8-K: Southwest Gas, Icahn Group Amend Cooperation Pact

Southwest Gas Holdings, Inc. and the Icahn Group have updated their cooperation agreement, outlining board nominations, governance changes, and standstill provisions.

Summary

• An Amended and Restated Cooperation Agreement was signed on October 14, 2025, superseding the prior agreement dated October 15, 2024.
• The Company agreed to nominate Andrew W. Evans, Henry P. Linginfelter, Ruby Sharma, and Andrew J. Teno (Icahn Designees) for election at the 2026 annual meeting of stockholders.
• Standstill restrictions on the Icahn Group will remain until the later of the conclusion of the 2026 Annual Meeting or the earlier of Andrew J. Teno's board service ending or 30 days prior to the 2027 Annual Meeting advance notice deadline.
• The agreement terminates automatically if the Board re-appoints any former director (who served prior to the 2022 annual meeting but not immediately after) without the approval of a majority of the Icahn Designees.
• The record date for the 2026 Annual Meeting will be established within 30 days of March 3, 2026.
• The Board size will not exceed eleven (11) directors as long as the Icahn Group retains the right to designate Board members.
• The Strategic Transactions Committee (STC) will include three (3) Icahn Designees if the Icahn Group has the right to designate three or four Board members, or two (2) if they have the right to designate two.
• Decisions by the STC require a majority vote of the full committee (STC Requisite Approval).
• The STC's mandate now includes overseeing governance arrangements and board composition for a potential tax-free spinoff of Centuri (Centuri Spinoff).
• Restrictions are placed on Centuri Board appointments, generally precluding current/former SWX directors, Icahn Restricted Persons, or SWX employees (other than Centuri CEO) without unanimous Board approval.
• Conditions for any Spinoff include Delaware incorporation, annual election for SpinCo board members, and specific timing for the first annual meeting (9-12 months post-spinoff, with extensions).
• Divestitures require STC Requisite Approval; in case of a deadlock, a majority of the Board decides without a stockholder vote unless legally required.
• Acquisitions exceeding $500,000,000 individually or $1,000,000,000 in aggregate (trailing 12 months) require STC Requisite Approval; in case of a deadlock, a majority of the Board and stockholder approval are required.
• Primary offerings of Common Shares or convertible securities with net proceeds over $50,000,000 at a price less than the 5-day volume weighted average price require STC Requisite Approval; in case of a deadlock, the Company must offer the Icahn Group its pro rata portion.
• If a Search Committee for a new CEO is established, it will have six (6) members, with three (3) Icahn Designees if the Icahn Group has the right to designate three or four Board members, or two (2) if they have the right to designate two.
• The Company will reimburse the Icahn Group up to $3,722,200 for reasonable documented out-of-pocket third-party expenses related to the 2022 proxy solicitation, tender offer, and litigation.
• The Icahn Group collectively beneficially owns 6,032,604 Common Shares as of October 14, 2025.
• The Company and Icahn Group will negotiate a Registration Rights Agreement, including two demand registrations for underwritten public offerings (each for at least 5 million Common Shares, not before December 1, 2022), piggyback registration rights, and shelf registration rights.

Sentiment

Score: 7

Explanation: The agreement formalizes a cooperative relationship with a significant activist investor, reducing immediate uncertainty and providing a clear governance framework. While it grants substantial influence to the Icahn Group, it also outlines a path for strategic initiatives like the Centuri Spinoff and sets clear rules for capital allocation, which can be viewed positively for long-term stability and value creation. The expense reimbursement resolves a past dispute.

Positives

• The agreement formalizes a cooperative relationship with a significant activist investor, potentially reducing future activist friction and providing governance stability.
• A clear framework for board representation and committee involvement, including four Icahn Designees, is established, which may lead to more shareholder-aligned strategic decisions.
• The structured approach to potential strategic transactions, such as the Centuri Spinoff, and guidelines for acquisitions and divestitures, provides clarity for future corporate actions.
• The reimbursement of up to $3,722,200 for the Icahn Group's past expenses resolves a prior financial dispute, fostering a more constructive relationship.
• The commitment to negotiate a Registration Rights Agreement provides a clear path for the Icahn Group to manage its investment and potential liquidity.

Negatives

• The Icahn Group's significant influence on strategic decisions, including acquisitions, divestitures, and capital raises, through STC Requisite Approval and Board deadlock provisions, could limit management's autonomy.
• The potential for internal disagreements or deadlocks within the Strategic Transactions Committee or the full Board on key strategic matters could delay critical initiatives.
• The standstill agreement has specific termination conditions that, if triggered, could lead to renewed activist pressure or a proxy contest.
• The reimbursement of $3,722,200 to the Icahn Group represents a direct cost to the Company and its shareholders.

Risks

• Risk of deadlocks within the Strategic Transactions Committee on significant transactions (e.g., divestitures, large acquisitions, capital raises), potentially requiring Board or even stockholder approval, which could delay or complicate strategic initiatives.
• Potential for renewed activist pressure if the standstill agreement terminates under specific conditions, such as the Board re-appointing a former director without majority Icahn Designee approval.
• The Icahn Group's beneficial ownership falling below specified thresholds could lead to the resignation of Icahn Designees, altering board dynamics and potentially destabilizing governance.
• The requirement for stockholder approval for certain large acquisitions (in case of STC deadlock) introduces execution risk and potential delays in strategic growth opportunities.

