Charlotte, North Carolina-based Duke Energy Corporation, an electric power and natural gas holding company, is under attack by New York, New York-based Elliott Management, one of the largest activist investment fund managers in the world.
Elliott Management has taken a large stake in Duke Energy, but the Duke Board of Directors shows little or no receptivity to Elliot's proposals for change at the utility.
The modus operandi of Paul Singer's Elliot Management is based on scaring the board with a letter demanding the company cut costs including a reduction in force, divest unprofitable and underperforming assets, buy back shares to increase the share price, and upstream dividends. Sometimes fighting to add designated directors to the board.
According to Duke Energy, "The new Elliott Management letter to the Board of Directors is the latest attempt to push its short-term agenda at the expense of long-term shareholder value as well as the interests of Duke Energy’s employees and the communities it serves.
This announcement is similar to earlier Elliott plans that failed to gain support. Elliott first proposed a preferential equity scheme in which the company would issue up to $7 billion of deeply discounted equity to Elliott and its hedge fund allies, which would materially dilute Duke’s existing shareholders. After that was rejected by the Duke Energy Board, Elliott then publicly advocated for an illogical, complex three-way breakup of the company.
Elliott’s 'shrink-the-company' break-up proposal collapsed immediately because it was financially unsound and ran counter to the strategic direction of the entire industry. Over the past several months, Duke Energy’s management team has been in active dialogue with the equity analyst community and institutional shareholders. Our largest investors, as well as analysts, public officials, and other stakeholders were near-universal in their rejection of the hedge fund’s unsound plan.
Now, Elliott is taking aim at Duke Energy’s leadership to find a way to force a shareholder-value-destroying plan that has no support."
For Duke employees, vendors, consultants, and others: change is afoot. Most companies will attempt to cut costs by implementing a reduction in force and tighten-up operations. The handwriting is on the wall.
Change is coming. There will always be a tomorrow, no matter how much you may try to ignore it. There are no guarantees in life or promises for a bright future. Just because something bad hasn't happened yet, doesn't mean it won't. It can happen to anyone, anytime, anywhere. No one is guaranteed to wake up tomorrow and still have a job by evening. Are you now wondering, Am I Next?