By Dhirendra Tripathi
Investing.com – Southwest Gas (NYSE:SWX) stock traded 1.6% lower Tuesday after the company said it will issue new shares to repay debt it had raised to fund its $2 billion acquisition of Questar Pipelines.
The company Monday said it will issue 5.5 million shares at $74 apiece. The offering will raise around $392.5 million on a net basis and close on Thursday.
Assuming the underwriters choose to subscribe to the 825,000 shares they have the option of buying, the dilution will amount to about 9.6% of the current outstanding equity. A share dilution tends to depress a company’s earnings per share.
Southwest’s purchase of Questar was opposed by investor Carl Icahn, whose offer to buy the former at $82.50 per share was rejected by the company. Southwest shares are currently trading around $78.
It termed Icahn’s offer “inadequate, structurally coercive, highly conditional” and said it undervalues the company. The activist investor’s first offer of $75 for each share of the company was rejected by it on November 9 last year.