Unlocking Value: Southwest Gas’s Strategic Divestiture Positions Centuri as a Utility Infrastructure Play

Southwest Gas Holdings’ (SWX) decision to offload 9 million shares of Centuri Holdings (CTRI) in a secondary offering, coupled with a $50 million concurrent private placement to Icahn Partners, marks a pivotal moment for both companies. This move is not merely a capital-raising exercise but a strategic reallocation of resources that signals confidence in Centuri’s standalone potential while sharpening Southwest Gas’s focus on its core natural gas operations. For investors, this transaction presents a rare opportunity to capitalize on a utilities infrastructure underdog with improving fundamentals and institutional validation.

The Divestiture: A Playbook for Value Creation

By monetizing its 18.7% stake in Centuri, Southwest Gas is executing a classic value-unlocking strategy. The offering—plus the 1.35 million share underwriter option—allows SWX to reduce its exposure to a non-core asset while bolstering its balance sheet. With proceeds likely reinvested into its core regulated gas utility business, this move positions Southwest Gas to strengthen its credit profile and fund growth initiatives in its traditional service areas.

The inclusion of a $50 million private placement to Icahn Partners, at the same price as the public offering, adds critical institutional credibility. Carl Icahn’s reputation as a contrarian value investor underscores his belief in Centuri’s undervalued equity and its capacity to deliver returns. This dual transaction structure—public and private—creates a liquidity event for Southwest Gas while aligning with Icahn’s long-term holdings, reducing overhang concerns for CTRI shareholders.

Centuri’s Operational Turnaround: A Catalyst for Revaluation

Centuri’s Q1 2025 results provide the financial backbone for this strategic pivot. Despite a slight net loss of $0.12 per share (vs. estimates of $0.10), the company delivered a 20% year-over-year jump in adjusted EBITDA to $24.2 million, driven by margin improvements from 2.5% to 3.7%. These metrics, combined with a robust backlog of utility infrastructure projects, signal operational leverage at work.

Analysts’ price targets ranging up to $26.00—versus CTRI’s current $18.50 share price—highlight the disconnect between its improving fundamentals and market valuation. The private placement’s $50 million infusion at the offering price also acts as a price floor, reducing downside risk for new investors.

Why Centuri Deserves a Re-Rating

1. Utility Infrastructure Tailwinds: Centuri’s focus on gas utility construction and maintenance aligns with North America’s aging infrastructure needs. The $1.2 trillion infrastructure bill and rising demand for grid modernization create a multiyear growth runway.
2. Debt Reduction and Efficiency Gains: The company’s Q1 gross profit margin expansion and EBITDA growth reflect cost controls that should continue as scale benefits materialize.
3. Strategic Backing: Southwest Gas’s willingness to divest at this juncture—and Icahn’s contrarian bet—suggests both parties see CTRI as an undervalued asset with asymmetric upside.

Risks and Considerations

While the offering’s success hinges on market appetite for energy infrastructure stocks, Centuri’s valuation remains vulnerable to macroeconomic volatility. The press release’s forward-looking caveats about capital markets and economic conditions are valid, but the company’s improving margins and backlog visibility mitigate execution risk.

Final Verdict: A Buy Signal for Patient Investors

Southwest Gas’s strategic divestiture and Icahn’s capital commitment are not neutral events—they are bullish affirmations of Centuri’s standalone merits. With a P/E ratio of just 12x consensus 2025 estimates and a 20%+ EBITDA growth trajectory, CTRI offers asymmetric upside for investors seeking exposure to regulated utility growth.

The time to act is now. As Southwest Gas exits its non-core stake and institutions like Icahn step in, Centuri stands at the intersection of undervaluation and infrastructure demand. This is a buy for portfolios seeking a leveraged play on North America’s energy transition—one that’s already showing the operational proof to deliver.

Investment Recommendation: Buy Centuri (CTRI) with a 12-month price target of $22–24.