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Southwest Gas' (SWX) Arm to Acquire Riggs Distler for $855M

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·3 min read
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Southwest Gas Holdings, Inc.’s SWX subsidiary Centuri Group, Inc. inked a deal to acquire full ownership of Riggs Distler & Company, Inc. and its affiliates for $855 million in cash. The deal is likely to be complete in the third quarter, subject to certain conditions and will be entirely funded by Centuri debt.

Upon closure, Riggs Distler will operate as a separate unit of Centuri and in the first year from the date of acquisition, the transaction is expected to be accretive to the company’s earnings.

Benefits of the Deal

The deal will strengthen Centuri's electric services platform by including 5G telecom and renewables services. Riggs Distler will assist customers in designing, building and integrating essential decarbonization solutions along with deploying smart meters, electric vehicle charging stations, battery storage and microgrids. Also, the deal will likely solidify the finances of the combined entity as well as open up opportunities for growth and diversification.

Centuri’s buyout will expand the company’s operating footprint into new markets in the Northeast and Mid-Atlantic region. Also, the deal will allow it to serve additional customers with enhanced capabilities and partner with those having long-term infrastructure-spending plans.

Capital Investment Plan

During the ongoing year, the utility plans to spend $692 million. For the 2021-2023 period, it expects to make investments worth $2.1 billion. Of the planned capital budget, 45% will be used in increasing the safety and reliability of its existing operations while 36% will be allotted to new businesses and 19% to general plant.

Over the five years ending 2025, capital expenditures are likely to be $3.5 billion, which will further strengthen the company’s operations and help it serve the expanding customer base. Also, the CAPEX plans are likely to improve the rate base by 7.5%.

Zacks Rank & Price Performance

Shares of this presently Zacks Rank #3 (Hold) player have gained 7.1% in the past six months, underperforming the industry’s rise of 18.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Six Months Price Performance

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Stocks to Consider

A few better-ranked utilities are CenterPoint Energy, Inc. CNP, NewJersey Resources Corporation NJR and UGI Corporation UGI, all carrying a Zacks Rank #2 (Buy) at present.

CenterPoint Energy delivered a trailing four-quarter earnings surprise of 15.22%, on average. The company has a long-term (three to five years) earnings growth rate of 4.27%.

NewJersey Resources has a long-term earnings growth rate of 7.1%. The Zacks Consensus Estimate for fiscal 2021 earnings has been revised 9.5% upward in the past 60 days.

UGI Corporation has a trailing four-quarter earnings surprise of 58.23%, on average, and a long-term earnings growth rate of 8%.

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