Carl Icahn holds Southwest Gas stake, objects to Questar deal -letter - Reuters

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Billionaire activist-investor Carl Icahn gives an interview on FOX Business Network's Neil Cavuto show in New York, February 11, 2014. REUTERS/Brendan McDermid

Oct 5 (Reuters) - Carl Icahn holds a significant stake in Southwest Gas Holdings Inc (SWX.N) and is pushing the gas distribution company to abandon a potential acquisition and instead focus on improving its share price, a letter from the activist investor detailed on Tuesday.

On Sunday, Reuters reported that Southwest Gas is in advanced talks to acquire Questar Pipeline Co, a gas transportation and storage business of Dominion Energy Inc (D.N), for close to $2 billion, including debt. read more

That deal comes after the energy arm of Warren Buffett's Berkshire Hathaway Inc (BRKa.N) abandoned in July an acquisition of Questar for $1.7 billion, including debt, because of fears antitrust regulators would not sanction it. This was part of a wider deal to purchase Dominion's gas infrastructure business.

Icahn, who has a history of agitating for change at U.S. utilities, said in letter dated Oct. 4 to Southwest Gas' board that the prospective purchase would "result in serious diminution of shareholder value" and would compound other management errors in recent years.

The letter said Southwest Gas was trading below its peers, with the company's financial performance held back by high expenses and a poor relationship with regulators. Icahn also questioned whether the board could hold management accountable, given many have been in place for over a decade.

Southwest Gas did not respond to a comment request.

Shares in Southwest Gas, which serves more than 2 million customers in Arizona, California and Nevada, initially spiked almost 8% on news of the letter, first reported by The Wall Street Journal, before giving up some gains. They were 6.7% higher at $70.51 in early afternoon trade.

Questar's natural gas pipeline and storage network spans Colorado, Utah and Wyoming. Its 1,867 miles (3,005 km) of pipeline connects to other pipeline systems in the West and Midwest United States, while the company also owns the Clay Basin storage facility, the largest underground storage reservoir in the Rocky Mountains, according to its website.

In March, Ohio-focused utility FirstEnergy Corp (FE.N)said it would add two members backed by Icahn to its board.

Reporting by Svea Herbst-Bayliss in New York and Sahil Shaw in Bengaluru; Writing by David French; Editing by Maju Samuel, Nick Zieminski and Marguerita Choy

Our Standards: The Thomson Reuters Trust Principles.

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