Adopts Tax-Free Spin Protection Plan as it
Considers Additional Centuri Separation Alternatives
LAS
VEGAS, Nov. 6, 2023 /PRNewswire/ -- Southwest Gas
Holdings, Inc. (NYSE: SWX) ("Southwest Gas" or the "Company") today
announced actions to help preserve the Company's ability to
effectuate a tax-free separation of Centuri Group, Inc. ("Centuri")
as it considers additional separation alternatives to form a new
independent publicly traded utility infrastructure services
company. The Company remains committed to separating Centuri and
continues to assess the value of a potential tax-free spin-off of
Centuri, either following, or in lieu of, a potential initial
public offering by Centuri as well as other transaction
alternatives.
In order to help preserve the value to stockholders of a
potential spin-off of Centuri in a manner that could be tax-free to
Southwest Gas as well as its stockholders, Southwest Gas announced
that its board of directors (the "Board") has adopted a tax-free
spin protection plan (the "Plan") on November 3, 2023 to help reduce the possibility
of a 355 Ownership Change, detailed below, which could impair
Southwest Gas's ability to effectuate a spin-off transaction that
is tax-free to Southwest Gas.
The Plan, which the Company intends to submit to a vote of
Southwest Gas stockholders at the Company's 2024 annual meeting, is
intended to help preserve the Company's ability to reduce any
potential significant tax liability to the Company associated with
a spin-off of Centuri. Southwest Gas is also considering other
taxable transaction alternatives that may use the Company's
available net operating losses to offset the tax impact in certain
cases, including, among other potential structures, a potential
sell-down of Centuri shares held by Southwest Gas following an
initial public offering of Centuri. As of December 31, 2022, the Company had a U.S. federal
net operating loss carryforward of $932.8
million.
The considerations of additional separation alternatives and
implementation of the Plan come as the Internal Revenue Service
(the "IRS") has advised the Company that the IRS has exercised its
discretion not to rule on certain tax questions relating to a
potential spin-off of Centuri based on the fact-intensive nature of
the questions presented.
Overview of the Tax-Free Spin Protection Plan
While Southwest Gas intends that any spin-off transaction,
if effected, would qualify as a tax-free transaction to Southwest
Gas stockholders, the ability to effect a tax-free spin-off to
Southwest Gas (as opposed to its stockholders) could be lost if
certain stock purchases (including by existing or new holders in
the open market) are treated as part of a plan pursuant to which
one or more persons acquire directly or indirectly a 50% or greater
interest in Southwest Gas (a "355 Ownership Change") within
applicable time periods for purposes of Section 355(e) of the
Internal Revenue Code.
The Company believes that there is minimal capacity for changes
in the ownership of its stock before a 355 Ownership Change could
occur. The Plan is intended to restrict the acquisitions of
Southwest Gas stock that could cause a 355 Ownership Change and
could impair Southwest Gas's ability to effectuate a spin-off
transaction that is tax-free to Southwest Gas. The Plan is not
designed to prevent any action that the Board determines to be in
the best interests of Southwest Gas and its stockholders, and will
help to ensure that the Board remains in the best position to
discharge its fiduciary duties, including providing the most value
to Southwest Gas stockholders in connection with the separation of
Centuri.
As part of the Plan, the Board declared a dividend of one
preferred stock purchase right, which are referred to as "rights,"
for each outstanding share of Southwest Gas common stock. The
dividend will be payable to holders of record as of the close of
business on November 17, 2023. Any
shares of Southwest Gas common stock issued after the record date
will be issued together with the rights. The rights will initially
trade with Southwest Gas' common stock and will generally become
exercisable if a person or group, without the approval of the
Board, acquires 4.9% or more of Southwest Gas' outstanding common
stock (or, in the case of a passive investor, 9.9% or more of
Southwest Gas' outstanding common stock, or, in the case of Mr.
Carl Icahn and his affiliates, as
required by the terms of the Amended and Restated Cooperation
Agreement, dated as of October 24,
2022, between the Company and Mr. Icahn and certain of his
affiliates, 24.9% or more of Southwest Gas' outstanding common
stock, subject to the terms of the Plan).
