Duke Energy and Elliott Reach a Deal for Independent Directors
(Bloomberg) -- Duke Energy Corp. and Elliott Management reached a settlement that will add two independent directors to the U.S. utility giant’s board.
The agreement averts the possibility of a board challenge by Elliott, which for months has pushed for changes at the North Carolina-based utility while criticizing its leadership.
Some analysts welcomed the settlement, while another questioned what effect the two directors would have on the company’s direction. “We see this agreement and board refreshment as further strengthening the company’s existing position,” Guggenheim utility analysts said in a note Monday.
“I don’t know how meaningful it really is,” Paul Patterson, an analyst for Glenrock Associates, said in an interview. “It’s not clear to me what it actually does fundamentally for the company’s direction and strategy.” Duke shares were mostly unchanged in New York at 9:48 a.m.
Idalene Kesner, 63, Dean of Indiana University’s Kelley School of Business, was appointed as an independent director, Duke said Monday in a statement. The company is looking for another independent board member to be appointed no later than March 31, while Elliott has agreed to standstill, voting and other provisions for one year.
Elliott, which has successfully lobbied for change at some of the world’s most prominent companies, first disclosed its Duke stake in May. The hedge fund called on the utility to explore splitting into three companies, saying the move could unlock as much as $15 billion in value for investors. Duke executives insisted the costs would outweigh any benefits.
Elliott also criticized Duke for paying “excessive compensation” to its leaders, including Chief Executive Officer Lynn Good. In response, Duke’s chief financial officer said in an interview with Bloomberg that Good was “worth every penny.”
The idea of breaking up the power giant runs counter to the trend over the past decade of large utilities buying smaller rivals to expand their customer bases, achieve economies of scale for massive infrastructure investments and run operations more efficiently. Almost as soon as Elliott suggested the idea, analysts expressed skepticism that it would benefit shareholders.
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