Southwest Gas rises after Corvex boosts stake, plans talks

Shares of Southwest Gas are up 30c, or 0.5%, to $57.44 in morning trading after Keith Meister’s hedge fund Corvex Management disclosed a 5.8%, or 4,153,717 share, stake in the company after the close. In the filing disclosing the increased stake in Southwest, Corvex stated in part: “The Reporting Persons intend to enter into discussions with the Issuer’s Board of Directors and management of the Issuer to discuss options to unlock the value of the Issuer’s core utility franchises and its investment in Centuri Group, Inc. The Reporting Persons are supportive of the Issuer’s announced plan to separate Centuri in a manner which maximizes value. However, based on Corvex’s analysis, the Reporting Persons believe the Issuer’s regulated portfolio, Southwest Gas Corporation, is trading at or below its currently authorized rate base. The implied valuation represents a deep discount to underlying value, market comps, and recent transactions – where similar assets trade at 1.5 – 2.0x rate base. If the current valuation disconnect persists, the Reporting Persons believe the Issuer will be required to take further action. In the Reporting Persons’ view, Southwest’s ambitious $2B capital plan clearly does not make sense if growth capital results in a market valuation less than cost. The Reporting Persons anticipate engaging with the Issuer on ways to enhance shareholder value, including: improving earned returns on capital, further restructuring, and/or a sale of the Issuer.”