Dominion-Scana Deal OK'd by Regulators

We are reaffirming our $56 per share fair value estimate for

Our fair value estimates now reflect certainty that the deal as proposed will close at Dominion's 0.669 share exchange ratio. We previously assumed a 75% probability that the deal would receive regulatory approval. We expect the South Carolina Public Service Commission will issue a written order next week and the acquisition will close shortly thereafter. Although there could be appeals, we don't expect them to affect the deal closing.

For Scana shareholders, we always considered Dominion's offer the least-worst outcome following Scana's decision in mid-2017 to abandon construction of its new nuclear plant. If regulators rejected the deal, we believed Scana shareholders would be faced with substantial regulatory, legal, and financial uncertainty for many years. Financial distress, including bankruptcy, was a real possibility.

Scana shareholders now will benefit from annualized dividend payments that will go from $0.49 per share to a merger-equivalent $2.46 per share in the first quarter; ownership stakes in the only U.S. utility with a wide moat rating; and similar valuation upside. Scana's stock closed near $51 per share following the regulatory approval, up from as low as $34 per share in mid-September.

For Dominion, integrating Scana gives us greater confidence that the company can meet management's 6%-8% earnings growth target through 2020. Our EPS estimates for Dominion assume modest earnings accretion from the merger and almost 7% average annual EPS growth through 2022.

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