Under the Plan, any person that currently owns 4.9% (or 9.9%, in
the case of a passive investor) or more of Southwest Gas'
outstanding common stock may continue to own its shares of common
stock but may not acquire any additional shares without triggering
the Plan (except as otherwise specified in the Plan, including with
respect to Mr. Carl Icahn and his
affiliates, who are subject to the limit described above). If the
rights become exercisable, all holders of rights (other than the
triggering person) will be entitled to purchase Southwest Gas
common stock at a 50% discount or Southwest Gas may exchange each
right held by such holders for one share of Southwest Gas common
stock. Rights held by the triggering person will become null and
void and will not be exercisable.
The Plan includes procedures by which the Board will consider
requests by stockholders to exempt certain acquisitions of
Southwest Gas common stock from the Plan if the Board determines
that doing so would not adversely impact or impair the tax-free
status of the potential spin-off of Centuri or is otherwise in the
best interests of Southwest Gas.
The Plan will expire on the date following the certification of
the voting results for Southwest Gas' 2024 annual meeting of
stockholders, unless Southwest Gas' stockholders ratify the Plan on
or prior to such meeting, in which case the Plan will continue in
effect until the date that is two years after the date of the
consummation of the spin-off of Centuri (consistent with a
presumption period for testing for a 355 Ownership Change), unless
terminated earlier in accordance with its terms, including if
Southwest Gas determines to no longer pursue a tax-free spin-off of
Centuri.
Additional information about the separation of Centuri and the
Plan will be available on a Form 8-K to be filed by
Southwest Gas with the Securities and Exchange Commission (the
"SEC").
About Southwest Gas Holdings, Inc.
Southwest Gas Holdings, Inc., through its subsidiaries, engages
in the business of purchasing, distributing and transporting
natural gas, and providing comprehensive utility infrastructure
services across North America.
Southwest Gas Corporation is a dynamic energy company committed to
exceeding the expectations of over 2 million customers throughout
Arizona, Nevada and California by providing safe and reliable
service while innovating sustainable energy solutions to fuel the
growth in its communities. Centuri Group, Inc. is a strategic
infrastructure services company that partners with regulated
utilities to build and maintain the energy network that powers
millions of homes and businesses across the United States and Canada.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the U.S. Private Securities Litigation Reform Act of
1995, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
Such statements include, without limitation, statements regarding
the Company's expectations or intentions regarding the future.
These forward-looking statements can often be identified by the use
of words such as "will", "predict", "continue", "forecast",
"expect", "believe", "anticipate", "outlook", "could", "target",
"project", "intend", "plan", "seek", "estimate", "should", "may"
and "assume", as well as variations of such words and similar
expressions referring to the future, and include (without
limitation) statements regarding expectations with respect to the
separation of Centuri and the ability to preserve the viability of
a tax-free spin-off of Centuri. The Company can provide no
assurances that an initial public offering and/or separation of
Centuri will occur on the expected timeline or at all. A number of
important factors affecting the business and financial results of
the Company could cause actual results to differ materially from
those stated in the forward-looking statements. These factors
include, but are not limited to, the timing and impact of executing
(or not executing) on strategic alternatives, including the
separation Centuri, the timing and amount of rate relief, changes
in rate design, customer growth rates, the effects of
regulation/deregulation, tax reform and related regulatory
decisions, the impacts of construction activity at Centuri, the
potential for, and the impact of, a credit rating downgrade, future
earnings trends, inflation, interest rates, sufficiency of labor
markets and similar resources, seasonal patterns, current and
future litigation, and the impacts of stock market volatility.
Factors that could cause actual results to differ also include
(without limitation) those discussed under the heading "Risk
Factors" and "Quantitative and Qualitative Disclosure about Market
Risk" in Southwest Gas Holdings, Inc.'s most recent Annual Report
on Form 10-K and in the Company's and Southwest Gas Corporation's
current and periodic reports, including our Quarterly Reports on
Form 10-Q, filed from time to time with the U.S. Securities and
Exchange Commission. The statements in this press release are made
as of the date of this press release, even if subsequently made
available by the Company on its website or otherwise. The Company
does not assume any obligation to update the forward-looking
statements, whether written or oral, that may be made from time to
time, whether as a result of new information, future developments,
or otherwise.
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SOURCE Southwest Gas Holdings, Inc.
