Southwest Gas Holdings Inc. (SWX) has announced it has reached an agreement to acquire Riggs Distler&Co. Inc. (Riggs Distler), a construction services business mostly serving regulated utilities under multiyear contracts. SWX intends to finance the $1 billion acquisition price, excluding the expected refinancing of existing debt, working capital and fees, with incremental debt of about $1 billion. We expect the financing to substantially increase SWX's debt leverage, such that funds from operations (FFO) to debt is consistently below our downgrade threshold over the next two years. At the same time, we expect the acquisition to disproportionately expand SWX's construction services segment, such that EBITDA contributions from this higher risk segment represents more than 30% of SWX's consolidated EBITDA.
