Dominion Energy has proposed to acquire a stake of 85% or so it previously didn’t own in Dominion Energy Midstream Partners (DM) in an all-stock deal worth around $2.2bn.
Headquartered in Virginia, Dominion Energy Midstream Partners is a Delaware master limited partnership (MLP) created by Dominion Energy to build a portfolio of natural gas terminaling, processing, storage, transportation and associated assets.
Dominion Energy chairman, president and CEO Thomas F. Farrell said that continued weakness in MLP capital markets along with the prolonged disruption in Dominion Energy Midstream’s share price were main factors leading to the takeover proposal.
Farrell blamed the 15 March policy revision by the Federal Energy Regulatory Commission (FERC) for the decline in the MLP’s share price.
He said: “Fortunately, Dominion Energy has already successfully completed several steps that will allow us to achieve our earnings and credit objectives despite these challenges.
“The proposed transaction would provide a premium to recent market trading levels for DM common unit holders and also benefit Dominion Energy shareholders by removing uncertainty as to the future of DM and the potentially negative impact of changes in FERC tax policy to the future cash flows of current DM assets.”
Under the terms of the deal, Dominion Energy proposes to issue 0.2468 of its shares for each share of Dominion Energy Midstream Partners, it previously didn’t own, giving a per-unit valuation of $17.75.
The assets of Dominion Energy Midstream Partners include the Dominion Energy Cove Point LNG Facility, Dominion Energy Carolina Gas Transmission, Iroquois Gas Transmission System and the Dominion Energy Questar Pipeline.
The parties are expected to sign an agreement regarding the transaction in the fourth quarter of this year, with the closing targeted to be in the first quarter of 2019.
Recently, Dominion Energy had received approval from the FERC for its $14.6bn all-stock merger with energy utility Scana. As per the deal announced in January 2018, Scana shareholders will be issued 0.6690 shares of Dominion Energy common stock for each share they hold in Scana.