Elliott in Mix as NiSource Reveals Board, C-Suite Changes

Elliott Management says it welcomed the utility’s CEO change and business review plan, but proxy solicitors suggest the activist fund privately agitated in advance of the action.

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Elliott Management Corp. on Friday, Jan. 28, said it “welcomes” NiSource Inc.’s (NI) decision to change its CEO, launch a business review and bring on two new directors.

The changes, however, appeared shortly after the Merrillville, Ind.-based utility’s director nomination window opened up for an annual meeting expected in May — and they indicated to some observers that the activist fund had been privately agitating for change.

On Thursday, NiSource said that “as a result of a long-planned succession” process, its CEO, Joe Hamrock, will resign, to be replaced by director Lloyd Yates, effectively Feb. 14. In addition, Yates noted that he plans to “conduct a review of the business” and to discuss strategic initiatives at an investor day in “the coming months.”

NiSource also said it will be appointing two new directors, Sondra Barbour, a former vice president at Lockheed Martin Corp. (LMT), and Cassandra Lee, chief audit executive at AT&T Inc. (T), to its board, replacing Hamrock and another director, Carolyn Woo. Woo held a position on the boards of NiSource and its predecessor for 23 years — between 1998 and 2022, according to relationship mapping service BoardEx, a sister company to The Deal.

In its statement, Elliott indicated it may be seeking some sort of M&A at NiSource. It said the C-suite and board changes at the company with an $11.5 billion market capitalization were positive moves considering “the high level of strategic interest in gas and electric utilities at robust valuations, indicating a clear opportunity for NiSource.”

NiSource and Elliott didn’t reach a settlement — and the utility’s CEO and board changes appear to have emerged independently. Elliott Management at times, however, will consider launching director contests to drive C-suite and board changes, and NiSource’s director nomination window opened on Jan. 25 in advance of an annual meeting expected in May.

Alliance Advisors’ Thomas Ball, a proxy solicitor, said it appeared to him that Elliott and NiSource both got what they wanted and “peace has prevailed.” He added, however, that if NiSource’s stock doesn’t “react positively” in the next year, with or without M&A, then Elliott will probably want more action. Ball added that he thought Elliott had likely accumulated a large derivatives position in NiSource.

Another proxy solicitor said Elliott has the resources and expertise in the utilities sector to be able to engage with NiSource’s management and “through dialogue achieved strategic objectives to allow the company’s business to move forward without a shareholder battle.”

Observers have noted that Elliott seeks to accumulate large derivatives positions in hopes that it can engage with corporations privately and directly, rather than through outside advisers that are often hired once a campaign becomes public.

“They would like to have a dialogue with companies without advisers complicating the situation,” he added. “I know that Elliott’s portfolio managers will be able to talk to the companies in which they invest in.”

In addition, connections exist between Elliott and one of the new directors and the incoming CEO, which suggest the activist fund was involved in the changes. Elliott waged a campaign in 2019 at AT&T, where Lee is employed in a senior position. And Yates, who joined NiSource’s board in 2020, until September 2019 served as Duke Energy Corp.’s (DUK) executive vice president of customer and delivery operations. Elliott launched a campaign at Duke Energy last year and settled in November in a deal adding two directors to the utility’s board.

NiSource chairman Kevin Kabat noted in the company’s Thursday statement that NiSource conducted an extensive CEO search, evaluating “over a dozen external and internal candidates, including candidates identified by a nationally leading executive search firm engaged by the board.”

In a statement to The Deal on Monday, a NiSource spokesman acknowledged that Elliott is a shareholder, adding the utility “regularly [speaks] with many of [its] significant shareholders.” He added that NiSource is “pleased” Elliott is supportive of the actions the company has taken.

Nevertheless, the size of Elliott’s NiSource stake is unclear, as is whether the investment is made up mostly of derivatives or has a common equity position component. Elliott accumulated a large derivatives position in Duke Energy amidst its campaign urging the utility to break into three parts.

This article originally was posted on The Deal on February 1, 2022 by Ron Orol. View the original article here.

Follow Ronald Orol on Twitter and LinkedIn.

About the author

Ronald Orol
Senior Editor at | + posts

Ronald Orol leads coverage of activist hedge fund managers, a high-profile group of corporate investors who press for blockbuster deals and were the subject of his book “Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World.” Ron produces the Activist Daily and Activist Weekly briefings, which offer exclusives, trend pieces and breaking analysis about insurgent investors and their M&A efforts. Ron also authored “Corporate Governance in the Era of Activism,” a digital handbook for CNBC’s Jim Cramer. He previously worked as a financial regulation and activism reporter at MarketWatch and Dow Jones Newswires.

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