SCANA would have to pay $240 million to walk away from Dominion deal

SCANA Corp. would have to pay Dominion Energy $240 million to walk away from its Wednesday agreement to be acquired by the Virginia-based utility.

Meanwhile, Dominion would owe SCANA $280 million if it broke its deal to buy the Cayce-based company, which became a takeover target when its stock price plummeted after the failure of a $9 billion nuclear construction project.

Such “breakup” fees are standard practice in large corporate acquisitions and mergers, where they help fend off potential offers from other would-be acquirers.

Florida-based NextEra Energy and North Carolina-based Duke Energy are said to be interested in making a bid for SCANA, even after the company’s deal with Dominion. Both utilities have declined to comment.

Dominion chief executive Tom Farrell and SCANA chief executive Jimmy Addison described the breakup fees as “traditional” before the dollar figures were disclosed.

Addison has said Dominion was the only company to make an offer to buy SCANA so far.

“This is a fantastic offer given the very difficult situation we’re in,” Addison said in an interview with The State Thursday. “It’s very customer driven, but it also has its commitment to employees to keep them whole financially through the end of ’19 for any that are displaced. And, as Tom said earlier, we have to get two-thirds of shareholders’ votes, so there is something there for the shareholder as well.

“I can never say never, that something else might not come in there. But I can tell you this is the only offer that we received, and everybody is very aware of this situation. I believe that if someone had a sincere interest – and by sincere, I mean solving all three parts of that equation (involving SCE&G ratepayers, SCANA employees and stockholders) – it would have already been on the table.”

Addison added any would-be acquirer of his Cayce-based utility that beats Dominion’s offer likely would end up paying the breakup fee – not SCANA.

“They would have to consider that because that would really be a cost they would end up having to pay as part of the proposal,” he said.

Wall Street analysts say the breakup fee is evidence Dominion wants to ward off other SCANA bidders.

“There’s some fear that Dominion is going to spend a lot of time and effort getting this across, and they don’t want to be there at the last minute having that asset stripped away from them” by a higher offer, said Roger Foltynowicz, a portfolio manager with New York-based Water Island Capital.

Under terms of the deal, the buyout could be called off if S.C. lawmakers or state regulators block SCANA’s electric subsidiary, SCE&G, from continuing to charge its customers for the failed V.C. Summer nuclear project. Currently, that charge is about $27 a month for the utility’s residential customers.

In that case, however, neither utility would owe a breakup fee.

The deal would leave SCANA as a subsidiary of Dominion, which has offered refunds worth about $1,000 to SCE&G customers who collectively have paid $1.8 billion in higher electricity rates for two abandoned V.C. Summer nuclear reactors.

As part of the stock-for-stock merger, SCANA shareholders will receive 0.669 shares of Dominion Energy stock for each share of SCANA stock that they own.

Based on a 30-day average closing price for Dominion shares, Dominion’s offer valued the stock at about $55.35 a share as of Tuesday. SCANA shareholders would own 13 percent of the combined company.

This story was originally published January 5, 2018 at 10:24 AM with the headline "SCANA would have to pay $240 million to walk away from Dominion deal."