Guggenheim: Dominion's Scana Acquisition A 'Big Win'

South Carolina regulators approved a merger that has Virginia-based Dominion Energy Inc D buying South Carolina's Scana Corporation SCG.

What Happened

State regulators approved Dominion Energy's proposed acquisition of Scana, as the deal is expected to benefit state residents via competitive retail and industrial rates, according to South Carolina's The State Media Company. 

Dominion offered consumers a rate cut of up to $22 a month for customers of Scana's subsidiary, SCE&G.

Yet the same 730,000 customers will pay an extra $2.3 billion — average of $1,600 per household — over 20 years for SCE&G's failed nuclear construction project.

Why It's Important

Regulatory approval of the merger is a "big win" for Dominion Energy, as it comes with lighter conditions compared to other proposals, Guggenheim Partners' Shahriar Pourreza said in a note. Prior estimates for the deal to be accretive to Dominion Energy by 2.5-3.5 percent are unchanged and support the company's 6-8 percent growth story "well into the next decade," the analyst said.

Guggenheim downgraded Scana from Buy to Neutral and raised the price target from $49 to $51. 

Dominion Energy's stock is trading near $78 per share. Based on the acquisition exchange ratio of 0.669, Scana's stock is valued at $51.45, which represents a premium to Monday morning's trading price of $50.50.

What's Next

Final written orders from South Carolina's lawmakers are expected to be filed by December 21.

Dominion shares were trading down nearly 2 percent at $75.35 at the time of publication Monday, while Scana shares were down 2.29 percent at $49.86. 

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Photo by Edbrown05/Wikimedia.