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Evergy, Elliott Management reach ‘agreement’ resulting in changes to utility’s board

   

Kansas City-based Evergy, Inc. and Elliott Management Corporation, an activist hedge fund owned by billionaire Paul Singer, have reached an agreement, the utility company announced this week. 

Among other changes, Evergy’s board will now include Paul Keglevic, the former chief financial officer and chief executive officer of Energy Future Holdings; and Kirk Andrews, executive vice president and chief financial officer of NRG Energy. 

With the addition of Andrews and Keglevic, Evergy’s board will grow to 17 members for now. However, four board members are set to retire this year — bringing the size down to 13 by the annual shareholders meeting in May. 

The agreement comes after Jeff Rosenbaum, Elliott’s senior portfolio manager, sent a letter to Evergy’s board in January regarding what he called a “stock-price underperformance” since the electric company was created through a merger between Westar and KCP&L. Specifically, the hedge fund suggested the need for a new “highly-credentialed board- and management-level leadership” as well as a “strategic combination via a premium stock-for-stock merger.” 

The New York-based Elliott firm owns about 11.3 million shares in Evergy, or about $760 million in market value — about a 5 percent stake. Elliott is an activist hedge fund, meaning it attempts to influence or change management and other decisions within a company through a large enough investment, and is owned by Singer, dubbed the “Doomsday Investor” by New York Magazine. Elliott is known for its role in slashing companies, leading to thousands of layoffs.  

In addition to the changes to Evergy’s board, the two companies also agreed to create a “Strategic Review & Operations Committee” which will be tasked with recommending ways to increase shareholder value “through a potential strategic combination or a modified long-term standalone operating plan and strategy,” Evergy said in a news release Monday. 

The committee will be comprised of Andrews, Keglevic, Terry Bassham, and Art Stall with Keglevic and Stall serving as co-chairs. Elliott will have an ongoing dialogue with the committee, Evergy said, and the group will make a formal recommendation and reveal the outcome of its review to Evergy’s board during the first half of 2020. 

The full agreement between Evergy and Elliott is to be filed with the SEC. 

“Elliott recognizes our commitment to serving the best interests of all Evergy stakeholders,” Bassham, Evergy’s president and chief executive officer, said in a statement. “We welcome these new, highly qualified directors and the significant and valuable experience they bring to this effort. The comprehensive strategic and operating review we are undertaking will help ensure that Evergy is directing capital to the greatest opportunities and continuing to consider all opportunities to enhance shareholder value.” 

Rosenbaum said Elliott “appreciate[d] the constructive dialogue” the two companies have held over the “past several months.” 

“We believe Evergy is well-positioned to significantly increase investment in critical electric infrastructure to benefit key stakeholders,” Rosenbaum said. “We view this agreement, including the clear mandate of the Strategic Review & Operations Committee, as a great opportunity to ensure that Evergy is best positioned to drive shareholder value creation, whether that be through a strategic combination or an enhanced standalone plan with higher investment levels and stronger growth rates.”  

Elliott said it went public with its letter to Evergy earlier this year because of its “interactions with management and the board to date as well as Evergy’s persistent share-price underperformance.” In a news release this week, Evergy said it’s committed to working with state regulators and its stakeholders. 

Morgan Stanley and Goldman Sachs & Co. LLC are acting as financial advisors with Cravath, Swaine & Moore LLP as the legal adviser for Evergy. 

Evergy’s stock opened at 69.57 Wednesday morning.