expected to close by the end of this year, said Dominion, which is based in Richmond, Virginia.
Dominion is to assume close to $1.6 billion in debt, said a company spokesperson. The cash price is a premium of 23% over the price of stock at Questar as of the close of business on January 29.
The purchase of Questar, based in Salt Lake City, Utah, expands the service territory of Dominion and boosts revenue from the delivering of fuel. Questar has 1 million commercial and residential customers of which the vast majority is in Utah.
Dominion will join owners of utilities Southern Co and Duke Energy Corp in buying gas companies due to the growth in power demand slowing down.
An analyst on Wall Street said that growth on the top-line in electricity is for all intents and purposes nil. Dominion, said the analyst is looking for gas side of a business that is similar to what they currently are doing and would have prospects of growth that are better.
Southern, which is based in Atlanta, agreed last August to purchase AGL Resources a gas distributor for $8 billion in cash. The purchase allows it to profit from expansions in pipeline as cheap gas and tighter rules of air pollution boost the use of fuel in power generation.
Duke agreed in October of last year to purchase Piedmont Natural Gas for $4.9 billion in a cash deal.
Questar is also the owner of close to 3,400 miles of pipeline for gas transmission and gas storage of 56 billion cubic feet that will benefit the master partnership Dominion Midstream LP that is controlled by Dominion, said the company in an official statement.