Duke Energy’s Standoff With Activist Elliott Management Heats Up
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Elliott Management revealed a large stake in Duke Energy two months ago, but the utility hasn’t been receptive to the hedge fund’s proposals. This likely won’t change anytime soon.
Callaghan O'Hare/BloombergIt’s been two months since Elliott Management revealed its stake in Duke Energy, as well as its desire to see change at the major utility company. However, there’s no sign that the two sides will soon come to an agreement.
Earlier this week the $44 billion hedge fund sent a letter to Duke’s (ticker: DUK) board of directors, calling out the company’s “prolonged underperformance” under the current management team. Elliott noted that Duke stock has been underperforming regulated-utility peers by 63% since Lynn Good became CEO in July 2013.
Elliott had previously called for Duke to split into three entities, claiming that such a move would unlock up to $15 billion in near-term value for shareholders. But Elliott’s latest missive didn’t focus on a potential split. Instead, it called on the utility to enhance its board independence, and seat directors with more public-policy experience in Florida and Indiana, with the intent of improving performance.
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Duke swiftly countered, arguing that Elliott is pushing a ”short-term agenda at the expense of long-term shareholders.” It noted that Duke stock’s three-year total shareholder return of 47% tops both the PHLX Utilities Index (UTY) and the S&P 500 Electric Utilities Industry Index. Duke also noted that nine of its 13 board members were added within the last five years, generating an average board tenure of 4.7 years.
While Duke said it remains open to “value-creating ideas,” there’s little sign that Elliott’s call is sparking any changes.
Write to Carleton English at carleton.english@dowjones.com