Centuri, Southwest Gas Unit, Surges in Market Debut Amid Strong Demand

(Reuters) — Shares of Centuri Holdings, the freshly spun-off unit of Southwest Gas Holdings, jumped in their market debut on Thursday, in another sign of a revival in demand for new stocks.

Centuri, which builds and maintains energy networks across the United States and Canada, sold 12.4 million shares at $21 apiece, at the top of the marketed range, on Wednesday to raise $260.4 million in its initial public offering.

Centuri shares initially rose to $23.75, valuing the company at about $2.06 billion. As of 3.15 p.m. ET, they were up 11% at $23.31.

The third-largest utility services provider in North America, Centuri sees significant demand for its business as power infrastructure is modernized and replaced as part of the clean energy transition, Chief Executive Bill Fehrman said in an interview.

"As we push to upgrade the grid in this country, and the pipeline system, we're uniquely qualified to do that," said Fehrman, who joined Centuri in January after heading Berkshire Hathaway's energy business for five years.

As an independent company, Centuri can pursue additional growth opportunities, including outside of the regulated utility industry, Fehrman added.

Centuri was spun off after Southwest Gas faced pressure in recent years from activist shareholders including Carl Icahn and Corvex Management to revamp its business.

Southwest Gas first mooted Centuri's separation in 2022 and worked to establish the best method for doing that, as well as the right timing. It will initially hold more than 80% of Centuri, but is expected to reduce its stake over time.

After a two-year dry spell, U.S. IPOs are slowly returning in 2024 on firming bets of a soft landing for the economy and a broad equity markets rally.

IPO proceeds will be used to reduce Centuri's debt. As it went public, Centuri sold about 2.6 million shares to Icahn to raise another $54.4 million.

UBS Investment Bank, BofA Securities and J.P. Morgan were the lead underwriters on the offering.

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