Future Outlook

The agreement provides a framework for continued cooperation and stability in corporate governance, particularly regarding board composition and strategic transactions like the potential Centuri Spinoff. It also sets clear guidelines for capital allocation decisions and potential future capital raises, aiming to align shareholder interests and reduce uncertainty from activist campaigns.

Management Comments

• The Company and the Icahn Group desire to amend and restate the Prior Agreement in its entirety.
• The Icahn Designees are expected to deliver the Nomination Documents for the 2026 annual meeting of stockholders of the Company in the ordinary course at the same time as the other nominees for election at the 2026 Annual Meeting.
• The Board will consider appropriate appointments for the Icahn Designees to applicable Board committees as they would consider such appointments for other Board candidates.

Industry Context

This filing reflects ongoing trends in corporate governance where activist investors like Carl Icahn exert significant influence over company strategy and board composition. Cooperation agreements are common mechanisms to formalize such influence and avoid costly proxy contests, aiming for a more stable, albeit controlled, strategic direction. The focus on a potential Centuri Spinoff aligns with broader industry trends of companies divesting non-core assets to unlock shareholder value and streamline operations.

Comparison to Industry Standards

• The agreement to nominate activist-backed directors is a common outcome of activist campaigns, aligning with practices seen in other companies facing similar pressure.
• The standstill provisions, capping ownership at 24.9% and restricting certain actions, are standard in cooperation agreements to prevent further hostile actions while the agreement is in effect.
• The structured approach to potential spinoffs and M&A decisions, involving a dedicated committee with activist representation and specific approval thresholds, is a robust governance mechanism often adopted by companies under activist scrutiny to ensure thorough review and stakeholder alignment.
• The reimbursement of activist expenses, while a cost, is not uncommon in such agreements as a means to settle past disputes and foster future cooperation.

Management Changes

Corporate Governance

Legal Proceedings

• The Company will reimburse the Icahn Group up to $3,722,200 for expenses incurred in connection with past litigation (Civil Action No. 2021-1031-KSJM) filed by Icahn Partners LP and Icahn Partners Master Fund LP, indicating a resolution or settlement of this dispute as part of the cooperation agreement.

Related Party Transactions

• The Amended and Restated Cooperation Agreement itself is a significant related party transaction between Southwest Gas Holdings, Inc. and the Icahn Group, a major shareholder.
• The Company will reimburse the Icahn Group up to $3,722,200 for specific past expenses related to proxy solicitation, a tender offer, and litigation.
• Provisions allow the Icahn Group to participate pro rata in certain primary capital raises if a deadlock occurs within the Strategic Transactions Committee.
• The Company and Icahn Group will negotiate a Registration Rights Agreement to facilitate the Icahn Group's ability to sell its Common Shares.

Stakeholder Impact

• Shareholders: The agreement aims to provide stability and a clear strategic direction, potentially benefiting all shareholders by reducing uncertainty from activist campaigns. Icahn Group's influence could lead to value-enhancing initiatives like the Centuri Spinoff.
• Management/Board: Management and the Board will operate under increased scrutiny and influence from the Icahn Designees, requiring closer collaboration and adherence to the agreed-upon governance framework.
• Employees: Strategic decisions like the Centuri Spinoff could impact employees of the affected business units, though the filing does not provide specific details on these impacts.

Next Steps

• Company to file a Current Report on Form 8-K disclosing the execution of this Agreement.
• Icahn Group to file an amendment to its Schedule 13D disclosing the execution of this Agreement.
• Icahn Designees to provide Nomination Documents for the 2026 Annual Meeting.
• Board to make a determination on Icahn Designees' independence.
• Company to establish the record date for the 2026 Annual Meeting within 30 days of March 3, 2026.
• Company and Icahn Group to negotiate and enter into a customary Registration Rights Agreement.
• Company to file a shelf registration statement upon request from a Demand Party (not before December 1, 2022).
• Strategic Transactions Committee to continue pursuing delegated matters and include governance arrangements and Centuri Board composition for a potential Centuri Spinoff.

Key Dates

Recommendation

The Amended and Restated Cooperation Agreement provides a structured framework for the relationship between Southwest Gas Holdings and the Icahn Group, reducing immediate uncertainty from activist pressure. The inclusion of Icahn Designees on the board and committees, along with specific approval thresholds for strategic transactions, suggests a more aligned governance structure focused on value creation, particularly through the potential Centuri Spinoff. However, the significant influence of the Icahn Group on key strategic and capital allocation decisions, including potential deadlocks, introduces a degree of operational complexity and potential for internal friction. While the agreement resolves past disputes and sets a path for future liquidity for the Icahn Group, the long-term impact of these governance changes and the execution of strategic initiatives remain to be seen. Therefore, a 'hold' recommendation is appropriate as investors await further clarity on the execution of the Centuri Spinoff and the financial outcomes of the new governance structure.

Keywords

Southwest Gas Holdings, Icahn Group, Cooperation Agreement, Board of Directors, Corporate Governance, Shareholder Activism, SEC Filing, 8-K, Centuri Spinoff, Strategic Transactions, Capital Raise, Registration Rights, SWX