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Elliott Prompts Duke Energy to Consider Separation Into 3 Business

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Elliott Advises Duke Energy to Consider Separation Into 3 Companies

< img src=" https://images.wsj.net/im-339472/social" class =" ff-og-image-inserted"/ > Activist financier Elliott Management Corp. is advising Duke Energy Corp.. DUK -0.59% to think about separating into 3 companies, in what would be a significant change of among the country’s most significant energies.

Elliott is looking for board seats at Duke and wants the business to form a strategic-review committee that would check out the possibility of a tax-free separation of the utility into three business, it stated in a letter to Duke’s board that it launched Monday. The three business would be based on the 3 significant geographies it serves: the Carolinas, Florida and parts of the Midwest.

The Wall Street Journal reported on Elliott’s plans previously Monday after previously reporting that Elliott had a stake in Duke and was agitating for modification. Elliott informed Duke in the letter that it is one of its 10-largest shareholders, which would put the stake above $900 million.

Duke stated it would examine Elliott’s proposition, which it noted is one in a series the company has made because last July. “Throughout, Duke Energy’s Board of Directors has reviewed their proposals in depth and figured out that they are not in the finest interests of the company, its shareholders and other stakeholders,” the business stated.

It stated a three-way separation, in particular, posed capital structure and credit problems and could lead to lost expense savings. It pointed out that over the previous 12 months, Duke’s stock price has actually increased 25.2% versus 18.7% for the S&P Energy Index.

Charlotte, N.C.-based Duke, which has a market worth of around $65 billion, supplies electricity to nearly 8 million customers in six states including the Carolinas, some Midwestern states and Florida. It disperses gas to 1.6 million customers in Ohio, Kentucky, Tennessee and the Carolinas.

Elliott stated in the letter that the company’s noncontiguous profile puts a “conglomerate discount” on Duke’s shares, which it estimated to be a difference of at least $12 billion. It also argued that Duke’s clients would be better served by locally handled utilities.

Duke has previously mentioned its progress over the previous year, including settling rate cases and coal ash litigation and accelerating its clean-energy efforts.

In recent months, Moody’s Investors Service and others have actually lowered Duke’s long-term financial obligation ranking, partly in reaction to the current settlement of lawsuits worrying the cleanup of ash from the company’s coal-fired plants.

NextEra Energy Inc., the biggest public utility in the U.S., made a takeover approach to Duke that was rebuffed. It subsequently made another method about an offer for just Duke Energy Florida, the Journal has reported.

Elliott, which has more than $40 billion under management, has a long record of purchasing power and utility business. It previously targeted business including Evergy Inc. and Sempra Energy.

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