Wall Street Is Losing Faith in This $8 Billion Utility TakeoverBy
Shares trading at a 30% discount to Dominion’s offer price
Stock has slumped on regulatory uncertainty over deal closing
The gap between Scana’s share price and the price that Dominion’s offered to pay for the utility is the widest since the companies announced the merger in January. On Monday, the stock traded even lower than it did before the takeover. That shows Wall Street has lost all confidence in the deal getting done as is, according to analysts.
“People think that Dominion may walk away,” said Kit Konolige, a utilities analyst for Bloomberg Intelligence. It’s that, he said, or they think Dominion will end up lowering its offer.
The widening merger arbitrage underscores the challenges the takeover has faced from the get-go. Scana was already the subject of state and federal investigations into a failed nuclear project when Dominion agreed to a merger. And since the deal was announced, South Carolina’s governor has thrown cold water on it and the state’s House of Representatives passed legislation challenging Dominion’s terms for closing it.
On Monday, Moody’s Investors Service stripped Scana of its investment-grade rating, citing the legislation that could suspend Scana’s ability to recoup the costs of the canceled V.C. Summer nuclear project from customers. “Ratings could be affected further” should more “political and regulatory contentiousness” develop, Scana said in an emailed statement.
Dominion spokesman Ryan Frazier didn’t immediately have comment.