Starboard’s stake, expected to be revealed in a securities filing on Friday morning, is more than 5%, the people said.The activist hedge fund has privately held talks with Algonquin executives about its belief that the company’s core regulated-utilities business is undervalued, the people said. Starboard also thinks investors aren’t giving the company credit for how much value it could fetch from a sale of its renewable-energy operation, they added.
In May, when Algonquin reported its first-quarter results, the company announced it had commenced a strategic review of its renewable-energy group and had retained bankers at JPMorgan Chase to review possible alternatives. The renewable-energy group includes all of Algonquin’s nonregulated operating and developing power-generation assets.
Algonquin Chief Executive Arun Banskota also said around that time that he believed the market didn’t “fully appreciate” the value of the company’s assets. Banskota said he anticipated announcing a plan based on the results of the strategic review by its second-quarter earnings call, which should take place in August.
Through two business segments, regulated services and renewable energy, Algonquin provides energy and water services to customers mostly in the U.S. and Canada, according to its website.
The Canadian company’s stock has been under pressure since late last year when management said it was facing challenges from higher interest rates and inflation, in addition to construction delays in its renewable-energy projects.
Algonquin in January said it planned to raise roughly $1 billion through asset sales and would slash its dividend by 40%.
Then in April, Algonquin said it was terminating a $1.5 billion deal to buy Kentucky utilities from American Electric Power after regulators rejected the transaction. The deal had given many shareholders pause.
New York-based Starboard, established in 2002, invests across sectors but is especially active in technology. Other recent investments include Salesforce, Splunk and Wix.
Starboard Chief Executive Officer Jeffrey Smith was appointed to the board of another Canadian company, Ritchie Bros. Auctioneers, earlier this year. Starboard made a $500 million investment in order to help the heavy-equipment and truck auctioneer win shareholder approval for its roughly $7 billion acquisition of IAA, which closed in March.
(WSJ 29-06-23)
starboard-builds-stake-in-algonquin-power-dfe98c99